Budget, Financial Services, GDP, Lithuania

"We have (a budget deficit of) 398 mln euros. This is strictly in compliance with the rule that does not allow us to have more expenses," the minister told members of the parliament's Budget and Finance Committee, while presenting next year's draft budget.

"There will be a deficit of 0.6% (of GDP), which the European Commission will likely deem permissible if the Labor Code is regarded and counts as a structural reform," she said.

In Budbergyte's words, next year's budget contains commitments to increase national defense spending and to allocate funds for measures that are part of the new social model.

"We are projecting a small deficit, because there are two key priorities that we stick to. Our draft budget earmarks 150 mln euros for national protection and defense as we move closer to the 2% (of GDP target) in line with our international commitments to NATO. Another very large portion, 254 mln euros, is for the social model," the minister said.

She added that raising the minimum wage and the non-taxable personal income tax threshold would cost the state another 144 mln euros.

The government plans to start discussing next year's draft budget on Oct. 10, a day after the first round of general elections. The bill is to be submitted to the Seimas by Oct. 17.

The government's stability program, approved last April, calls for balancing the public sector's finances in 2017.

Budbergyte told in August that local government budgets and social funds would be balanced in 2017, but the central government budget would run a deficit of 0.6% due to the new social model package, which includes the Labor Code.

If the European Commission recognizes that the new social model is a structural reform, an exception will be applied to expenditure related to the package and Lithuania will not be in breach of fiscal discipline and its commitments.

The general government deficit for 2016 is projected at 0.8% of GDP.