On January 1, 2015, Lithuania becomes the 19th EU Member State to adopt the euro as its currency, completing the shift by all three Baltic nations to the EU’s single currency. The EU Member States that have adopted the euro constitute the euro area, and all are subject to the monetary policy set by the European Central Bank.
Lithuania satisfied the necessary economic convergence criteria prior to taking this historic step:
• Price stability. The inflation rate should not be more than 1.5 percentage points above the previous year’s rate for the three EU countries with the lowest inflation.
• Budget deficit. The national deficit generally must be below 3 percent of GDP.
• Debt. National debt should not exceed 60 percent of GDP, although a country with a higher rate can still adopt the euro, provided its debt level is falling steadily.
• Interest rates. Long-term rates should be no more than two percentage points above the previous year’s rate in the three EU countries with the lowest interest rates.
• Exchange rate stability. The national currency’s exchange rate should have remained within the authorized fluctuation margins for two years.
In July 2014, the Council of the EU fixed the exchange rate for the conversion from Lithuania’s currency at 3.45280 Lithuanian litas per one euro. As of January 1, 2015, 337 million Europeans will share the same currency.
The EU Treaty requires all EU Member States to join the euro area once the necessary conditions are fulfilled, except Denmark and the United Kingdom which have negotiated an “opt-out” clause. The remaining Member States, not yet participants in the euro area, are in various stages of preparing their economies to adopt the euro in place of their traditional currencies.
All EU countries are part of the economic and monetary union (EMU), although not all use the euro. EMU underpins the euro: It deals with monetary policy (price stability and interest rates), economic policy, and aspects of fiscal policy (in order to limit governments’ annual deficits and debts). Economic and monetary union aims to provide a stable and growth-friendly economic environment for the euro area and the single market, and consequently, to ensure a strong and stable currency.
This content is courtesy of the Delegation of the European Union to the United States of America.