Analytics, EU – Baltic States, Financial Services, Legislation, Lithuania

Photo: lrp.lt

Lithuania received comments and recommendations on fiscal discipline, public finance management, rigid labour market, pension reform, and social exclusion.

In its report, the European Commission states that growing budget expenditure is a matter of concern to Lithuania. It may negatively affect the budget for 2015-2016 and the planned deficit reduction. Lithuania needs to control expenditure, adhere to a responsible finance policy, improve tax collection and curb the shadow economy.

"The recommendations presented by the European Commission indicate that we need to be concerned about the growing budget deficit. Irresponsible financial populism ahead of general elections gives rise to ungrounded expectations, harms economic growth and hinders competitiveness. Excessive spending can be dangerous in case of an economic slowdown," the president said.

The Commission also underlines that a rigid labour market and a heavy burden of labour taxation have become a major drag on the Lithuanian economy. Lithuania is recommended to lower taxes for low-income earners, improve employment opportunities and not to delay decisions ensuring more flexibility to labour relations.

The Commission also recommends Lithuania not to ignore the fall in the working-age population and to ensure that education should be relevant to the labour market.

The Commission highlights the ineffective healthcare system which does not correspond to the needs of the Lithuanian people: it is necessary to improve access to quality services, reduce prices for medicines and fight bribery.

The third important welfare-related area, which requires immediate action is the faltering pension reform and continued social exclusion.

The Commission recommends that Lithuania relate the retirement age to longer life expectancy, set clear rules for the indexation of pensions, promote voluntary pension savings schemes, and ensure a rational and adequate distribution of social benefits.

According to the president, the European Commission's report is a direct obligation for the Lithuanian Government to take immediate measures for economic growth and general well-being.

In order to deal with possible economic and demographic challenges, we need to continue responsible financial policies and push for structural reforms with more determination.