Opinion of the European Central Bank of 20 July 2009 on the procedure to change the official litas exchange rate (CON/2009/61)
Date: 2009-07-20
Institutions: European Central Bank
Subjects: Lithuania, exchange rate, exchange-rate mechanism, money, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 20 July 2009 

on the procedure to change the official litas exchange rate 

(CON/2009/61) 

Introduction and legal basis 

On 23 June 2009 the European Central Bank (ECB) received a request from the Speaker of the Seimas 

(Parliament) of the Republic of Lithuania for an opinion on a draft law amending Article 3 of the Law on 

the credibility of the litas (hereinafter the ‘draft law’). 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European  Community  and  the  first  and  third  indents  of  Article 2(1)  of  Council  Decision  98/415/EC  of 

29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft 
legislative provisions1, as the draft relates to currency matters and Lietuvos bankas. In accordance with 

the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing 

Council has adopted this opinion. 

1. 

Purpose of the draft law 

1.1  The  main  purpose  of  the  draft  law  is  to  amend  the  Law  on  the  credibility  of  the  litas  in  order  to 

include  the  Parliament  in  the  procedure  for  changing  the  anchor  currency  and/or  official  litas 

exchange rate. 

1.2  According  to  Article  3(3)  of  the  Law  on  the  credibility  of  the  litas,  Lietuvos  bankas,  upon 

coordination  with  the  Government,  has  been  delegated  the  power  to  change  the  anchor  currency, 
currently the euro2, and/or the official litas exchange rate. This power may only be exercised under 

extraordinary  circumstances,  where  maintaining  the  established  exchange  rate  of  the  litas  would 

have a destructive effect on the stability of the national economy. 

1.3  According  to  the  draft  law,  Parliament  becomes  responsible  for  deciding  if  such  extraordinary 

circumstances  exist.  Parliament,  which  previously  played  no  role  in  this  process,  takes  on  an 

1 
2 

OJ L 189, 3.7.1998, p. 42.  
Lietuvos bankas decided to set the euro as the anchor currency and to set the official litas exchange rate as 3.4528 litas to 
1  euro  from  2  February  2002  (Resolution  No  15  of  the  Board  of  Lietuvos  bankas  of  1  February  2002  ‘On  the  anchor 
currency  and  the  official  litas  exchange  rate’  (Valstybės  žinios,  2002,  No  12-453)).  This  decision  was  taken  upon 
coordination with the Government (Resolution No 157 of the Government of 1 February 2002 ‘On the endorsement of 
the  proposal  of  Lietuvos  bankas  concerning  the  anchor  currency  and  the  official  litas  exchange  rate  and  the  repeal  of 
resolutions of the Government’ (Valstybės žinios, 2002, No 12-417)). 

 
 
 
 
                                                 
important  role  in  the  procedure  to  be  followed  when  the  anchor  currency  and/or  the  official  litas 

exchange rate is to be changed. 

2. 

General observations 

2.1  According to Article 124(2) of the Treaty, each Member State with a derogation as referred to in 

Article 122(1) of the Treaty will treat its exchange-rate policy as a matter of common interest. 

2.2  On  27  June  2004,  at  the  request  of  the  Lithuanian  authorities,  the  ministers  of  the  euro  area 

Member  States,  the  President  of  the  ECB  and  the  ministers  and  the  central  bank  governors  of 

Denmark and Lithuania decided, by mutual agreement, following a common procedure involving 

the European Commission and after consulting the Economic and Financial Committee, to include 

Lithuanian litas in the Exchange Rate Mechanism II (ERM II). The central rate of the Lithuanian 

litas was set at 1 euro = 3.45280 litas with a standard fluctuation band of ± 15 %.  

2.3  The  draft  law  will  amend  the  procedure  for  changing:  (i)  the  anchor  currency;  and/or  (ii)  the 

official litas exchange rate. As regards the possibility to change the anchor currency (the euro), the 

ECB notes that although Member States with a derogation do not yet participate in economic and 

monetary union, they have a legal duty to start preparatory work for the adoption of the euro and to 

ensure the compatibility of their legislation with the Treaty and the Statute of the European System 

of  Central  Banks  and  of  the  European Central  Bank  (hereinafter  the  ‘Statute  of  the  ESCB’)  with 

respect to Eurosystem-related tasks. In this context, the ECB is of the opinion that the provisions on 

a  possible  change  from  the  anchor  currency  (the  euro)  to  any  other  anchor  currency  are  not 

compatible  with  Lithuania’s  membership  in  ERM  II,  its  obligations  under  the  Treaty  and 
Lithuania’s goal of introducing the euro and becoming part of the euro area3.  

3. 

Establishing and changing the exchange rate 

3.1  According to Article 1.1 of the Agreement of 16 March 2006 between the European Central Bank 

and  the  national  central  banks  of  the  Member  States  outside  the  euro  area  laying  down  the 

operating  procedures  for  an  exchange  rate  mechanism  in  stage  three  of  Economic  and  Monetary 
Union4  (hereinafter  the  ‘ERM II  Agreement’),  the  parties  participate  in  a  joint  notification  to  the 

market of the bilateral central rates, and any changes to them, between the participating non-euro 

area currencies and the euro as agreed following the common procedure specified in paragraph 2.3 

of the Resolution of the European Council of 16 June 1997 on the establishment of an exchange-

3  

4 

See, for example, the Ecofin conclusions of 7 November 2000, which provide that ‘The ERM II could accommodate the 
main features of a number of exchange rates regimes, provided their commitments and objectives are credible and in line 
with those of the ERM II. The only clear incompatibilities vis-à-vis the ERM II that can be identified already at this stage 
are … pegs against anchors other than the euro’. 
OJ C 73, 25.3.2006, p. 21. 

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rate mechanism in the third stage of economic and monetary union5 (hereinafter the ‘Resolution’). 

Lietuvos bankas, as party to the ERM II Agreement, is bound by these conditions. 

3.2  Paragraph 2.3 of the Resolution provides that decisions on central rates and the standard fluctuation 

band are taken by mutual agreement of the ministers of the euro area Member States, the ECB and 

the  ministers and central  bank governors of the non-euro area Member States participating in the 

mechanism,  following  a  common  procedure  involving  the  European  Commission,  and  after 

consulting  the  Economic  and  Financial  Committee.  It  also  provides  that  all  parties  to  the  mutual 

agreement,  including  the  ECB,  will  have  the  right  to  initiate  a  confidential  procedure  aimed  at 

reconsidering central rates. 

3.3  The Law on the credibility of the litas was adopted on 17 March 19946. Article 3 of this Law, on 

the  procedure  for  establishing  and  changing  the  official  litas  exchange  rate,  was  last  amended  on 
20 July 19947, well before Lithuania’s entry into the European Union. It has no direct references to 

Community legal acts and/or instruments in the field of exchange rate mechanisms. 

3.4  Despite  this  shortcoming  in  the  Law  on  the  credibility  of  the  litas,  the  ECB  understands  that 

Lietuvos  bankas  would  follow  the  procedures  described  in  the  ERM  II  Agreement  and  the 

Resolution  when  reconsidering  the  central  rate,  under  which  confidentiality  is  of  utmost 

importance. 

4. 

Final observations 

In the ECB’s view, there is an inconsistency between the provisions of the draft law on the amendment to 

the  procedure  to  change  the  official  litas  exchange  rate,  which  provide  for  the  involvement  of  the 

Parliament in this procedure, and the provisions of the Law on Lietuvos bankas, in particular Article 3(2) 

and Article 8(1)(3), which delegate to Lietuvos bankas the function of determining the litas exchange rate 

regulation  system  in  an  independent  manner;  such  inconsistency  would  create  uncertainty  for  Lietuvos 

bankas in fulfilling the tasks conferred upon it.  

The ECB notes that the national legislation must ensure that Lietuvos bankas’s primary goal of preserving 

price stability is maintained.  

5 
6 
7 

OJ C 236, 2.8.1997, p. 5. 
Valstybės žinios, 1994, No 24-378. 
Law No I-566 on the amendment of Article 3 of the Law on the credibility of the litas (Valstybės žinios, 1994, No 59-
1157). 

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This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 20 July 2009. 

[signed] 

The Vice-President of the ECB 

Lucas D. PAPADEMOS 

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