The euro is coming

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We can be glad because it shows that the financial and economic situation in Lithuania is relatively good, at least in the context of the European Union countries. However before we decide whether to celebrate or mourn the introduction of the euro, we must ask ourselves whether we know enough about it.

Money publishing is an exclusive government monopoly. The central bank determines the amount of money and the interest rate. In the case of the euro, it is the responsibility of the ECB. So, whether the euro will be a reliable and stable currency or one with a constantly decreasing value, which in turn leads to constant inflation and has other negative effects on the economies of the member states.

This week the decision on the introduction of the euro in Lithuania was announced. But at the same time, important decisions were adopted by the ECB. For example, on the Thursday meeting of the ECB’s Executive Board it was decided that it is necessary to do more to deal with a lagging increase in prices! This is not a mistake, you read the sentence correctly. The ECB believes that prices are rising too slowly, meaning that inflation is not sufficient. That also means that it is necessary to weaken the euro against other currencies.

What is Lithuania’s position on this matter? Soon we will be sitting as equals and will be voting on the issues of the ECB board. So far, Lithuania aimed and kept current value of litas, or at least ensured not to lose its value quickly. For that reason, the Currency Board was set up, which has been successful in Lithuania for 20 years. Are we changing our policy and welcoming the multiplication of money now?

We have less than six months until we change litas to euro and, starting to look ahead, we have to be aware of everything that the ECB does. Not only because they ultimately affect every user of the money issued by the ECB, but also because they determine the benefits and possible negative consequences of the free monetary policy in Lithuania and the whole of Europe.

Anyway, we can enjoy the fact that Lithuania is going to join the euro zone. Perhaps when it happens we will be encouraged to think more seriously about the ECB’s monetary policy and the euro’s future.

Vytautas Žukauskas
Lithuanian Free Market Institute

Fot. flickr /na by-sa 2.0

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