Economics / Politics

The Euro, or the Rouble 2.0? Lithuania’s New Choice of Currency

1,_2,_and_5_litai_(1998)

Out with the old…

After the initial news buzz surrounding the latest member of the Eurozone, Urte Cibulskaite takes a step back to consider how the change of currency affects Lithuania, and Europe.

On the 5th of December, five days into the adoption of a new currency in Lithuania, which became the nineteenth country to adopt the euro as its national currency, the Euro reached a nine year low (Reuters). The European Central Bank together with Mario Draghi at the head will have to do its best to improve the ever-worsening situation of the Eurozone. When the prospects for improvement are low and threats of deflation increasing, the benefits of the Euro adoption come into question. Lithuania’s Finance Minister Rimantas Sadzius encouraged a positive outlook towards the future: “Myself, and I think, many of you feel that the Litas, which has served us well for more than two decades, becomes history, but we have to move forward.” But what does Lithuania stand to gain?

Despite overwhelming pro-Euro propaganda littering the media as well as the streets, about 50% of Lithuanians still have strong doubts about the adoption of the new currency. Lithuanians despise the loss of the Litas, as a part of their national identity, so fragile already, given all the occupations and troubles the country has gone through in the past centuries. Consequently, the loss of this part of their identity might remind some Lithuanians of the involuntary surrendering of their freedom under the Soviet Union, even though it is more or less voluntary this time. One can hear comments likening the Euro to the Rouble, which served as the national currency when Lithuania was part of the Soviet Union. In both cases Lithuania became a part of a greater union, thus surrendering its sovereignty, at least to some extent. The former national currency of Lithuania, Litas, served as a symbol of Lithuanian independence multiple times – firstly after the fortuitous recovery of the Lithuanian state following the First World War, and then in 1991 when Lithuania became the first country to leave the Soviet Union. The Litas, therefore, is a signifier of Lithuanian victory in the struggle for independence and their perseverance despite all odds.

The Government, in the words of Lithuanian Prime Minister Algirdas Butkevicius, believes the Euro to “become a guarantor of both economic and political security.” (Reuters). The Euro should ensure greater economic cohesion with the rest of Europe for Lithuania, making its economy less reliant on countries outside of the European Economic Zone – 18.9% of Lithuania’s total exports in 2012 were to Russia. Knowing the political climate is rather hostile, it is important to reduce this number, which the introduction of the  Euro should help to accomplish. Doors to more investments from the EU businesses are opened with the adoption of the common currency. The government has hopes in aided recovery – from 15% economic contraction in 2009 due to the global financial crisis – to 3.5% economic growth as is expected in 2015.

Various displays of Russian military power in Kaliningrad worsened the situation further. Lithuanians are looking for ways to protect themselves against the Russian aggression. Further integration into the EU is believed to ensure this. Of course, the assumption that the EU could actually help Lithuania in case of a, say, military threat, is rather mistaken. It should be kept in mind that the European Union is first and foremost an economic union. It cannot actively engage with the threats posed by Russia. The best the EU can do is impose economic sanctions. As is known, such strategies do not often work quickly, as was the case with Ukraine – the economic sanctions imposed after overly long period of deliberation failed to achieve anything significant in terms of diminishing the conflict. The fighting between the Ukrainian army and the pro-Russian rebels is still going on. The EU, therefore, is not a suitable international body to protect against or alleviate these threats, since its decision-making is way too slow to react effectively. This, of course, is simply because of its structure, which strives to be as democratic as possible in all cases and at all times. Democracy is time consuming.

NATO is the international body more suitable – more equipped and fast-acting – to deal with the ‘Russian Threat’. It is capable of posing a real threat, dealing with problems not merely by imposing belated economic sanctions. This is not to say that such an approach is ineffective, I am simply pointing out that a solution producing quicker effects is necessary. Therefore, Lithuanians should not rely on the EU as their best solution to the problem of their relations with Russia.

It’s hard to tell if there is truly a Russian threat to Lithuanian sovereignty and economic independence. Of course, the annexation of the Crimea and the Ukrainian situation makes Lithuania uneasy. And relations between the two countries are certainly unfriendly. The present situation is not only the Russians’ fault, however. Hostile attitudes towards the Russians are prominent among the Lithuanians in the government and among the general public. A statement made by Lithuanian president Dalia Grybauskaite in which she called Putin a terrorist because of Russia’s actions in Ukraine a few months ago, certainly did not assuage the situation. What did it achieve then? It made it clear that Lithuanians had not forgotten the past. The adoption of the Euro lets everyone know which side Lithuania chooses – being a buffer-country for the West against the East or vice versa.

There was no other way but to adopt the Euro – Lithuania cannot survive on its own: it needs a protector, it is too small to stand alone. No one usually listens, or cares about what the Lithuanians have to say. However else Lithuanians might like things to be, they face a binary choice – East or West. To some, the new change in their pockets might represent the lesser of two evils.

lithuania-euro_lg

Urte Cibulskaite is a philosophy undergraduate at the New College of the Humanities, London, and was born in Vilnius, Lithuania.

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