Bank of Lithuania
2004-06-28

Lithuania joined the Exchange Rate Mechanism II (ERM II) with the current exchange rate of LTL 3.45280 to EUR 1 following the adoption the appropriate decisions by the competent European Union (EU) institutions.

The currencies of EU Member States participating in ERM II are allowed to fluctuate against the euro within the standard fluctuation band of ±15 per cent (for Lithuania the upper rate is LTL 3.97072 and the lower rate LTL 2.93488 for EUR 1). However, Lithuania has made a unilateral commitment to maintain the current exchange rate regime and the current exchange rate of the litas against the euro with the zero fluctuation band.

Such a commitment took into account the fact that the fixed exchange rate regime has served as a key factor in ensuring non-inflationary and stable macroeconomic growth since 1994 and should be maintained until the adoption of the euro in the future.

Lithuania was committed to adopt the euro on EU accession. The requirement for the adoption of the euro is spending at least a two-year period in ERM II. Lithuania’s participation in ERM II will contribute to the further strengthening of the reliability of the exchange rate system and, in parallel with structural reforms and tight fiscal discipline, with create conditions for further convergence with EU Member States and the preparation for the adoption of the euro.

Lithuania will be able to adopt the euro after spending the minimum two years in ERM II and upon compliance with the convergence criteria set in the Maastricht Treaty. Membership in the euro area will allow Lithuania to benefit from all the advantages of the single European currency and to cut costs: the exchange rate risk will disappear, borrowing will become cheaper, currency exchange costs will be removed, while cash transfers for settlement with key trade partners in Europe will cost less. These and other factors will contribute to the promotion of investment and trade, thus creating further conditions for the stable growth of Lithuanian economy.