Vitas Vasiliauskas. Speech on the “Euro Conference Lithuania — Single Market, Single Currency, Common Future”
Good morning, dear Ladies and Gentlemen,
It is a great honour to welcome you to the Euro Changeover Conference. By accepting our invitation, today you are, in a way, part of a premiere — the first event accomplished by Lietuvos Bankas and the European Central Bank together.
I believe you will enjoy the result. But, before we dive into discussions, let me share the latest news from my institution.
This morning we welcomed a very distinguished guest. Mario Draghi, the President of the ECB, presented Lietuvos Bankas with the Euro Star — a symbol confirming that the national bank of Lithuania has been accepted into the euro family. Thank you, Mario, for the message.
To be precise — thank you for the big message that covers so many aspects and that is, given the current geopolitical risks, all the more relevant today.
Recently a foreign journalist asked me “What does the euro mean for Lithuania?” and suggested an answer: “Does entry into the eurozone mark the completion of disconnection from Russia?”
He was surprised when my answer was “no, this does not mark disconnection from Russia”.
Disconnection was decided on and marked a quarter of a century ago. The euro in Lithuania confirms that our decision then was firm and final. Our European orientation is consistent and irreversible and we are ready, willing and fully prepared for deeper EU integration.
I have just mentioned “integration” — one of the key words that most likely will be in the air for the next few hours. To make sure that nobody gets lost in translation, let us stick to the classic definition: integration — bringing together, combining into an integral whole.
Not one joining another, not one blending into the rest, but clearly and definitely coming together into a whole. Consequently, integration is not a sponsor-recipient, or patron-ward relation, but a two-way traffic and a deliberate and dutiful partnership in it.
I will be open. We are often asked about the benefits for us of adopting the euro. But very rarely about what we will bring to the club. As bankers we know that there are two sides to a coin. So, how do the two — the inviting and the invited — parties benefit from this deal that will be sealed in less than 100 days?
This time, let me start with the inviting party.
Reviving growth, boosting competitiveness, safeguarding financial stability — these are the top three tasks for the euro area today. And, in my view, Lithuania has good potential to contribute to getting ahead in all three directions.
I will speak in facts: Lithuania is one of the fastest growing economies in the EU. It will be one of the fastest growing in the euro area as well. After taking into account the impact of the recent trade restrictions, we forecast 2.9 per cent real GDP growth in 2014 and 3.3 per cent next year.
And, most importantly: these numbers are neither the consequence of good luck, nor of some base effect. We are adopting the euro from a strong and sustainable basis, exceeding the pre-crisis level of output without any major imbalances and cyclical gaps.
The second good news — the euro club will be joined by a member that ranks no. 17 among almost 200 countries in the latest World Bank’s Doing Business report. If we were to look closer, Lithuania is 3rd in terms of this competitiveness index among euro area members.
And, finally, the euro area is gaining a partner that is financially disciplined, responsible and credible. During the past two decades we faced and successfully addressed several dramatic shocks — including the recent financial turmoil. And, despite unprecedented turbulences and the related speculation, we have proven our ability to successfully function under the fixed exchange rate regime.
As a central banker and supervisor of Lithuania’s financial sector, I would also like to add that we will enter the Banking Union with a well-capitalised and transparent banking sector. It has not only dealt with its fragilities during the recent years, but also has accumulated twice as much capital as is required and nearly all of it is of the highest quality.
Turning to the other side of the coin, for us the attractiveness of joining the single currency is obvious. By reducing the remaining frictions and barriers in the economy, the euro will have a visible effect on foreign trade.
The elimination of foreign exchange risk and the expected positive effect on Lithuania’s credit rating, will also lead to lower borrowing costs to non-financial corporations and households.
Moreover, given better access to liquidity support for the financial sector in times of stress, the euro means increased resilience to shocks and more stable crediting environment.
All this implies that the euro is a natural and important step to our further economic convergence.
Big changes are always surrounded by myths or prejudices. That is the rule. Therefore, it is no surprise that such a grand change as currency reform is also accompanied by both big expectations and worries. To be honest, I am not very worried about worries.
They help concentrate for any exam, including the currency changeover. The experience of our neighbours, the Estonians and Latvians, also suggests that the fears will disappear shortly after the 1st of January — when we find out that our national identity did not change, prices did not explode and we did not lose, but on the contrary — gained a voice in monetary policy matters by taking a seat at the ECB decision-making table.
However, I feel obliged to warn against the positive myths.
The euro gives us many opportunities. But, big opportunities go together with big temptations. This is why now, after reaching the euro, we need even more self-control and financial prudency.
To keep it short: staying on the track of self-discipline is a key prerequisite for long term success. The euro is not an aim in itself. It only opens a big window for big opportunities. Their realisation depends on us.
Ladies and gentlemen,
Let us be realistic — Lithuania is not a heavyweight player that can change the weather on its own. But if we take Estonia, Latvia and us together, I strongly believe in our potential to make a change. Lithuania’s entry to the euro area completes the entry of the Baltic region as a whole.
Being the last in the region and — at the moment — the latest entrant in the euro area reminds me of a medieval fresco in the Sainte-Pierre-le-Jeune church in Strasbourg. It portrays Lithuania as the last pagan European nation that accepted Christianity.
I sincerely hope and wish that in the history of the euro the picture will be different — Lithuania will not be last. And, speaking as a central banker, in the coming decades, we will no longer need to make a distinction between the Eurosystem and the European System of Central Banks.