Lithuania’s Drive for the Euro: Here We Go Again

Dealing with European microfinance is invariably influenced by its macrofinance, which might generously be called “convoluted.” Yet the convoluted European finance game is nothing compared to trying to work out ordinary banking arrangements in Lithuania, which is making an heroic dash to cease being the last Baltic state not part of the Eurozone.

This is not a wildly popular idea among Lithuanians, roughly half of whom are scared of entering a still-uncertain currency and, worse, of having to bail out the Greeks some time soon. Lithuania’s political class, however, is motivated to join the euro for a few reasons:

First, no one wants to be the only country turned down for euro membership, an honor Lithuania still holds.

Second, joining the euro will be a sign of being part of Europe, an important part of Lithuania’s left’s view of its role in history.

Third, joining the euro will be a somewhat pointless warning to Russia that Lithuania is off-limits. As Russia has felt free to bully Lithuania over Ukraine for the last several months, that particular warning is either desperately needed or a joke. (Or both.)

Fourth, joining the euro will promote investment and something resembling economic dynamism in a country that is really bad at both of those things; in fact, the two are closely related, and it is hoped that joining the euro will force a change in legal regime sufficient to spark some of that missing dynamism.

Regardless of what its citizens want, the governing class would very much like to join the euro soon. So intent on this project is Lithuania’s government that Prime Minister Algirdas Butkevicius is threatening to resign if Lithuania does not accede to the euro in 2015.

The next elections are in 2016, making this threat roughly the same as the European Union poses to Russia.

Lithuania’s banking and monetary systems are a bit of a mess, making this a reachable goal but a difficult one. The real test of Vilnius’s government is not its ability to disregard popular opinion — its component parties are quite good at that — but rather mustering the political will necessary to slaughter some sacred cows in its legal regime to make the rejection of 2006 truly a thing of the past.

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