The Economist explains: Why Lithuania is about to adopt the euro

THE euro zone is in a terrible state. Growth has been anaemic for years. It is on the verge of deflation, where prices fall, thereby pushing up the value of debt. Unemployment is high: in Spain and Greece it exceeds 20%. The debt-to-GDP ratio of the euro zone has increased from 84% in 2010 to more than 90% today. Yet Lithuania, a fast-growing, low-debt Baltic state of 3m people, will on January 1st become the 19th member of the club. Why?Most obviously, because Lithuania is required to join. All 28 member states of the European Union (EU), except Denmark and Britain, which negotiated opt-outs, have to adopt the single currency. Lithuania has been a member of the EU since 2004, when it joined with nine other countries. Its Baltic neighbours, Latvia and Estonia, already use the euro. Some say it was only a matter of time before Lithuania followed suit. And there are other political reasons why joining the euro may be necessary. Lithuania is an ex-Soviet nation just a short flight from Moscow. About one in twenty Lithuanians are Russian-speaking—the group that Vladimir Putin, the Russian president, has undertaken to “protect”. Many Lithuanians hope that the euro will provide a symbolic defence against a Kremlin incursion. There are also other reasons why Lithuania wants to join. Boosters point to the economic benefits of membership. With euro adoption, investors …

Link to article: www.economist.com/blogs/economist-explains/2014/12/economist-explains-12?fsrc=rss

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