EC warns Lithuania about possible economic imbalances

VILNIUS - The European Commission said on Tuesday the 2023 state budget adopted by the Lithuanian Seimas earlier in the day is not fully in line with the EU Council's 2022 recommendation for Lithuania to limit expenditure growth and pursue a neutral fiscal policy. Therefore, the country will be subject to an in-depth review for possible economic imbalances.

The Commission points out that this will the first such review since the start of the procedure.

In its Alert Mechanism Report on Lithuania, the EC calls on the Lithuanian government to limit spending, for example by limiting energy price compensation to the most vulnerable groups only.

"In the European Commission's view, temporary measures designed to help households and businesses to cope with energy price changes are not sufficiently targeted at the most vulnerable public groups," the EC said in its commentary on the 2023 budget bills of Lithuania and other euro area countries.

The Commission believes the additional stimulus effect will come from the increases in other recurrent public spending, which will not be offset by sustainable budget revenue.

According to the Commission, out of the 14 indicators against which potential imbalances are assessed, Lithuania exceeded the thresholds for five indicators in 2021.

The Commission concludes that Lithuania's 2023 fiscal policy will stimulate the country's economy, despite high inflation.