Budget, Economics, EU – Baltic States, Financial Services, Legislation

Both the Latvian government and the Commission expect the country's economic growth to reach 3% in 2016. According to the Commission's projections, Latvia will record the fastest economic growth in the Baltic countries this year and in 2016. However, negative impact from the external environment, including unstable geopolitical situation, may affect macroeconomic indexes in 2016.

The budgetary plans of five eurozone members in the preventive arm of the SGP – Germany, Estonia, Luxembourg, the Netherlands and Slovakia – have been found to be compliant with the requirements for 2016 under the SGP. For Belgium, Latvia, Malta and Finland, the draft budgetary plans are found to be broadly compliant with the SGP requirements.

Draft budgetary plans for three countries – Italy, Lithuania and Austria – pose a risk of non-compliance with the requirements for 2016 under the SGP. Budget deficits in five eurozone members – Ireland, France, Portugal, Slovenia and Spain – exceed 3% of gross domestic product and they will be applied excessive deficit procedure.

Cyprus and Greece do not need to submit draft budgetary plans because they are currently subject to macroeconomic adjustment programs.

There's a risk that Lithuania's budget expenditure will exceed revenues by more than it is estimated, the European Commission said on Tuesday.

Brussels believes Lithuania might fail to meet its commitment for the structural deficit not to exceed 1% GDP.

"The Commission is of the opinion that the Draft Budgetary Plan of Lithuania, which is currently under the preventive arm, is at risk of non-compliance with the provisions of the Stability and Growth Pact," the EC said in a statement.

The Government of Lithuania's economic growth outlook is too optimistic, Brussels says.

"The Commission therefore invites the authorities to take the necessary measures within the national budgetary process to ensure that the 2016 budget will be compliant with the Stability and Growth Pact," the Commission said.

Under Lithuania's first draft budget assessed by the EC, the 2016 budget deficit is estimated at 1.1% GDP.

The central government's budget for the next year is planned with EUR 8.004 billion in revenue, up by 0.2% compared with this year, and EUR 8.655 billion in expenditure, up by 3.1%. The budget deficit is projected to widen by 59.6% to EUR 651.5 million.

The state and municipal budgets' revenues will stand at almost EUR 3.394 billion (EUR 2.111 billion, including EU and other aid funds) and spending will amount to EUR 10.045 billion.

The Commission provided its opinions for the 2016 draft budgetary plans (DBP) of member states, according to which Estonia's draft budgetary plan is in accordance with the requirements of the Stability and Growth Pact (SGP).

"Three years into the implementation of the euro area's new budgetary framework, most countries are compliant or broadly compliant with the requirements. The euro area continues to improve its public finances, helped along by a strengthening economic recovery," Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs, said in a press release.

No DBP for 2016 has been found in particularly serious non-compliance. In several cases, however, the Commission finds that the planned fiscal adjustments fall short, or risk doing so, of what is required by the SGP.

Estonia is one of the five countries, in addition to Germany, Luxembourg, the Netherlands and Slovakia, whose budget plans are found to be compliant with the requirements under the SGP. In 2014, Estonia exceeded its medium-term budgetary objective, and is estimated to do that also in 2015 and 2016.