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Dalia Grybauskaite (Photo: Šarūnas Mažeika/Delfi)
Image: Delfi

Goodbye, litas

Monika Griebeler / ai
March 9, 2013

Lithuania wants to join the eurozone in 2015 - despite the crisis. Talking to DW, President Dalia Grybauskaite explains why she's still convinced the euro is a good choice and where the southern EU states went wrong.


Deutsche Welle: It's been almost ten years now since Lithuania became a member of the European Union. Now the next step is about to be taken: introducing the euro in 2015 - despite the ongoing economic crisis. Why?

Dalia Grybauskaite: Let's first say that the economic crisis is not a euro crisis. There are also economic difficulties in countries that do not have the euro - while at the same time, there are eurozone countries that don't have any difficulties. In our accession treaty there is a part that says that we will introduce the euro as soon as possible. So it really is an obligation based on that treaty.

In the case of Lithuania, we already de facto have the euro because we have a currency board system that pegs the litas to the euro at a fixed, strong rate. And in reality, our monetary policy very much depends on the European Central Bank. We do not have monetary instruments of our own. We have only the obligations and restrictions and not the benefits that we would have if we had the euro. There are enough reasons to join the eurozone as soon as we can.

However, some countries that are members of the eurozone are in a deep financial crisis. Other countries have to step in and help out. There are discussions whether the euro is stable enough. Aren't you afraid the system might collapse?

I don't think it's about the euro at all. It's about economic and fiscal policies and political responsibility in some member states - which was not always the case. So you cannot blame the euro if within your country you're unable to make responsible political decisions.

You took political responsibility when the crisis hit Lithuania in 2009 and applied severe austerity measures. You did not apply for financial assistance from the International Monetary Fund (IMF). You even said: "Countries who do that cannot help themselves, showing that they are weak." Why did you choose this approach?

I think that Lithuania was very well able to do it on its own, without dictatorship from outside. And this is exactly what I meant: If political will and political responsibility are in place, you don't need anybody to help you. It is only up to you how you manage your country. And the lack of this kind of responsibility is exactly the problem in some of the southern European countries.

Latvia, your neighboring country, did apply for financial assistance. Now it is one of the strongest growing countries. Did you make the right choice?

As economists we say: the harder you fall, the stronger your growth will be. So it depends on from what basis you calculate the growth. But Lithuania is one of the largest growing economies. I think last quarter we were the third in growth. But this is healthy growth because our drop was not as huge as in Latvia.

As a politician you can be proud to make such a decision and to take all the responsibility. Because I had the experience of dealing with the IMF previously, in 1999 after the Russian crisis. And my experience was that nobody will help - neither the IMF, nor any EU programs or funds - unless you are able to manage your country well.

You mentioned the southern European countries - Spain, Greece. They had these severe austerity measures like you had here in Lithuania. However people there went on the street, they protested. You didn't have that here.

I will say that even they didn't have such severe cuts as we had! In two years we cut 12 percent of our GDP in consumption because we knew that for us there was no choice. The markets had been closed at that time. The help we would be receiving was not coming as fast as we needed it. These fast decisions were made by the government with my support.

But of course it's about how you persuade people. And you have to begin with yourself - that means my salary as a president was cut by practically 30 percent! The government's top salaries have also been cut very much. If I ask people to be patient and to suffer, I need to set an example. The same goes for any politician who is in power. So only by giving a personal example, by winning the trust of the people, you can persuade people to wait a little bit and believe your promise that there will be a recovery. And we managed this in two years! We're slowly starting to recover salaries. But that's about trust between politicians and people.

Is it also about a difference in mentality?

Sometimes we blame ourselves for being too self-critical, less optimistic than in Southern European countries. But I don't really want to blame that on mentality. I think that mistrust between the political elite and the people had probably been growing for too long in some Southern European countries. And this affected quite negatively those countries' societies and economies. Of course people were not happy here with the austerity measures but it was a necessity. Because these measures helped us to restore our economy: within one and a half years we started to grow. So that shows that we didn't have to suffer for too long.

What do you expect for Lithuania's future - no more crisis?

I think things will get better each year. As a joke I might say that if we survived 50 years of [Soviet] occupation, we will also survive better times. But of course, it will depend very much on who is in power. Populism is growing everywhere, probably as a result of economic difficulties. Traditional political parties are losing, bit by bit, because they are not able to transform themselves, to reform themselves fast enough. And the population gets more and more frustrated with this. So these are trends and developments that are similar across all of the European Union.

Since 2009, Dalia Grybauskaite has been president of Lithuania. Before that she worked for the EU Commission on financial planning and budgeting. Echoing Margaret Thatcher, the economist is often referred to as the "Iron Lady" within Lithuania. In May she received the Charlemagne prize from the German town of Aachen for her contributions to European integration and for her country's exemplary progress within the EU.

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