Residents of Lithuania will not feel any direct effect from the country being a party to the Exchange Rate Mechanism (ERM-2), a waiting chamber before joining the euro area. However, the mechanism will help solve the remaining macroeconomic problems so that the country is stable when it joins the area, Raimondas Kuodis, the monetary policy director at the Bank of Lithuania, told ELTA.
On Sunday evening, the finance officials of the European Union blessed the admission of Lithuania, Estonia and Slovenia to the ERM-2.
Central bank officials have mentioned many times that Lithuania could enter the euro zone in late 2006 or early 2007.
Kuodis pinpointed a few target goals indicated by the European Central Bank for Lithuania. The ECB recommended that the Baltic state set more ambitious fiscal objectives for itself, because, as it put it, it is abnormal to have a state budget deficit against the backdrop of such significant economic growth. The European institution also cautioned Vilnius to oversee the loan portfolio in the context of the growing number of loans. One more highlighted point suggests carrying through structural reforms that could increase the flexibility of the national economy.
Kuodis stated that Lithuania would continue to stick to a fixed exchange rate, which has been in place since 1994 as a major factor ensuring the inflation-free, steady economic growth of the country.
The monetary policy official, however, acknowledged that joining ERM-2 was no guarantee that Lithuania would be within the euro zone in two years time.
"There is always some degree of uncertainty - no governments or central banks can precisely steer an economy to a certain point, because they do not control the economic shocks coming up in the world," he said.
On the other hand, Kuodis expressed optimism that Lithuania would spend the minimum period of two years within the Exchange Rate Mechanism because it "complies with all the Maastricht criteria for the states applying for membership in the euro area".
Lithuania is among the few EU member states complying with these criteria, its budget deficit being kept below the benchmark three percent with respect to gross domestic product. The country estimates its state debt at no more than 60 percent of GDP, has a stable national currency, and keeps the inflation rate down to meet the average 1.5 percent rate of the three EU member states with the lowest inflation.