Lithuania forumulates crisis plan as global recession begins to hit
By Christina Finn
“We’re sitting on a ticking time bomb,” warned prime minister designate Andrius Kubilius last Monday as Lithuania’s parliament worked on a plan to deal with the world financial crisis.
The plan, which has been agreed by Kubilius’ incoming Conservative government, aims to tackle the Baltic state’s economic slump.
Kubilius, who is expected to officially take the post of prime minister this month after his party won the recent general election, said that there are difficult times ahead. “If we don’t do anything, then the situation will be even more difficult,” he noted.
RÅ«ta PalšauskaitÄ—, a Lithuanian living in Ireland, said that while times are tough for her fellow expatriates, and especially those in the construction sector, it is just as difficult back home in Lithuania. “I know many people who have returned home and cannot find jobs there either,” she said. “If people have jobs here I wouldn’t recommend going home.”
One of the crisis plan’s key reforms is the introduction of a 20 per cent single rate ‘flat tax’. The new government intends cutting the pay of lawmakers and civil servants (the pay cut will not affect teachers). There will also be a reduction in social security payments to better-off families.
“It is inevitable that [Kubilius] will be criticised for these reforms,” said PalšauskaitÄ—.
“People will not be happy to pay more tax, but you have to find the money somewhere.”
Lithuania’s leaders hope the planned reforms will save the state LTL5.3bn (€1.56bn) in 2009 and prevent the looming four per cent deficit of gross domestic product, which is the European Union’s set limit – something that the Irish Government has failed to do.
Since joining the EU in 2004, Lithuania has seen its economy rise rapidly with strong exports and domestic demand, which has in turn fuelled rising wages. The money sent home by some 300,000 Lithuanians who have left to work abroad, mostly in the UK and Ireland, has also been of huge benefit to the growing country.
However, with the nation in the grip of its first major economic slowdown since joining the EU, the government declared that action needs to be taken now.
