Lithuania's accession proves the euro is "attractive"

Photo:Eisenrah

The country will become the 19th member of the eurozone on 1st January 2015, when it joins the single currency. Its accession, though, arrives as the euro is seeing its value slide severely.

The single currency is set for its "worst quarterly performance since late 2011", notes Forbes, with it falling to $1.26955 against the US dollar. Indeed, the gap in bond yields between 10-year U.S. Treasuries and German Bunds, the euro zone benchmark, are now at 15 year highs, says Reuters, a divide that is fuelling positive expectations of America's economy.

While the US is expected to raise interest rates soon, the euro is considering increasingly drastic measures to kickstart the sluggish currency. The dollar is forecast to rise for the 11th week in a row this week, a run that would equal a 40-year best. The euro, by contrast, is now at a 19-month low against the dollar.

Nonetheless, Mario Draghi, President of the ECB, insists that Lithuania's joining of the euro is a positive step: "Lithuania itself will – amongst others – benefit from having a say in the monetary policy-making of the world’s second largest economy. Initial scepticism among some Lithuanians regarding the introduction of the euro is already transforming into increasing support now that people become more informed about their new currency and the changeover modalities. Joining the euro area does not only follow from economic considerations: it is a binding commitment to European values."

"The euro area benefits from Lithuania’s accession in at least two ways," he adds. "First, Lithuania has shown that adjustment is not only necessary, but also possible – even without currency devaluation; second, Lithuania’s decision to join the euro area demonstrates that our common currency is attractive."

"Frankly speaking... we feel safer in the eurozone," Lithuania's Central Bank Governor Vitas Vasiliauskas told The Wall Street Journal.