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Sancho Panza

Lithuania Adopts Euro As Russia Worries Rattle Baltics

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Bloomberg 1/1/15

'Lithuanians celebrated with fireworks and toasted champagne bought with euros as their country finished a quarter-century transition from a communist economy to a member of the single European currency.

Swapping its litas for euros at midnight, the Baltic country of 3 million wedged between Poland and Latvia became the 19th member of the currency bloc. Crowds gathered by the cathedral on the main square in the old town of Vilnius, the capital, as Prime Minister Algirdas Butkevicius withdrew the country’s first euros from a bank machine.

Lithuania’s entry puts the entire Baltic region in the euro area after neighboring Latvia’s accession a year ago and Estonia’s in 2011. It also comes as the countries, which gained independence in 1990 and 1991 during the collapse of the Soviet Union, are seeking greater security guarantees from their allies amid signs of growing Russian expansionism.

Security Blanket?

Lithuania, which joined the North Atlantic Treaty Organization and the EU in 2004, also considers the single currency an economic shield as its concerns grow over Russia’s actions in Ukraine

Public Support

Backing for the euro surged to 53 percent in Lithuania in November, according to a central bank-sponsored poll of 1,002 people, which didn’t provide a margin of error. That compares with 31 percent support in March 2006. Of those opposing the currency switch, 49 percent said they were concerned over price increases and 26 percent said they objected to losing national identity.'

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Where's the story? Euros are widely accepted in European countries. Not just those whose own currencies might be weak: even the likes of Switzerland that are quite the opposite.

[edit] OK, misread that. It is indeed real news!

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So are they going to contribute the required % of GDP to defence as part of NATO commitments?

Pah! Fat chance. The NATO target for defence spending is 2.0% of GDP, which is what Estonia (to its credit) currently spends. Latvia and Lithuania spend 0.9% and 0.8% respectively. Only Luxembourg spends less as a percentage than Lithuania. It is ironic that the countries most likely to need international clubs like NATO, the EU or the euro zone are the ones who undermine them by treating them as a free meal ticket.

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