Lithuania welcomes euro but wave of emigration a painful side-effect of closer ties with West

VILNIUS, Lithuania – When Antanas Zubavicius turns the light on in his run-down house, it’s the only light for miles. He is the last man in Dumbliuneliai, a once busy farmers’ village in Lithuania that has gradually been abandoned as its residents emigrated in search of better jobs.

“I’m not going anywhere. This is my land,” the 60-year-old says, waving at the abandoned, shuttered houses around him. “When I am gone this village is gone too.”

Lithuania became the 19th country to adopt the euro on Thursday, hoping that membership in the European Union’s official currency will bring a rise in investment and trade. But the Baltic country’s increasing integration with richer European countries has also a pernicious side-effect: a wave of emigration that is emptying towns and causing worker shortages.

Emigration has been on the rise since 2004, when this country of 3 million people joined the EU, whose membership guarantees freedom of movement.

During the 2008-2011 financial crisis, more than 80,000 people — almost 3 per cent of the population — left every year, mainly to Germany, Britain and other richer economies to earn salaries many times higher. Experts forecast that trend to continue, or even increase.

In the field of construction, business owners complain it is impossible to keep hold of workers, even with massive annual wage increases of 10 to 20 per cent. The problem is not confined to rural villages. Most shopping malls, restaurants and businesses in once busy urban areas are increasingly short of labour.

“There’s simply no more skilled people left here,” says Arvydas Avulis, CEO of Hanner, a leading real estate investor and developer that specializes in high-rise construction.

A quick look at wage figures shows why. A manual worker in Lithuania can expect to earn 1.80 euros ($2.20) an hour compared with 4.30 euros ($5.24) in Spain and 8.60 euros ($10.50) in Ireland, according to the EU statistics agency.

In the more skilled sectors like computing, medicine or the services industry, where Lithuania’s educational system produces highly qualified graduates, wage differences are even greater.

In her New Year’s speech, President Dalia Grybauskaite said accession to the euro area is “our opportunity to grow and develop as a modern European state, to set ourselves new goals and look firmly to the future.”

On Wednesday — the day before the official changeover to the euro — Lithuanian Prime Minister Algirdas Butkevicius thanked those who introduced the litas back in 1992 and welcomed the incoming euro. “It will be the new tool to guarantee greater economic and political security,” he told a meeting of bankers and business leaders.

Shoppers filled stores on Wednesday in a last-minute bid to get rid of litas despite assurances by the central bank that the national currency will be accepted throughout Lithuania until mid-January.

“I had several thousands (of litas) left at home and decided to get rid of those before its too late. It’s a win-win; I did not have to wait in line at the bank and will surprise my kids,” said Mindaugas Kazlauskas, an engineer, who purchased a gaming console.

Euro membership is expected to help Lithuania’s economy, even though the currency bloc is struggling to grow. Having the same currency as 18 other richer economies will facilitate commerce and reduce investment risks for foreigners. Government borrowing rates are forecast to drop by almost 1 percentage point, which would filter down to the private sector.

The problem is that Lithuania is the bloc’s poorest member and even though its economy is growing at a stronger pace than most EU countries, it has a long way to develop before it can hope to offer wages on a par with other EU states.

Unsurprisingly, most Lithuanians favour joining the euro, as it will cement the country’s ties with the West and keep those richer labour markets open to them.

In a Nov. 26 survey by Berent Research Baltic, 53 per cent of respondents said they back euro membership, up from 47 per cent in September. Some 39 were opposed, down from 49 per cent. A total of 1,002 people were interviewed for the poll, which had a margin of error of 2.5 percentage points.

Skeptics worry about the euro’s recent problems with government debt and economic stagnation.

Pranciskus Sliuzas, a journalist and anti-euro activist, describes joining the euro as “one of the most stupid things of all time.” He laments the fact that Lithuania is giving up some national powers, such as the ability to determine its interest rates or budget deficit.

For others, such economic arguments are of secondary concern to issues like national security — in particular the fear of an increasingly aggressive Russia. Along with neighbours Latvia and Estonia, Lithuania was occupied by the Soviet Union for almost five decades.

“I think it would be a good thing to get closer to the rest of Europe as the only other option is to become friends with (Russian President Vladimir) Putin,” said Janina Gailiene, a retired primary school teacher in Vilnius.