Finans : The Government Approved the Most Important Draft Document for the Euro Adoption in Lithuania

Vilnius, January 15.Today the Government approved the draft Law on the Euro Adoption in Lithuania, which establishes the procedure for the preparation to adopt the euro, exchange the litas to the euro, withdrawal of the national currency from circulation, and regulates other practical aspects of the euro adoption. The draft Law will be further discussed in the Seimas.

"Starting to discuss the key document for the euro adoption we are consistently approaching the goal for Lithuania to join the euro zone in 2015, and we send a signal to the markets that there will be no other choice. Moreover, the provisions embedded in the Law should dispel unsound fears of the part of the public that transition to the euro will bring harm to ones and benefits - to others. This will be avoided," Minister of Finance Rimantas Šadžius said.

According to the Minister, after adoption of this Law and its secondary legislation, the legal basis for the euro adoption will be created. This will enhance the image of Lithuania as attractive for investments and reliable country, have a positive impact on business environment and development, and this, on its turn, will positively affect each person's welfare.

Currency exchange

The draft Law establishes that after the euro adoption date the litas will be exchanged to the euro free of charge for an unlimited period and without any limitation on the amount at the Bank of Lithuania (the BoL).Commercial banks and foreign bank branches as well as their units will carry out this transaction under the same terms and conditions for 6 months following the euro adoption date; however, they may set the requirement on which they should clearly notify at client service sites that all willing to exchange an amount exceeding LTL 15 thousand to EUR must inform them in writing on that no later than 3 working days in advance. After 6 months, for another half-year the same transaction will be carried out at bank units, the list of which will be established by the Bank of Lithuania on a proposal by the banks.

Public limited company Lithuanian Post Office will also exchange the litas to the euro free of charge for 60 calendar days following the euro adoption date, and after the expiry of this term, it will be allowed to continue the transaction under the procedure established by them. However, as distinct from the banks, during the entire exchange period the Lithuanian Post Office will be allowed to set a maximum permissible amount in litas to be exchanged to the euro, and it will be obliged to publish it at the sites clearly visible to clients.

After 6 months following the euro adoption date, the banks will be allowed to take the fee established by themselves for exchange of the litas and cent coins or not to exchange them. Whereas the BoL will exchange the litas and cent coins to the euro free of charge for an unlimited period and without any limitation on the amount.

In conversion of the litas to the euro, it is proposed to establish a general mathematical rounding rule: in case the decimal is under 5, it is rounded down, and in case the decimal is 5 or above - it is rounded up. Simultaneously, in order to protect the interests of employees and benefit recipients at the maximum, a more favourable procedure would be applied: in conversion of wages, pensions and other social benefits, in case the third decimal were above 0, one euro cent would be added to the new amount in euro.

The money held in all client accounts will be converted to the euro free of charge by preserving the unique number of an account.

Payments and settlements

Following the euro adoption date all non-cash settlements will be made in euro, automated debit write-offs - following the established terms and conditions or schedule. A credit institution will convert the write-off amount to the euro in accordance with the established rules for conversion and rounding.

Whereas after the euro adoption date VILIBOR will not be calculated, it is proposed to consider references to VILIBOR in all legal instruments as references to EURIBOR.

The obligatory display of prices in litas and in euro starts after 30 calendar days following the date when the EU Council sets the irrevocably fixed conversion rate between the euro and the litas (it is likely that the EU Council will take this decision in July of the current year) and for 6 months after the euro adoption date (by July 2015).

"We expect that dual display of prices will allow reducing the risk of their unjustified increase. Therefore, we just welcome the initiative of business enterprises even now to display the prices of their production both in litas and in euro," Minister of Finance Rimantas Šadžius said. According to the Minister, in this way buyers will be able to get used more quickly to future settlement in euro, have a possibility to compare the difference in the price of the same commodity or service that was before and after the euro adoption.

Having regard to the practice of euro area states and the recommendations by the European Commission, it is proposed that for 15 calendar days following the euro adoption date it were possible to make settlements both in litas and in euro, while the change will have to be given in euro. However, at some places due to sound practical reasons it will be impossible; thus, the proposal is to contemporary set exceptions and allow giving the change in litas in public transport and taxi.

The draft Law on the Euro Adoption in Lithuania also provides the information on publication of the images of the euro banknotes and coins and descriptions of their authentication features, liability in case of breaching the provisions of the Law, reimbursement of the euro adoption costs, and presents proposals to the Government and other institutions within their competence for preparation and approval of legal acts related to the euro adoption.

The draft Law was submitted to the European Central Bank, its comments will be assessed during consideration of the draft Law at the Seimas.

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