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

Markets Associated Press

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.

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"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."

As Lithuania prepares to adopt the euro on Jan. 1, it is 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 is also having 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 percent 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 percent. The problem is not confined to rural villages. Most shopping malls, restaurants and businesses in once busy urban areas are increasingly short of labor.

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"There's simply no more skilled people left here," says Arvydas Avulis, CEO of Hanner company, 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.

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. The central bank estimates the government's borrowing rate would 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 are in favor of joining the euro, as it will cement the country's ties with the West and keep those richer labor markets open to them.

In a Nov. 26 survey by Berent Research Baltic, 53 percent of respondents said they back euro membership, up from 47 percent in September. Some 39 were opposed, down from 49 percent. 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 neighbors 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.

For all the potential economic and security benefits, that means business leaders like Avulis will continue to struggle with a shortage of workers as Lithuania's economy integrates further with the West.

One solution businesses are lobbying for is to facilitate immigration from countries that have even lower wages — Ukraine, Belarus and even China. There has been little progress by the government on that front, however.

Sarmite Mikulioniene, sociology professor at Mykolas Romeris University, warns that in time, worker shortages will hurt the economy, threatening the gains made in the first place by joining the EU and euro.

"There will simply be no one left to do simple jobs here in 10 or 15 years," she said.