Kubilius Says Euro Is `Best Outcome' for Lithuania Even Amid Debt Crisis

Lithuania wants to join the euro “as soon as possible” even as members of the currency bloc struggle through the region’s sovereign debt crisis, Lithuanian Prime Minister Andrius Kubilius said.

“We have a very clear goal to join the euro as soon as possible,” Kubilius said yesterday in an interview in Copenhagen. “The best outcome is to join the euro even with the euro’s problems at the moment.”

Lithuania was the first country to have its bid to adopt the euro rejected in 2006 because its inflation rate was too high. The budget deficit, which was 8.9 percent of gross domestic product last year, almost three times the European Union limit, is now the biggest hurdle to the currency switch.

The government aims to slash the shortfall to about 5.6 percent of GDP in 2011 by controlling spending, boosting revenue from state-owned enterprises and cracking down on the shadow economy to increase tax collection, Kubilius said. Lithuania has set a target of joining the euro in 2014.

The Economy Ministry and Kubilius have backed a plan to improve returns from state assets by pulling its 300 companies into a single holding, shielding them from political influence and increasing transparency. Finance Minister Ingrida Simonyte said Sept. 15 the overhaul of state enterprises may raise 1.5 billion litai ($590 million) for the budget in two years.

The proposal has been criticized by both the ruling coalition and the opposition.

“The holding structure is not the issue,” Kubilius said. “We want to introduce better corporate governance in the state- owned companies. The consolidation of assets into one company is a not a goal, it’s a tactical move.”

‘Steady’ Recovery

Lithuania’s economy, which shrank 15 percent last year, will expand 1.5 percent to 2 percent in 2010, driven by exports, Kubilius said. Exports increased 32.5 percent from a year earlier in July on fuels and plastics, the statistics office said Sept. 9.

“The recovery is really very steady,” Kubilius said. “Next year will be easier.”

The Finance Ministry estimates growth may average 1.6 percent this year.

The government has “very limited instruments” to stem rising food prices, Kubilius said. The Finance Ministry said Sept. 7 that consumer prices may rise 1.1 percent this year, reversing an earlier forecast for deflation.

“Inflation is not a problem yet,” Kubilius said. “We don’t see objective reasons for a big increase in inflation. We’re asking our competitive authorities to look into the market. We’ll try to make sure that somebody doesn’t use factors like the climate to increase prices.”

To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net Milda Seputyte in Vilnius at mseputyte@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net

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