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| Lithuania Moves Closer to Joining Euro Zone | Lithuania Moves Closer to Joining Euro Zone |
| (about 2 hours later) | |
| FRANKFURT — The euro zone is closer to adding its 19th member. | FRANKFURT — The euro zone is closer to adding its 19th member. |
| The Baltic state of Lithuania received preliminary approval on Wednesday to join the currency union at the beginning of 2015, in what is likely to be the last expansion of the troubled bloc for several years. | The Baltic state of Lithuania received preliminary approval on Wednesday to join the currency union at the beginning of 2015, in what is likely to be the last expansion of the troubled bloc for several years. |
| Lithuania, with about three million people, fulfills the economic and legal criteria necessary to join, the European Central Bank and the European Commission said, after conducting separate assessments of the country’s readiness. | |
| Lithuania’s membership must still be approved by European governments after consultation with the European Parliament. | Lithuania’s membership must still be approved by European governments after consultation with the European Parliament. |
| The country would begin using the euro as its legal tender on Jan. 1, becoming the latest member since Latvia, its neighbor and fellow former Soviet republic, joined at the beginning of this year as the 18th nation in the bloc. | The country would begin using the euro as its legal tender on Jan. 1, becoming the latest member since Latvia, its neighbor and fellow former Soviet republic, joined at the beginning of this year as the 18th nation in the bloc. |
| Membership in the euro zone ties Lithuania yet closer to western Europe at a time when Russia is striving to reassert influence in former Soviet republics. | Membership in the euro zone ties Lithuania yet closer to western Europe at a time when Russia is striving to reassert influence in former Soviet republics. |
| The Lithuanian prime minister, Algirdas Butkevicius, suggested that linking his country to Brussels through the single currency would improve security for his people in the wake of Russian aggression in Ukraine. | The Lithuanian prime minister, Algirdas Butkevicius, suggested that linking his country to Brussels through the single currency would improve security for his people in the wake of Russian aggression in Ukraine. |
| Becoming a part of the single currency area “is one more step toward the deeper economic, financial and political national security,” Mr. Butkevicius said in a statement issued by Lithuanian diplomats in Brussels. | Becoming a part of the single currency area “is one more step toward the deeper economic, financial and political national security,” Mr. Butkevicius said in a statement issued by Lithuanian diplomats in Brussels. |
| The move, he said, would mean a “better life for all the residents of the country.” | The move, he said, would mean a “better life for all the residents of the country.” |
| Countries that join the euro cede control of monetary policy to the European Central Bank, and they can no longer allow their currencies to depreciate as a way of making their exports more competitive on world markets. | Countries that join the euro cede control of monetary policy to the European Central Bank, and they can no longer allow their currencies to depreciate as a way of making their exports more competitive on world markets. |
| But Lithuania has tied its currency, the litas, to the euro for a decade, and membership in the euro relieves the country’s central bank of having to defend its value against speculators. | But Lithuania has tied its currency, the litas, to the euro for a decade, and membership in the euro relieves the country’s central bank of having to defend its value against speculators. |
| Vitas Vasiliauskas, the chairman of Lietuvos Bankas, the Lithuanian central bank, will become a member of the European Central Bank’s governing council with a voice in euro zone monetary policy. | Vitas Vasiliauskas, the chairman of Lietuvos Bankas, the Lithuanian central bank, will become a member of the European Central Bank’s governing council with a voice in euro zone monetary policy. |
| But a report issued Wednesday by the European Central Bank suggested that euro membership remains a distant prospect for other potential members like Hungary, Romania and Sweden. | But a report issued Wednesday by the European Central Bank suggested that euro membership remains a distant prospect for other potential members like Hungary, Romania and Sweden. |
| Of eight European Union countries that remain outside the euro zone, none except Lithuania fulfill the standards for membership and many do not seem to be making much of an effort to do so. The E.C.B. highlighted shortcomings in areas like budget discipline, central bank independence and economic performance. | Of eight European Union countries that remain outside the euro zone, none except Lithuania fulfill the standards for membership and many do not seem to be making much of an effort to do so. The E.C.B. highlighted shortcomings in areas like budget discipline, central bank independence and economic performance. |
| After six years of crisis and near-record unemployment, the popularity of the European Union is at a low ebb in the wake of a series of financial and debt crises that nearly destroyed the euro. | After six years of crisis and near-record unemployment, the popularity of the European Union is at a low ebb in the wake of a series of financial and debt crises that nearly destroyed the euro. |
| Parties that are hostile to the European Union or want to abandon the euro made big gains in elections to the European Parliament last month, including in countries like Britain, France, Germany and Denmark. | Parties that are hostile to the European Union or want to abandon the euro made big gains in elections to the European Parliament last month, including in countries like Britain, France, Germany and Denmark. |
| In that atmosphere, countries like Poland and the Czech Republic are moving cautiously toward euro membership, if at all. | In that atmosphere, countries like Poland and the Czech Republic are moving cautiously toward euro membership, if at all. |
| In theory, all European Union members are required to strive for euro membership, with the exception of Britain and Denmark, which have exemptions. Of the remaining eight noneuro countries, only Lithuania has fulfilled the prerequisites. | In theory, all European Union members are required to strive for euro membership, with the exception of Britain and Denmark, which have exemptions. Of the remaining eight noneuro countries, only Lithuania has fulfilled the prerequisites. |
| The other countries are not yet participating in the European exchange rate mechanism, under which they pin the value of their currencies to the euro. | The other countries are not yet participating in the European exchange rate mechanism, under which they pin the value of their currencies to the euro. |
| Countries must be in the exchange rate mechanism for at least two years before they can join the euro. There is no sign that any of the countries outside the euro will join the mechanism soon, meaning that further expansion of the euro zone is years away. | Countries must be in the exchange rate mechanism for at least two years before they can join the euro. There is no sign that any of the countries outside the euro will join the mechanism soon, meaning that further expansion of the euro zone is years away. |
| Some of the countries actually seem to be drifting further from European norms. Viktor Orban, the prime minister of Hungary, has been accused of infringing on news media freedom and meddling in central bank policy. | Some of the countries actually seem to be drifting further from European norms. Viktor Orban, the prime minister of Hungary, has been accused of infringing on news media freedom and meddling in central bank policy. |
| In its report on Wednesday, the European Central Bank urged Budapest to respect the independence of the Hungarian central bank and also expressed concern about government measures to relieve Hungarian borrowers by restructuring loans at the expense of commercial banks. | In its report on Wednesday, the European Central Bank urged Budapest to respect the independence of the Hungarian central bank and also expressed concern about government measures to relieve Hungarian borrowers by restructuring loans at the expense of commercial banks. |
| Sweden, which is supposed to be moving toward euro adoption, has been dragging its feet on laws necessary to harmonize with euro zone standards, the European Central Bank said. | Sweden, which is supposed to be moving toward euro adoption, has been dragging its feet on laws necessary to harmonize with euro zone standards, the European Central Bank said. |
| “As yet no legislative action has been taken by the Swedish authorities to remedy the incompatibilities described in this and previous reports,” the E.C.B. said. | “As yet no legislative action has been taken by the Swedish authorities to remedy the incompatibilities described in this and previous reports,” the E.C.B. said. |
| Even in Lithuania, a poll last year showed that opponents of euro membership outnumbered supporters by a wide margin, though sentiment may have shifted recently after the aggressive moves by Russia in Ukraine in recent months. | Even in Lithuania, a poll last year showed that opponents of euro membership outnumbered supporters by a wide margin, though sentiment may have shifted recently after the aggressive moves by Russia in Ukraine in recent months. |
| For Olli Rehn, the European commissioner for economic and monetary affairs, the recommendation to admit Lithuania marked the continued appeal of the single currency for Europeans — and the progress made to shore up the euro after six years of turmoil that nearly sank the project. | For Olli Rehn, the European commissioner for economic and monetary affairs, the recommendation to admit Lithuania marked the continued appeal of the single currency for Europeans — and the progress made to shore up the euro after six years of turmoil that nearly sank the project. |
| “The euro area today has more effective economic policy coordination, a robust financial firewall to safeguard stability and, from this year, a banking union,” Mr. Rehn said in a statement before his official announcement. “All of these, Lithuania is committed to participating in and to further strengthening.” | “The euro area today has more effective economic policy coordination, a robust financial firewall to safeguard stability and, from this year, a banking union,” Mr. Rehn said in a statement before his official announcement. “All of these, Lithuania is committed to participating in and to further strengthening.” |
| The eight countries assessed on Wednesday had made uneven progress to meeting the terms of membership of the euro area, but Lithuania showed prudent fiscal policies and economic reforms, said Mr. Rehn. | The eight countries assessed on Wednesday had made uneven progress to meeting the terms of membership of the euro area, but Lithuania showed prudent fiscal policies and economic reforms, said Mr. Rehn. |
| “That reform momentum, driven in part by Lithuania’s E.U. accession 10 years ago, has led to a striking increase in Lithuanians’ prosperity,” he added. | “That reform momentum, driven in part by Lithuania’s E.U. accession 10 years ago, has led to a striking increase in Lithuanians’ prosperity,” he added. |
| The Lithuanian finance minister, Rimantas Sadzius, said admission to the euro zone should deliver “greater confidence of foreign partners in the country” as well as “more favorable borrowing, lower unemployment, and growing income of the residents.” | The Lithuanian finance minister, Rimantas Sadzius, said admission to the euro zone should deliver “greater confidence of foreign partners in the country” as well as “more favorable borrowing, lower unemployment, and growing income of the residents.” |
| Lithuania tried to join the euro in 2007 but was rejected because inflation was 0.1 percent higher than allowed. The rejection may also have been related to concern about the levels of private debt in the country, which proved to be well founded. The financial crisis in 2008 sent the Lithuanian economy into a tailspin. | Lithuania tried to join the euro in 2007 but was rejected because inflation was 0.1 percent higher than allowed. The rejection may also have been related to concern about the levels of private debt in the country, which proved to be well founded. The financial crisis in 2008 sent the Lithuanian economy into a tailspin. |
| After a severe austerity program, Lithuania recovered and is now among the fastest-growing countries in the European Union. Growth in the first quarter of this year was 2.4 percent on an annualized basis. | After a severe austerity program, Lithuania recovered and is now among the fastest-growing countries in the European Union. Growth in the first quarter of this year was 2.4 percent on an annualized basis. |
| Along with Latvia and Estonia, which suffered similar crises, Lithuania is often cited by advocates of fiscal austerity as a model for how countries like Greece should behave. | Along with Latvia and Estonia, which suffered similar crises, Lithuania is often cited by advocates of fiscal austerity as a model for how countries like Greece should behave. |
| While Lithuania received generally good marks, the European Central Bank expressed concern over whether the country could contain inflation once the euro zone as a whole recovers. | While Lithuania received generally good marks, the European Central Bank expressed concern over whether the country could contain inflation once the euro zone as a whole recovers. |
| Inflation in the country averaged 0.6 percent from May 2013 through April of this year, the period examined by the central bank, which targets annual price increases for the bloc at just under 2 percent. | Inflation in the country averaged 0.6 percent from May 2013 through April of this year, the period examined by the central bank, which targets annual price increases for the bloc at just under 2 percent. |
| “The current low level of inflation in Lithuania reflects mainly temporary factors, including the fall in global commodity prices,” the E.C.B. said. “Maintaining low inflation rates on a sustainable basis in Lithuania will be challenging in the medium term.” | “The current low level of inflation in Lithuania reflects mainly temporary factors, including the fall in global commodity prices,” the E.C.B. said. “Maintaining low inflation rates on a sustainable basis in Lithuania will be challenging in the medium term.” |
| Under European Union procedure, the next step is for government ministers to make the final decision on whether to admit Lithuania, which could happen during the second half of July, after the European Union’s leaders discuss the matter in late June and after the European Parliament has given its opinion. | Under European Union procedure, the next step is for government ministers to make the final decision on whether to admit Lithuania, which could happen during the second half of July, after the European Union’s leaders discuss the matter in late June and after the European Parliament has given its opinion. |
| Because Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden had not met all of the criteria to adopt the euro, European Union officials said that they would be assessed again two years from now. | Because Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden had not met all of the criteria to adopt the euro, European Union officials said that they would be assessed again two years from now. |