“The crucial effect is the drop in interest rates. Two factors are in play here: the stimulating policies pursued by the European Central Bank and by us. Interest rates have been reduced for both businesses and households. The euro itself has, too, contributed to this, since the currency risk gas been eliminated,” Vitas Vasiliauskas, the governor of the Bank of Lithuania, said in a press conference on Monday.
After introducing the euro, Lithuania has received a better credit rating, which allows the government to borrow in international markets cheaper, said Vasiliauskas. With the better rating, Lithuania will spend €70 million less on servicing its 2015 bonds than it would have otherwise.
The introduction of the euro has also helped save €18.5 million on international money transfers. On the other hand, joining the eurozone entails certain financial obligations. Lithuania has to contribute to the European Stability Mechanism and the European Central Bank‘s capital stock, Vasiliauskas noted.
A drop in global oil prices was the main factor pushing down the cost of goods, while some services have grown dearer mainly due to rising wages, according to Vasiliauskas.
“The main factor is the wage and its growth. Sure, we should not rule out the factor of the rounding up of prices. This is particularly relevant after July 1 [2015, when businesses could stop displaying prices in two currencies]. But real income grew much more than prices,” Vasiliauskas said.