Analytics, Economics, EU – Baltic States, Financial Services, Inflation, Lithuania, Markets and Companies

The rise in daily consumer goods and services is one of the most obvious effects of giving up national currencies and introducing the euro observed in the EU countries.

Economist Valdemaras Katkus predicts that after the introduction of the euro, inflation in Lithuania will also go up due to the rounding of prices. "Some goods will not be possible to divide from 3.45 (according to the existing exchange rate, EUR 1 equals to LTL 3,4528). Naturally, most traders and industrial companies will be rounding the prices up. It is in the nature of a human and there is nothing you can do to avoid it," said the economist. Katkus has no doubts that salaries and wages will be rounded most likely down. Actually, in his opinion, public and private sectors will do that differently.

"Business sector will definitely consider if to use rounding-down or not. In this case, it might result in huge differences between wages and prices," said the economist.

The National Changeover Plan approved by Lithuanian Government declares that all the measures will be taken to prevent abuse in converting prices, wages, pensions, social benefits. Still all the provided measures are only recommendations. Katkus is absolutely sure that these measures will be ineffective. "In my opinion it is impossible to avoid abuse in converting prices. Private companies determine prices on their own in the free market. The Government can say whatever it likes yet there was no discipline in converting prices during the introduction of the euro even in a such disciplined country as Germany," said the economist.