Lithuanian Inflation Remains an Obstacle to Euro, Premier Says

Lithuanian inflation will probably be the biggest obstacle to euro adoption in 2014 after it derailed a 2007 attempt by the country to qualify for the currency switch, Prime Minister Andrius Kubilius said.

Consumer-price growth may slow to 2.5 percent this year from 4.1 percent in 2011, Kubilius said in an interview in Brussels today, reiterating estimates by the Finance Ministry.

The Baltic nation’s government plans to cut the budget deficit to 3 percent of gross domestic product this year to qualify to join the currency union. Lithuania’s attempt to adopt the euro at the start of 2007 failed after inflation exceeded the threshold by 0.1 percentage point.

“We would hope that the euro club will be in a better shape” by 2014, Kubilius said. “A more consolidated European economy that is coming out from this crisis is what is needed for Lithuania.”

The goal of euro adoption is unlikely to be challenged in the general election scheduled for October, Kubilius said.

The election campaign will be “a tough fight” with the opposition parties, the prime minister said. Kubilius said he is “optimistic” about the prospects for his Homeland Union- Christian Democrat Party, which plans to campaign on the positive results of the austerity program his government implemented in the past three years.

To contact the reporters on this story: Milda Seputyte in Vilnius at mseputyte@bloomberg.net; James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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