Brussels criticizes Lithuania

  • 2008-02-27
  • Staff and wire reports
VILNIUS - The European Commission has pointed out faults in the Lithuanian economy that by and large echo reports issued earlier on Estonia and Latvia.
For years Lithuania had the lowest level of inflation in the Baltics 's and indeed still does 's but in recent months a spike in domestic consumption has fueled prices to 10-year highs.
"Lithuania is strongly encouraged to aim for better budgetary outturns and further structural reforms to address mounting inflationary pressures, maintain competitiveness and tackle the remaining bottlenecks in the labor market," Economic and Monetary Affairs Commissioner Joaquin Almunia said in the report.
The EU executive authority noted that Lithuania had a low debt to GDP ratio but criticized performance in other key indicators, particularly fiscal policy.

Despite annual inflation of 9.9 percent, Lithuania continues to compile deficit budgets. In 2007 the deficit amounted to 0.5 percent, and in November the president signed into law the 2008 budget that also foresees a 0.5 percent deficit.
Brussels is attempting to convince new EU member states to more actively employ fiscal policy 's i.e., cut public spending 's to curb inflation, which in several countries has spiraled out of control.
Finance Minister Rimantas Sadzius said the criticism was "natural."
"Virtually all EU member states receive various comments and critical remarks, and in this respect we are not any worse than others," he was quoted by the Lietuvos Rytas daily as saying.
"Lithuania itself has informed the European Commission about the possibility of a higher than planned inflation, lower than expected budget revenue and other potential risks to financial stability. It is natural that the European Commission also sees the potential risks and reminds us," he said.

Tackling inflation in an election year will arguably prove to be the government's biggest challenge over the next nine months.