2014-03-13
Small and medium-sized businesses — among the major partners on which will depend smooth adoption of the euro
At a meeting of the Lithuanian Small and Medium-sized Business Council the Chairman of the Board of the Bank of Lithuania, Vitas Vasiliauskas presented practical aspects of euro adoption of relevance to small entrepreneurs related to banks, cash distribution, payments, accounts and amendments to contracts.
“Small and medium-sized business will play a particularly important role in ensuring that the adoption of the euro in Lithuania is a smooth process. Therefore already now we seek to explain important practical aspects as well as the works accomplished by the Bank of Lithuania and other state institutions that will be helpful for entrepreneurs in adequately preparing for the changes,” says V. Vasiliauskas.
The Chairman of the Board of the Bank of Lithuania presented at the meeting the projected procedure for cash changeover and the exchange rate, litas and euro circulation terms, the principles of continuity of contracts with banks and business partners, the euro cash frontloading schedule.
The ultimate, irrevocable euro and litas conversion rate will be fixed and published by decision of the Council of the European Union consisting of ministers of economy and finance of the EU Member States (ECOFIN Council). This is expected to take place in late July 2014.
The Bank of Lithuania holds a position that the current official exchange rate of the litas against the euro, i.e. 3.4528 litas for 1 euro, is adequate for the adoption of the euro in Lithuania. There are no grounds to believe that the exchange rate of the litas against the euro can be different from that effective for 12 years already. In Latvia and Estonia the previously effective exchange rate has been fixed too.
30 days after the Council of the European Union's decision, a period of relevance to business begins, when the prices are displayed both in litas and euro. After the euro adoption date — 1 January 2015 — the so-called dual circulation period will begin, when payment will be possible both in litas and euro; however, retailers are recommended to give change in euro only.
According to V. Vasiliauskas, once the euro is adopted, credit to business undertakings is likely to become cheaper, as the credit rates will be linked to the Euro Interbank Offered Rate, EURIBOR, which is lower than the VILIBOR rate. The interest rates on loans in litas have been mostly linked to the latter rate to date. The margins provided previously in entrepreneurs’ contracts with banks will remain effective by observing the principle of contract continuity, unless the parties agree otherwise.
The head of the Bank of Lithuania also presented the Quantitative Assessment of the Impact of the Adoption of the Euro on the Domestic Economy conducted by Bank of Lithuanian economists. According to the economists, the adoption of the euro would be beneficial for Lithuania, as it would not only entail declines in interest rates, but disappearance of the costs of litas exchange into euro and vice versa, liveliness of foreign trade, investment growth as well.
The overall positive impact of the euro adoption in Lithuania in the medium term would amount to LTL 40 billion, while the one-off costs of the adoption and contributions to European institutions — about LTL 2 billion.
The Lithuanian Small and Medium-sized Business Council is an advisory institution consisting of representatives of associations whose membership includes business entities. The Council represents 47 associated business structures throughout Lithuania.
The aim of the Council's activities is to ensure cooperation between representatives of small and medium-sized business and state institutions, thereby creating a favourable environment for business.