2019.12.16 17:00

Euro benefits outweigh price increases, Lithuania's central bank says

Prices have gone up since Lithuania adopted the euro five years ago, but overall the European Union's common currency brought more benefits than costs, the Bank of Lithuania says. Faster economic and income growth are among the chief advantages, according to the central bank.

On average, the euro has added 0.5 percentage point to Lithuania's annual GDP growth, Vitas Vasiliauskas, the chairman of the Bank of Lithuania, said in a press conference on Monday.

“Speaking of the gross domestic product, we are speaking about positive impact every year. [...] That effect was more significant during the first years after the euro introduction,” Vasiliauskas told reporters.

Read more: Service prices up 22 percent since euro introduction, Statistics Lithuania says

According to the central bank, the euro boosted Lithuania's borrowing ratings and reduced risks, which allowed the country to borrow cheaper. This alone helped the country save 334 million euros over the past five years, according to Vasiliauskas.

Moreover, the euro pushed the country's export level by at least 200-350 million euros every year, the central bank said.

“If we speak about percentages, the introduction of the euro has added around 1 percent to export growth every year. And these are rather significant numbers. Why? Due to lower foreign trade costs, including currency exchange, international payments, and lower payment administration costs. All of that has allowed adapting prices competitively,” Vasiliauskas said.

The public opinion about the euro and prices is changing, he said.

“Since the initial euphoria after the introduction, when the popularity [of the euro] exceeded 50 percent, it soon dropped, and we believe the key reason for that was the euro's role in price increases,” Vasiliauskas said.

The public has now fully adapted to the new currency, the central bank governor said, citing surveys.

“The key problem which is mentioned in surveys is a certain inconvenience of using one and two euro cents,” the board chairman of the Bank of Lithuania said.

Lithuania switched from its national currency, the litas, to the euro on January 1, 2015.