The European Commission recommends Lithuania to reinforce the budgetary measures for 2014 in the light of expenditure growth exceeding the benchmark and the emerging gap of 0.3% of GDP in terms of structural effort based on the Commission 2014 spring forecast, pointing to a risk of significant deviation relative to the Stability and Growth Pact requirements, to complement the budgetary strategy with a further strengthened fiscal framework, in particular by ensuring binding expenditure ceilings when setting the medium-term budgetary framework.
It is recommended to further review the tax system and consider increasing those taxes that are least detrimental to growth, such as recurrent property and environmental taxation, while continuing to improve tax compliance.
Particular attention is paid to the social sector. Lithuania is recommended to adopt and implement legislation on a comprehensive pension system reform. In particular, align the statutory retirement age with life expectancy, restrict access to early retirement, establish clear rules for the indexation of pensions, and promote the use of complementary savings schemes. It is recommended to underpin pension reform with measures that promote the employability of older workers.
The recommendations of the European Commission also include a better targeting of active labour market policy measures to the low-skilled and long-term unemployed. Lithuania is recommended to improve coverage and adequacy of unemployment benefits and link them to activation, address persistent skills mismatches by improving the labour-market relevance of education and promote life-long learning. In order to increase employability of young people, prioritise offering quality apprenticeships and strengthen partnership with the private sector.
The European Commission also encourages Lithuania to complete the implementation of the reform of state-owned enterprises as planned; in particular by finalising the separation of commercial and non-commercial activities, further professionalising executive boards. It also recommends Lithuania to step up measures to improve the energy efficiency of buildings, through a rapid implementation of the holding fund, continue the development of cross-border connections to neighbouring Member States for both electricity and gas to diversify energy sources and promote competition through improved integration of the Baltic energy markets.
Lithuania has further to strengthen fiscal policy, to review tax system, to continue improving tax compliance, to complete the implementation of the reform of state-owned enterprises, to improve the energy efficiency of buildings and to continue the development of cross-border connections to neighbouring countries.
According to Lithuania's Minister of Finance Rimantas Sadzius, the majority of the recommendations to Lithuania remain similar to those in 2013, because structural reforms is a continuous and complex process requires time.
"We have to shape and to implement the budget in such a way as to adhere to the medium-term objectives of the deficit, and strengthened fiscal framework should help to comply with the Stability and Growth Pact requirements," says Sadzius in a statement of the Ministry of Finance.
The Commission recommends Lithuania to take active labour market policy measures to reduce the unemployment rate of the low-skilled and long-term unemployed and young people.
The Commission has published the country-specific recommendations for each Member State, along with an overarching communication on what is needed to return to growth and jobs. The recommendations are based on a thorough assessment of every Member State's plans for sound public finances (Stability or Convergence Programmes, or SCPs) and policy measures to boost growth and jobs (National Reform Programmes, or NRPs).
The country-specific recommendations will be discussed by EU leaders and EU ministers in June. They will be formally adopted by the EU's Council of Finance Ministers on 8 July. It will then be up to Member States to implement the recommendations by taking them up when drafting their national budgets and other relevant policies for 2015. The recommendations under the Stability and Growth Pact will be discussed and adopted at the EU's Council of Finance Ministers on 20 June.
