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Lithuania: the entry into the eurozone


Darbas anglų kalba. Lietuvos įstojimas į euro zoną. Introduction. A look at Lithuania. Post-soviet period and reforms. The accession into the European Union (EU). The path towards the Euro. After joining European Union (EU). Why Euro? Benefits and drawbacks of the common currency. Economic convergence criteria. Resistance of society. People against Euro - statistics. No exact date. Successful Slovenia vs. Loser Lithuania. Lack of information. Price jump and society concern. Are benefits real benefits? Conclusion. Table (3).


Lithuania is one of the Baltic States, located in Northern Europe, on the shores of the Baltic Sea. It is one of the republics of the former Soviet Union and has, since its collapse, after a few years of high inflation and economic sink, experienced considerable economic growth. This has made many refer to Lithuania, along with Estonia and Latvia, as the Baltic Tiger.
1.1. Post-Soviet period and reforms
In the post-Soviet period, even though Lithuania’s productivity levels and living standards were above the average of the republics of the Soviet Union (the World Bank estimates that the income per capita was USD 2700 for Lithuania in 1993 as opposed to the USD 2600 average income of the Soviet Union), the country was left with extremely negative GDP growth rates and high inflation rates as can be seen in Tables 1 and 2.
In 1992, Lithuania had an inflation rate of nearly a thousand percent and managed to bring it down to single digit numbers in time for the accession into the European Union. How did this happen? During the early 1990s, the Lithuanian government launched a program of market-oriented reforms, which included the privatization of state-owned enterprises, the reform of the banking sector, the land reform the land reform and the lifting of price controls.
The voucher-based mass privatization program was introduced in Lithuania, and it became a priority between 1992 and 1994 (especially for housing and small enterprises). With respect to the privatization of the state-owned industry, Lithuania was quite successful, although there was a lack of incentive for the restructuring of the enterprises. There was also a lack of foreign investment and management that resulted from the government’s attitude of favouring domestic companies without foreign capital, which was a cause for a relatively slow privatization process (especially when compared to fellow Baltic State Estonia). Another big difficulty in the implementation of Lithuania's privatization program was experienced in the agricultural sector. Traditionally being a country dependent on agriculture, the rapid privatization alongside the provided laws for the dismemberment of collective farms caused fear and confusion. Many of the small private farms that appeared on the landscape were inefficient and conflicts started to frequently arise over title to land. Many new owners did not intend to cultivate the regained land and as a result tens of thousands of hectares were left fallow. By the mid-nineties, however, about 80 percent of the assets marked for privatization had been sold and the private sector was responsible for producing more than half of the Lithuanian GDP.

Transiting from a centrally planned economy to a market economy needs careful planning and macroeconomic stabilization. Lithuania started stabilization and reform processes with the IMF immediately in 1992. An independent central bank, the Bank of Lithuania, was created in 1990 and began to work in the establishing of an independent currency. The reform program included also a review of the bank licensing system, privatization of the three state banks (Savings Bank, Agricultural Bank, and State Commercial Bank), a review of capital requirements to ensure compliance with international standards, and the introduction of new plans for accounts at the Bank of Lithuania and commercial banks. The government also started to pass stronger bankruptcy legislation and to ensure its enforcement. The national currency was re-introduced (it had already been in circulation before WWII) in the summer of 1993, the Litas, and in 1994 Lithuania pegged it to the US Dollar in order to approach price stability and turned towards a strict policy currency board, the results of which can be seen in the rate of inflation which started decreasing significantly. Nowadays, the Litas is pegged to the Euro.
All these factors have improved immensely the economic conditions of Lithuania, which, from 2000 to 2006 had one of the highest economic growth rates in Europe. ...

Rašto darbo duomenys
Tinklalapyje paskelbta2009-03-30
DalykasTarptautinės ekonomikos kursinis darbas
KategorijaEkonomika >  Tarptautinė ekonomika
TipasKursiniai darbai
Apimtis15 puslapių 
Literatūros šaltiniai27 (šaltiniai yra cituojami)
KalbaAnglų kalba
Dydis99 KB
Viso autoriaus darbų3 darbai
Metai2008 m
Švietimo institucijaUniversity of Amsterdam
Failo pavadinimasMicrosoft Word Lithuania the entry into the eurozone [speros.lt].doc

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