Talk of adopting the euro is thin on the ground before Lithuanian elections next month as politicians align with popular opposition to the switch.
The Baltic nation will abandon the litas “when the euro zone is ready,” Prime Minister Andrius Kubilius said August 28, putting into question a 2014 target to follow Estonia into the currency. While Latvian officials retain plans to join the euro area that year, support among the population is at a record low.
Latvia and Lithuania, the only remaining eastern EU members to have planned fast-track euro adoption, are among the fastest- growing economies in the European Union after record budget cuts in 2009-2010. They are losing their appetite for the euro, once considered a tool to spur growth and increase confidence across eastern Europe, as the 17-nation currency union grapples for a third year with a deepening debt crisis.
“It’s clear that the attractiveness of the euro area has suffered from the euro crisis,” said Christian Schulz, senior economist at Berenberg Bank in London. “These rescue packages, if you have to contribute to them, look expensive. For politicians, there’s relatively little to gain from advocating euro entry.”
Latvia’s economy is outpacing that of Estonia, which adopted the euro in 2011, surging 5 per cent from a year earlier in the second quarter, the EU’s fastest clip. Lithuanian gross domestic product matched Estonia’s 2.2 per cent growth rate.
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