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EC welcomes Lithuania’s fiscal discipline 10 July 2012

Brussels, 30 May. The European Commission adopted recommendations commending Lithuania’s efforts to correct the budget deficit. However the Commission encourages continuing adherence to disciplined spending policies, reform of the pension system, implementation of a number of measures to promote employment, especially for young people, and restructuring the energy sector.

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Annual EC recommendations welcome Lithuanian fiscal policy aiming for a balanced budget by 2015. According to the EC, the general government debt is projected to remain below the EU threshold. However, the Commission emphasizes that fiscal efforts should be made not only this year, but also renewed in coming years.

“Based on the recommendations of the Commission, Lithuania’s economic situation is evaluated really well in the context of EU. The EC welcomed the Lithuanian Government’s efforts to ensure fiscal discipline and carry out necessary economic reforms. On the other hand, the Commission clearly calls for a continuation of the reformist line and intensification of the fight against deep-rooted structural problems, which we all know, but their solution will take time,” Permanent Representative of Lithuania to the European Union, Ambassador Raimundas Karoblis said.

The EC pointed to the country’s ageing society stressing that although Lithuania had adopted a gradual increase in the pension age to 65 years by 2026, this alone would not ensure a sustainable and adequate retirement income in the future. It is therefore recommended to take additional measures aligning the statutory retirement age with life expectancy, establishing clear rules for the indexation of pensions and improving complementary savings schemes.

To tackle unemployment, the Commission recommends improving labour market flexibility and getting rid of administrative hurdles. According to the Commission, Lithuania should give priority to the development of flexible contractual agreements, also to additional measures to enhance participation in the labour market, especially for young people and unskilled persons, and to improve labour market flexibility.

The EC welcomes the initiative of the Government to reform the social support system aiming to reduce the risk of poverty, which is among the highest in the EU. However, the EC suggests increasing work incentives.

The Commission encourages Lithuania to step up measures to improve the energy efficiency of buildings.

The EC states that the lack of competition in energy networks and underdeveloped infrastructure slowed down the country’s economic growth. According to the Commission, it is necessary to promote competition in energy networks by improving interconnectivity with EU countries for both electricity and gas.

For two years the government has been undertaking an ambitious reform of Lithuanian state-owned enterprises, involving legislative as well as organisational changes. Major progress has been made in transparency and accountability. However, the EC invites Lithuania to keep up the pace of reform and further increase the efficiency of state-owned enterprises.

The Commission’s recommendations are to be endorsed by the European Council at the end of June to be formally adopted by the EU Heads of State and Government in Brussels.

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