Euro generates savings of over €125m for Lithuania

The head of the Central Bank, Vitas Vasiliauskas, said that the benefits from cheaper borrowing under the euro ran to tens of millions of euros in savings.

Citizens and businesses have saved up to €40 million because of the euro effect on interest rates, according to the bank. Due to increases in Lithuania’s credit rating this year, it was possible for the country to borrow with lower interest rates, while total interest expenses for debt securities issued in 2015 will be lower by approximately €70 million.

The euro‘s introduction has also affected euro rates for international transfers – they went down to the level of local commissions. Simply because of the decline of these rates, citizens and businesses have saved up to €18.5 million over the last year.

The head of the Bank of Lithuania, Vitas Vasiliauskas said that “Although the overall assessment of the impact of the euro could only be done after a few years, some indicators this year have already confirmed our expectations based on a quantitative assessment that we had before the introduction of the euro. As expected, citizens, businesses and the entire economy received a substantial benefit of tens of millions based on the less expensive borrowing. Significant amounts are saved on the basis that there are no exchange costs and less expensive transfers in euros.”

Banks did lose income from Litas to euro exchanges, totalling around €10 million over a nine-month period, if that trend continues those losses will rise to €14 million by the end of 2015.

The impact on prices of the euro has been small, with according to Eurostat. The adoption of the euro raised inflation in Lithuania by 0.04–0.11 percentage points (p. p.), the lowest impact on prices of any of the Baltic States. In Latvia, the euro raised inflation by 0.12–0.21 p.p., and in Estonia by 0.2–0.3 p.p.

The adoption of the euro had a more visible impact on prices of some services in Lithuania such as prices in cafeterias and hairdressers, for renting residential buildings and housing repairs, and maintenance services, according to Eurostat.

Overall prices fell in Lithuania this year. In November consumer prices were 0.5% lower than the same month last year, according to the Bank of Lithuania. The bank said extremely low fuel and gas prices, and a drop in heating and administered prices related to it, contributed to the fall. Price increases in the services sector mostly stemmed from increasing wages, said the bank.