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2014.07.24 10:43

Lithuania will feel benefits of euro in 3-5 years, analyst says

BNS | DELFI | The Lithuania Tribune2014.07.24 10:43

Lithuania, which will adopt the euro on Jan. 1, should feel positive effects of the new currency in three to five years. However, the new currency will bring both positive and relatively negative changes, an analyst with SEB Bankas, the largest Lithuania’s commercial bank, says.

Lithuania, which will adopt the euro on Jan. 1, should feel positive effects of the new currency in three to five years. However, the new currency will bring both positive and relatively negative changes, an analyst with SEB Bankas, the largest Lithuania’s commercial bank, says.

“Now we have to be patient and wait three to five years. Then we will really see and feel the positive effects of euro adoption, will become a member of a powerful common currency area and will be less vulnerable externally to certain potentially unfriendly states,” Gitanas Nausėda, an adviser to the president of SEB Bankas, told BNS.

The main positive aspects of having the euro will include increased activity of foreign investors, lower borrowing costs and improvements in Lithuania’s image, he says.

“Borrowing costs will decrease, since Lithuania will be seen as a more reliable borrower. Lithuania’s name will be associated with lower political and financial risks,” Nausėda said.

The adoption of the euro would also bring several negative consequences, which, however, should not produce any major effects, he said.

“Practically and theoretically, Lithuania will lose the possibility to solve its problems through the devaluation of its currency. However, we have not used this way to solve our problems for 20 years. Another thing is the additional injections, which will be required from Lithuania as a contribution to the EU’s stability mechanism and the capital of the European Central Bank,” Nausėda notes.

He pointed out that contributions to the Union’s stability instruments should not be considered as costs, since those were contributions to funds, which Lithuania would be able to use freely if the country’s financial situation were to deteriorate.

BNS