How to opt out from a constrained monetary union: the case of Lithuania,1989-1993

What defines a monetary union? Is any monetary space a monetary union? When a national currency system becomes considered a monetary union under threat of dismantlement? Is a forced monetary order a specific case of monetary union, or a specific type of monetary order that cannot be reduced to it? The last years of the former Soviet Union provide us with a singular series of monetary events that led to the eventual destruction of the Soviet monetary order inherited from the stabilization of the end of the 1920s and the birth of a number of new national currencies in 1992-93. This paper focuses on the case of Lithuania. In the Baltic Soviet republics, the soviet monetary system was already contested in 1987. The irresistible path toward autonomy, sovereignty and eventually independence of the Baltic republics led quickly to obvious projects of monetary opt-out. During this major political crisis that would led to the collapse of the USSR, the soviet monetary system was re-interpreted as a centralized monetary union, and then as a constrained monetary union. In this general context, this paper analyses the difficult process of implementation of a proper monetary system in Lithuania, from the first proposals of monetary restoration to its final act, when the litas, the former monetary unit of pre-war Lithuania, was introduced, in June 1993. It starts with the presentation of a conceptual framework on monetary sovereignty and public faith in money, in order to analyse Lithuania's case. It then presents the moves in the Baltic Soviet republics toward autonomy, then sovereignty and independence, including their monetary expression. It then analyses how the exit was organised in Lithuania and how this horizon had to face the unexpected… and thus had first to go through a highly unpopular provisory money, the talonas. It then details the steps toward the restoration of the definitive and historical money of Lithuania, the litas, and analyses the symbolic aspects of this restoration.