Lithuania Budget Review Threatens Euro Goal, Central Banker Says

A proposed revision of Lithuania’s 2013 budget may threaten the country’s goal of adopting the euro in two years, central bank Governor Vitas Vasiliauskas said.

Parliament asked the government last month to allocate more money to local governments, whose costs have risen since the minimum wage increased in January. Lawmakers are able to suggest other budgetary changes during discussion of the proposal.

“To qualify for adopting the euro in 2015, the main accent must be keeping public finances under control,” Vasiliauskas told reporters today in the capital, Vilnius. “Let’s be realistic -- I don’t see that we have any room for maneuver.”

Lithuania would probably be the last Baltic country to adopt the euro after Estonia made the switch in 2011 and with Latvia set to follow suit next year. To qualify, the government plans to bring the budget deficit within the European Union ceiling of 3 percent of gross domestic product, narrowing the 2013 gap to 2.5 percent from 3.2 percent last year.

Assuming this year’s fiscal goal is met, “the 2014 budget will be what ultimately determines Lithuania’s chances to adopt the euro” during a “window” of low inflation that’s expected to stay open until 2015, according to the central bank chief. Meeting the EU inflation limit “shouldn’t be much of a problem,” Vasiliauskas said.

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