Lithuania Changes Litas to Euro by the next January 2015 ~ International Business and Trade

Written by : Lia Dahliasari

NIM : 1701344163

European Union (blogspot.com)

Lithuania is an ex-soviet’s country and newly independent in 1990. As the new state; Lithuania needs recognition of sovereignty from another country. Lithuania decided to join the European Union. The ideology of Lithuania is liberal democracy. The economic cooperation by European union prefixed to the signing and ratification of free trade treaty in 1994. The important qualified being member of the European union are good and stable economy. Lithuania has capable of these requirements. Even Lithuania called as Baltic tiger, as countries on the Baltic which is located in the region of northwestern Europe experienced a good economic growth. It is a result of economic reform and liberalization since 2000. Lithuania's gross domestic product is 7.5%. Lithuania has become the highest economic growth country in Europe, together with Latvia and Estonia. The unemployment rate is a little below the EU averages. It's what makes Lithuania is able to join the European Union. In 1995, Lithuania signed an association agreement with the European Union.

Lithuania's effort to join the European Union:

1. December 8, 1995, the President of Lithuania, Algirdas Brazauska and Prime Minister Adolfas Slelevicius was sending requirement file to EU President.

2. September 5, 2001. The European Parliament Resolution has given Lithuania about requirement file to be member of the European Union.

The condition of being member of the European union according to Copenhagen criteria:

· In political aspect, the country has stable institutions which guarantee democracy, the supremacy of law and human rights;

· In economical aspect, the country has a functioning market economy and can cope with competitive pressure and market forces within the EU; by law the country obey the laws and practices the established of European union esp. main objectives, about a political union economic and monetary after Lithuania claimed that its could qualify the Copenhagen criteria by way of. In 2003 dated 16 April in Athens, signed the agreement that Lithuania was a member of the European union. In the earlier on august 10 and 11 may 2003, the referendum held in Lithuania about Lithuania’s motivation to join into European union with 90 percent of its inhabitants agree. Finally, on 1 November 2004, Lithuania officially became a member of the European union.

Each policy certainly has a reason. The European Union has a strong reason to accept Lithuania as a member of the European Union. Lithuania could become a target market expansion. This is the motivation of EU accepts Lithuania became a member. Because as an Organization that focused on the economic sector, the market is the most urgent, other than as a source of raw materials as well for buying and selling products.

Essentially, the EU wants to expand the membership and select the state that is appropriate and beneficial to become a member, so that the entry of Lithuania into one of the EU's development standards.

Lithuania's election as member of the European Union, Lithuania hasn’t use euro as a currency. During 2004 till now, Lithuania still using their country's currency which named Litas. The Euro is the currency used the area of Europe that members of the European Union. The countries that use the euro currency in Eurozone are Austria, Netherlands, Belgium, Estonia, Finland, Ireland, Italy, Germany, Luxemburg, Malta, Portugal, France, Cyprus, Slovenia, Slovakia, Spain, Greece, and Latvia joined in early 2014. If Lithuania wants to replace its currency into euro, Lithuania must obtain approval from the Commission of the European Communities.

Commission of the European Communities is one of the three main institutions that govern the European Union, the European Parliament and the Council of the European Union. The primary role of the European Commission is to propose and implement legislation, and acts as a guardian of agreement which provided the legal basis for the EU. The role of the European Commission has much in common with the executive branch of the government of a state, although it also has some differences.

Lithuania got the green light from the European Commission and the European Central Bank to adopt the Euro, because Lithuania is planning to increase spending on social security and national defense amid rising tensions with Russia. Lithuania deemed to have qualified all the criteria for adopting the euro and proposes to begin doing so by January 1, 2015. The official decision on that is likely to be issued in the EU Council of Ministers in July 2014.

Lithuania previous efforts to join the Eurozone had failed after rising inflation and not in accordance with the terms specified. Like the other Baltic countries; Estonia and Latvia, a country of about 3 million people experience a sharp economic downturn amid the global financial crisis that began in 2008. Estonia joined the Eurozone in 2011, followed by Latvia in 2014. Use the Euro currency in the Baltic seen as a step to deepen alliance with the region of the Western.

To be able to use the euro, a country must have no more government debt 60% of GDP, inflation and low interest rates, and currency must be stable to euro. In his press conference, Commissioner of the European Economic and Monetary Union, Olli Rehn, an inflation rate in Lithuania by 1.1% in 2014 and 1.8 to 1.9% by 2015. Lithuanian Central Bank estimates using the euro, they might lost about 2 billion Litas when borrowed funds during the financial crisis.

Seven EU countries that use the euro haven’t been considered yet qualified, such as Bulgaria, Czech, Croatia, Hungary, Poland, Romania, and Sweden. Romania has said that the target for used of euro in 2019.

Meanwhile, the President of Lithuania, Dalia Grybauskaite, said that the adoption of the Euro in January 2015 is expected to attract investments to Lithuania and helps reduce the borrowing cost. With this decision, the Lithuanian will start using the euro in January 2015 as the 19th state.

The economic cooperation between European Union and the role of the euro currency in Eurozone has facilitates the economic transactions for every country. As Adam Smith note, “The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation,” quoted in his book "The Wealth of Nations". We can conclude that in international trade that occurs between Lithuania and EU countries, require facilities and conveniences for the transaction. These activities should protect by law, so that every country does not act arbitrarily. And that is the function of the European Union for Lithuania.