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2014.06.05 14:40

Lithuania’s entry to euro area involves advantages, threats – political scientist

BNS | DELFI | The Lithuania Tribune2014.06.05 14:40

(BNS) Lithuania’s accession to the euro area may ensure the country’s military safety but also involves certain risks of easier borrowing, says political scientist Ramūnas Vilpišauskas.

 (BNS) Lithuania’s accession to the euro area may ensure the country’s military safety but also involves certain risks of easier borrowing, says political scientist Ramūnas Vilpišauskas.

Vilpišauskas, director the Vilnius University’s International Relations and Political Science Institute, does not think the European Commission’s (EC) decision to allow Lithuania adopt the currency will bring changes in the nearest future. In his words, markets have already taken into consideration the possibility of a positive EC decision concerning Lithuania.

“This may cause rating agencies to reduce the Lithuanian borrowing risk, however, I think many agencies have already done that,” he said.

Vilpišauskas stated that the final decision on Lithuania’s accession to the euro area will not be serve as an impetus for new Western investments in Lithuania. He also said that the decision should not have any effect upon trade with Eastern markets.

“I don’t think any of this can be expected now. Once we start using the euro, it will be easier to trade with other countries having the currency, i.e., costs will decrease due to absence currency exchange costs. From a more general point of view, the risk of Lithuania as an investment location will probably go down. But, of course, this will largely depend on the decisions of the Lithuanian government and Seimas, as well as their budget policies,” the political scientist added.

He said that trade with other countries of the eurozone, which are Lithuania’s key trade partners, namely, Latvia, Germany, etc., will become easier in the nearest future. On the other hand, in Vilpišauskas’ words, Lithuania will remain a country with the lowest trade volume with other countries of the euro area until Poland adopts the currency, too.

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