H.E. Mr. Vidmantas Purlys:

I will outline my country's preparations for the introduction of the euro on 1 January 2015. Membership of the eurozone is a long-standing strategic priority for Lithuania and a major objective for the Lithuanian Government in 2014. I will structure my presentation in three parts. First, I will outline the key considerations behind our strategy. Second, I will speak about Lithuania's compliance with the Maastricht membership criteria and summarise the practical steps taken by the Government in preparation for the introduction of the euro. Third, I will present a broad economic perspective for Lithuania.

Lithuania aims at a sustainable fulfilment of the Maastricht criteria with a target date to adopt the euro on 1 January 2015. Our commitment to join the euro area is enshrined in the EU Treaty; Lithuania has been participating and adhering to the Exchange Rate Mechanism, ERM, II commitments since 2004. We believe that an enlargement of the eurozone will benefit not only Lithuania via investment, trade and access to credit but also the Economic and Monetary Union and its individual members of the eurozone, including Ireland, because it would send a positive signal to the markets about the vitality of the euro project.

Lithuania is an open, trading nation. The EU is Lithuania’s main trading partner. Two thirds of our total exports go to the EU, with 30% going to the eurozone, and 80% of our FDI comes from the EU, with 40% from the eurozone. Our loan portfolio is 69% euro denominated. In terms of income convergence Lithuania is making steady progress. Real GDP per capita was 32% of the EU average in 1996 but in 2012 it stood at 64% in terms of purchasing power parity.

The course of deepening Lithuania’s integration with the EU was also informed by strategic and security considerations. The current aggression towards Ukraine highlights this imperative even more strongly. We are ready to assume all the commitments of euro membership, such as fully fledged participation in the European Stability Mechanism and adoption of the provisions of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. We are ready to work with other EMU members to make the euro area stable and credible.

Enlargement of the euro area and recent reforms in EMU, to which Lithuania contributed during its Presidency of the Council of the European Union, also prove the dynamism and credibility of the euro project. Lithuania’s prospective membership in the euro area serves as an anchor for prudent fiscal and economic policies that the country focuses on in building a balanced and competitive economy. Lithuania has demonstrated its ability to deal with the impact of the global downturn without external assistance and has undergone a significant financial and economic adjustment in the recent years.

Currently, Lithuania fulfils the Maastricht criteria. Prudent fiscal policy underpinned by the law on fiscal discipline and the Stability and Growth Pact is at the core of Lithuania’s policy framework to ensure macro-economic stability. Over the past several years Lithuania has implemented substantial fiscal consolidation measures which brought the post-crisis general government deficit from 9.4% of GDP in 2009 to 3.2% of GDP in 2012. The forecast for 2013 is 2.5%, compared to the Maastricht reference value of 3%. The general government debt, which was estimated at 39.5% of GDP in 2013, is one of the lowest in the EU and is projected to decline in the medium term. The Maastricht reference value is 60%. Lithuania continues to strengthen its fiscal framework, inter alia, through transposing the fiscal compact into its national legal system.

The annual average inflation rate fell sharply from the peak of 11.1% in 2008 to 1.2% in 2013. It has further moderated and is projected to remain stable with domestic price pressures firmly contained. The forecasted inflation for 2014 is 1%, compared to the Maastricht reference value of 1.6%. Lithuania pegged its national currency, the litas, to the euro at a fixed exchange rate of 3.4528 litas per euro on 2 February 2002 under the currency board arrangement. As I have already mentioned, Lithuania has been part of ERM II since June 2004. Aiming at full harmonization of national legislation with the requirements of EU law, the amendments to the law on the Bank of Lithuania and the law on the National Audit Office have been adopted by the Seimas, the Parliament of Lithuania. As a result, Lithuania’s national legislation is in line with the legal convergence requirements under the Treaty of Functioning of the European Union, the Statute of the European System of Central Banks and of the European Central Bank. Over the past several years long-term interest rates in Lithuania have decreased from 14% in 2009 to 3.83% in 2013, attesting to increased investor confidence in Lithuania’s fiscal policy and the stability of the financial market. The Maastricht reference value is currently 5.4%.

The national euro changeover plan and the information and communication strategy were approved on 26 June 2013 and updated on 4 December 2013. On the same day the Government of the Republic of Lithuania approved the action plan for the implementation of the national euro changeover plan.

The plan paved the way for the preparatory works by public and private institutions and includes provisions relevant to the dual display of prices, conversion of the litas - our national currency - to euro and the rounding and adaptation of information systems, as well as other measures. The implementation of the plan and strategy is co-ordinated by the special commission chaired by the Prime Minister, which is supported by the set-up of designated working groups. The information campaign is divided into stages and is focused both on informing the public about the practical aspects of euro introduction and on explaining the functioning of the euro area and implications of joining it in a broader context.

Let me now turn to the broader economic outlook. Since 2011, Lithuania has remained one of the fastest-growing economies in the EU. In 2012 Lithuania’s GDP rose by 3.7% - the third highest rate in the EU - while in 2013 real GDP growth was 3.2%. Growth is forecasted to be above the EU and euro area average in 2014-2016. The growth profile is balanced among the macroeconomic categories, such as consumption, investments, and exports. In particular, investment is rebounding and net exports continue to be one of the main drivers of growth. The growth pattern is much healthier than in the pre-crisis period, with wages rising in line with productivity, the current account staying close to balance, and credit in the economy more strictly monitored under the responsible lending guidelines issued by the Bank of Lithuania in 2011. The improved economic situation manifests itself in the labour market. In 2013, the unemployment rate was 11.8%, down 1.6 percentage points from the previous year, and it is projected that it will continue to decline in the medium term. The financial stability framework is robust; the banking sector is liquid and well capitalised, and steps have been taken to strengthen further macro-prudential policy, including the adoption of responsible lending regulations.

The resilience and flexibility of the Lithuanian economy is underpinned by the structural reform agenda, focusing on restructuring of the energy sector, reforms in the labour market that increase competitiveness and reforms in company law that bring improvements to the business climate. Energy sector reforms are particularly relevant and constitute one of the national priorities for Lithuania. These include a programme of apartment block renovation, alternative supply of electric power through interconnectors with Poland and Sweden, a liquefied natural gas terminal on the Baltic Sea to become operational by 2015, and other measures. These are relevant not only in terms of improving the competitiveness of our economy, but also in addressing our over-reliance on a single energy supply and diversifying the ways and means of bringing natural resources such as gas and electricity to our economy.

Improvement of the business environment has been recognised by international organisations. The Doing Business 2014 report, as compared to the same report for 2013, states that Lithuania improved its global ranking by ten positions, and now ranks 17th in terms of ease of doing business.

In conclusion, I would like to mention that Lithuania values Ireland’s support during the process of becoming the 19th member of the eurozone. Ireland and Lithuania are like-minded countries, active and responsible members of the international community. Co-operation on a bilateral level and in international forums is very close. In this context, I would like to recall our joint work as troika members in the OSCE in 2011 and 2012, as trio members of the Presidency of the Council of the European Union in 2013, and currently in the UN, where Lithuania sits on the UN Security Council and Ireland is a member of the UN Human Rights Council.

Contacts regarding the introduction of the euro are ongoing at intergovernmental level. Of course, the purpose of engaging with our Irish counterparts and colleagues in other member states is to reassure them that Lithuania is on the right track in preparing for the euro.

Finally, 11 March is a very special day for Lithuania, as it was this day 24 years ago that the Lithuanian Parliament adopted a resolution that restored the independence of Lithuania, and this set the course for the nation to move towards European and Euro-Atlantic institutions, where we naturally belong. We have made a great deal of progress. We became members of the EU and NATO in 2004, and we are members of all major international organisations. The introduction of the euro is yet another major step in integrating into the European Union. I thank committee members for their attention and I look forward to their questions and comments.