Opinion: From rouble to euro

In capitalism, USD 10 per week

I have experienced a strong wooden rouble when, I think, 62 kopecks could buy you a dollar – this was the official exchange rate. The so-called profiteers in the black market were selling dollars for about five roubles apiece, and the average salary was about 150 roubles pre-tax. Profiteers were raided and sentenced to long years in prison.

Officially, only those lucky enough to have permission to go abroad were legally allowed to purchase dollars. But even then, they could not buy as much foreign currency as they wanted, only a specified sum. For a ten-day tourist trip to the West, which could only be an “everything included” package for soviet citizens, a traveller could buy USD 10-15 – you really had to be creative to bring everyone home a gift they’d asked for. But the official line was that motherland could supply you with everything you needed and 10 bucks to buy coffee and ice cream was enough.

In fact, everything, even toilet paper, was in short supply in those days, so soviet tourists used to take everything they could from hotel rooms. A fountain pen from the hotel, free brochures from museums would be brought home together with stories about abundance of the West.

Later that rouble collapsed together with the entire soviet economy. Monthly salary, in figures if not value, was equal to what you’d previously make in a year, and household income could not keep up with sky-rocketing prices. Decades-worth of savings turned into nothing. Therefore there were no regrets when it came to bid farewell to that currency of the occupant. The Lithuanian government took a short-sighted decision to compensate for the devalued savings. This way it prevented dissatisfaction from exploding then, but took on massive obligation for the future. Voluntarily assumed responsibility for Moscow’s political fiasco pressed down our country’s economic development.

The rouble was replaced with the talonas, which did not even look like proper money, but people were less concerned about the beauty of their new money than its purchasing power. The interim talonas served its purpose for the transitional period. When introducing the litas, nobody regretted abandoning the “animals”. Back then, people believed that life was better in the 1930s, the times of President Smetona, and the litas was a comer from those better days. Moreover, litas notes looked like real money.

Silver Vytautas under the shirt

Under the soviet regime, people could still remember Lithuania’s former currency which came to symbolize the forbidden past. I recall that in my school in Kaunas, it was trendy at one point to wear a silver 10-litas coin featuring a portrait of Grand Duke Vytautas. Of course, you could only sport it under your shirt, so that it was not seen by those who shouldn’t, you would only show it proudly to the closest. I also wanted to be cool, so found such a coin, made a hole in it and was wearing it on my neck so that neither parents nor teachers could see. We were doing something prohibited and we liked it this way.

But it would be ridiculous to call a hidden pendant an act of unconscious resistance. To those who dared to think against the flow, that system seemed nauseating in general. The litas, much like the cross, then carried the meaning of general protest against the totalitarian system. Those who are crying about the litas now are, in fact, crying about their reluctance to be in Europe, although they have nothing against making use of the perks of Europe. Something like this: give me free fodder for my cows and I will sell you milk for the market price.

The litas certainly lived up to all the expectations we had for it in 1993. Over two decades in circulation, it did not once fall into devaluation dips, though there were plenty of opportunity. Of course, this is not the merit of the litas per se. Behind its success are the people who were carefully looking after its health. I will not win much popularity by saying that we should not forget that this stability of the litas was the achievement of the Lithuanian authorities, various institutions which complemented each other: the Bank of Lithuania, the Government and the Seimas. Let’s admit that, in this respect, we do not have any complaints to the authorities.

Certainly, the currency board model helped a lot to maintain stability. First the litas was to the US dollar and later to the euro. Any finance professional will confirm that, because of the currency board, we didn’t have an independent litas. We managed the Lithuanian currency, but did not do it independently from the European Central Bank which manages the euro.

Not identity but a tool

Now, as we have adopted the euro, we are also getting a seat at the table of the European Central Bank. We did not have it before. Decisions about financial steps of the euro zone will now be taken together with a representative of Lithuania. On the other hand, the euro should calm down citizens who do not have trust in our own government, since now on a supervision of our compliance with strict euro zone requirements is in place so that we do not choose to live in debt.

It is a real threat, if our finance minister was someone bursting with optimism and matching revenue estimates to what what the budget needs. The reverse is a safer option, and this is how it works in other reliable countries: both pessimistic and optimistic revenue estimates are rejected, and the average is taken to estimate how much the government should expect to collect in taxes the following year. When you put a cart in front of the horse, it is very easy to fall into a pond. The European Central Bank will supervise our government so that there are no popularity-raising tricks, because we are going to ride a European horse taken from the stables of Europe.

Another very important aspect of the euro adoption, a point that gets too little attention, is increased security. We cannot compare ourselves to big economies like the United Kingdom or Poland, where it easier for the currency to stand against the storms of external crises. For us, a small economy, it is more beneficial not only financially; it is also safer to be in the euro zone which includes 19 economically developed countries with 340m people, rather than to stand in the wind alone.

There are people who feel sentimental about the litas and who see it as a symbol of Lithuanian-ness. When I put this question to an old friend of mine and a true friend of Lithuania, Jon Baldvin Hannibalsson, a former minister of finance of Iceland and later minister of foreign affairs, he laughed it off, adding that over the last 70 years, the Icelandic kroon was devalued about 50 times, and after the financial crash of 2008, the kroon kept only 0.05 percent of its original value. “If the currency is our national identity, then it is worth so little,” he said.

With Europe in joy and misfortune

Today‘s litas resembles the one created by Vladas Jurgutis in 1922 only in name. Back then it served the needs of the state well. Now, nearly a century later, the situation is completely different: it is not enough to export geese to England, you need to be part of the global economy. And breathing at our back is is the power-hungry Kremlin showing its teeth and indulging in delusions of grandeur, preventing us from working with Russia and meeting the needs of its people.

When we joined the EU, a rich European market opened up for our businesses. With the euro, these businesses get the best tool to use in this market. Businesses pay taxes, and the government uses the money to fund welfare, healthcare, education and defence. More successful business will bring more taxes and this will raise prosperity for all, enhance safety and security.

We are politically connected with the EU, the biggest global economy, we are in the most powerful military alliance, NATO. The euro strengthens our relationship with Europe even more, makes us an integral part of Europe. As priests say during marriage ceremony: together in joy and misfortune. We have to realize that our way is the way of Europe. Happy New Year in the euro zone, Lithuania! Happy 19th member, the euro!