Lithuania is among the states with an interesting history. The formation of the national currency of this state, the litas, is no less exciting.
Lithuania: finance and history
Lithuania, as you know, has a very difficult history of its formation and development. In the Middle Ages, the territory of modern Lithuania was part of a powerful state - the Grand Duchy of Lithuania, which then merged into a union with another great power - the Commonwealth. But as a result of the division of this state at the end of the 18th century, the territory of modern Lithuania was transferred to Russia. The ruble has become the official monetary unit in these lands.
During the First World War, the territory of Lithuania was occupied by Germans. The local monetary system is also changing - the occupation authorities have introduced a new currency in the form of the East German ruble. Due to the strongest domestic political crisis and war, the Russian Empire collapsed in 1917-18. Lithuania is gaining independence.
In the first years of independent development, this Baltic state continues to use the German eastern ruble. Historians have fixed precedents for commodity-cash settlements in other currencies. Uncertainty in the sphere of money circulation forced the country's authorities to go for reforms. Also, post-war crisis contributed to changes in the banking system. The first step in the transformation was the introduction of the German brand (in Lithuanian “auxinas”). It has been quite successfully used in cash payments. But soon a period of hyperinflation began in the economy of the young state (by the way, in the most post-war Germany, things were not going very well in the economy, which affected the course of the brand). It became more and more difficult to carry out settlements on the basis of the ever-increasing currency.
How lit appeared and disappeared
The Parliament of Lithuania adopted a radical decision. The authorities decided - since there is an independent Lithuania, the currency should also be its own. In 1922, the Central Bank of the State appeared, and almost immediately the country introduced its own monetary unit, the litas. The situation in the economy has returned to normal.
The German brand has been successfully replaced by lith. An interesting fact is that banknotes, in accordance with the emission policy of the Central Bank of Lithuania, were printed not in the country itself, but in England or Germany. In Lithuania, only coins were issued. In 1939, the Baltic state again lost independence, becoming part of the USSR. The Lithuanian currency has also changed: the Baltic states had to get used to the ruble and copecks again.
Lit again in circulation
After the well-known events of the late 80s and early 90s, Lithuania again became a sovereign state and abandoned the ruble, as many economists and political scientists considered, at the first opportunity, as if emphasizing the willingness to conduct an independent economic policy. True, as soon as independent Lithuania reappeared in the political arena, the currency of this country was not introduced immediately.
The practical return to the litas was preceded by “general coupons”, sometimes referred to by the people as “vagnorki” (they were introduced with the direct participation of the country's prime minister Gediminas Vagnorius). Only in 1993, the litas returned to the money turnover of the Baltic state. They began to gradually replace themselves with “wagnorki” at the rate of 100 to 1. For some time, “general coupons” and litas were equivalent means of payment in Lithuania.
Banknotes and coins of Lithuania
Lit - Lithuanian, unparalleled in other countries, the banknote, but it consists, like the dollar, of 100 cents. Now in cash there are banknotes with the most varied denomination - from 1 to 200 litas. In Lithuanian stores you can find banknotes of one of two series - those that were issued before 1997, and those after. But they are very similar. In 2007, updated bills appeared, more protected from fakes.
Lithuanian banknotes depict events of history that are significant for Lithuania, well-known politicians and cultural figures, monuments, and architectural structures. The State Mint produces, in addition to standard litas, also anniversary, commemorative samples of national banknotes. Such coins are minted from copper-aluminum alloys, cupronickel, brass combinations of metals, and contain precious metals (gold, silver).
Theme of commemorative coins can be different. For example, coins were issued dedicated to a momentous event - when John Paul II paid a visit to Lithuania. A series of coins was minted in honor of the 60th anniversary of the record of the famous Lithuanian pilots Girenas and Darius, who crossed the Atlantic through the air.
Exchange rate of litas
Between June 25, 1993 and the end of January 2002, the exchange rate of the Lithuanian national currency was tightly linked to the US national currency. Lithuanian litas to the dollar began to be sold at the rate of 4 to 1. Since February 2002, however, the Baltic currency was now tied to a single European currency. The exchange rate at which Lithuanian litas were sold against the euro amounted to 3.4528 to 1. This proportion has remained virtually unchanged since then.
Preparing for Lithuania to enter the Eurozone
In the late 2000s, the Lithuanian financial authorities began to make active attempts to replace the national currency with a single European one. Getting into the zone of action of one of the most powerful world currencies - the euro - is also not easy. It is necessary to meet the so-called Maastricht criteria, under which the country's budget expenditures should not exceed revenues by more than 3% of annual GDP, and public debt should not exceed 60% of the country's GDP. Inflation in the economy should not be more than 1.5% relative to the average of the three countries in the Eurozone, characterized by the smallest price increase.
Lithuania took decisive steps towards the Eurozone at the beginning of 2014, when the financial authorities developed a plan according to which the strategy for joining the Eurozone should be implemented at several levels.
It was assumed that in the spring of 2014, experts from the EU countries that are members of the Eurozone will evaluate Lithuania’s preparations for the introduction of a single European currency, analyze the willingness of the economy to meet the Maastricht criteria. In the case of a positive assessment from the European partners, the final word was for the Balts, it all depended on what Lithuania itself would say: the currency should still be its own, or the Eurozone could enter.
Arguments against the Eurozone
Opinions of experts regarding the prospects for Lithuania's accession to the Eurozone were different. Some analysts felt that this step was reckless, arguing that the crisis in the European economy is still present. In addition, supporters of this point of view believe that integration within the Eurozone can significantly reduce the economic sovereignty of Lithuania. The example of some states that are now included in the euro zone, but cannot pursue their own monetary policy, confirms, as analysts say, this thesis.
Lithuania, as some experts thought, it would make sense to pay attention to the Czech Republic: it is a country with a post-Soviet past, it is a member of the EU, like Lithuania. This Slavic country has its own currency, and monetary policy is independent - it is maintained by the national Central Bank.
A number of experts questioned the ability of the Lithuanian economy to withstand the Maastricht inflation criteria. There were theses that the financial authorities might be tempted to artificially lower the numbers, although the Lithuanians themselves assured the community that they would not resort to such methods.
Arguments for the Eurozone
At the same time, optimistic assessments of the prospects for Lithuania's accession to the Eurozone were also met. Some economists have expressed the view that the state will receive, just the same, more economic sovereignty than now, when the litas rate is pegged to the euro. In their opinion, after entering the Eurozone, the country will have the opportunity to actively participate in determining the priorities of the financial policy of the European Central Bank.
What did the European partners decide?
In July 2014, the EU Council of Ministers decided to allow Lithuania to enter the Eurozone from January 1, 2015. What should be the exchange rate at the time of the transition of the Baltic country to the euro ? Lithuanian litas now corresponds to the euro in the proportion of 3.4528 units to 1. And it was decided to fix this rate. Lithuania will thus become the third former Soviet republic of the Baltic region, following Estonia and Latvia, which entered the euro area.