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Lithuania, in the person of the former EU commissioner who is now president of the country, went along with the pack in the ongoing Euro crisis. On television one could see Lithuania’s president enjoying the attention of France’s president Sarkozy and looking delighted with herself.

But there is no constitutional or even parliamentary authorization for her making the commitment. And some nations, such as Hungary, are already backing out.

The “Euro-Pact” was an agreement of sorts by 26 of 27 EU member-states to give up a great deal of control over their own nations to the unelected bureaucrats in Brussels in order to support (and, for those states which have not yet adopted the euro) to eventually adopt the euro as their official currency.

What is immensely interesting, and scary as can be, is that there is no up-side to adopting the euro. The crisis in the Eurozone, particularly in Greece and Italy, amply demonstrates the euro’s dangers.  (The danger is that some countries follow an inflationary path, whereas others do not; yet all eurozone countries have the same currency, meaning that it is quite possible for one country to cause grave fiscal difficulties in another.)

But the amazing part is that there is no economic upside. The euro has not increased trade.

There are political ‘benefits,’ however. The euro is an amazing device, operating on the theory of sunk-costs, which strongly militates toward increasing the power of the EU’s bureaucracy. Some, mostly the bureaucrats of various countries, have a nearly-religious belief that this is a good. Apparently the president of Lithuania does, too.

Now, however, would be the time for Lithuania to take a stand and to determine not to enter the eurozone (that is, to decide not to adopt the euro as its currency, displacing the litas). Indeed, it is high time that the Lithuanian litas be de-coupled from the euro.

What does that mean? At present, the litas is, by Lithuanian law, pegged to a certain price in euro currency. Thus it is not a floating currency, and events in the EU, including Greece, faraway Portugal, and exotic Cyprus, all have a distorting effect upon the Litas. Why would Lithuania need this?

Poland’s currency, by way of contrast, is a free-floating currency (the zloty). One would imagine that if the Poles can do it, the Lithuanians could.

But furthermore, Lithuania is surrounded by countries which are not in the Euro zone. Poland (zloty), Sweden (which owns all the large Lithuanian banks) (the Swedish krona), not to mention Russia and Latvia.

If the Lithuanian litas has to be linked to foreign currencies, Lithuania would be better served, one would think, to unhook it from that doubtful euro and set its price in regard to a ‘bundle’ of foreign currencies, such as the krona, the Danish krone, the Polish zloty, the U.S. dollar, the British pound sterling. This would give the Litas stability (in regard to speculation, if that is a legitimate fear) and it would tend to be less inflationary, or at least no more so than with its current status of being tied to the problematic euro.

Will this happen? No. It would take more guts than have been demonstrated. Let us remember that Lithuania was the first to vote in favor of the eventually-defeated EU Constitution – although based upon some rather decent insider information, no one had any real idea what they were voting for (the ‘constitution’ was a series of changes to various treaties, and it was immensely difficult to get a handle on what it all was to mean).

So it goes.


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