VILNIUS - The Lithuanian Cabinet is set to approve an economic stimulus plan that will provide micro-credit to small and medium-sized businesses, as well as jobs for the country's hard-hit construction sector.
The plan's estimated price tag is 5.7 billion litas (1.65 billion euros), which will be secured from a mixture of European Union structural funds and private bank loans.
Prime Minister Andrius Kubilius told journalists the plan would not push the national budget deficit above 5 percent. Holding down the deficit is one of the goals of the anti-crisis plan passed in December.
"[The] ability not to inflate the fiscal deficit is very significant," Kubilius said at a press conference on Feb. 23.
Some of the money for the plan will come from a European Investment Bank loan for 3.9 billion litas that was finalized with Lithuania on Feb. 17. Money from this loan will also be used for national infrastructure projects, though the government has not yet determined exactly how the funds will be allocated.
Construction and loans
The stimulus plan will open jobs up for Lithuania's beleaguered construction sector, which has seen employment figures dry up as the economic crisis set in and the real estate market slumped. According to the country's Real Estate Association, two-thirds of all construction companies have been adversely affected.
The plan will allow for up to 3 billion litas to be spent on the renovation of public buildings and privately-owned apartment buildings. Some 1 billion litas will come from EU structural funds and the rest from private banks. The Cabinet is still in discussions about which banks will be used for the co-financing.
"We haven't yet reached an agreement," Mykolas Majauskas, an adviser to the prime minister, told The Baltic Times.
The plan will also create a holding fund for the disbursement of loans to small and medium-size businesses to make up for the tightening of the credit market.
"That would be primarily set up for smaller businesses and export companies," Majauskas said.
Economy Minister Dainius Kreivys said that the government has to start providing loans along with banks in order to prevent tens of thousands of companies from going bankrupt.
"The state would assume a part of the risk. Our choice is between trying to pull and drive the whole economy or following Latvia on its road, which, as we can see, leads to a 17.5 billion litas bailout from international financial institutions and a 10 percent GDP contraction," Kreivys said on Feb. 21 during an online conference hosted by alfa.lt.
"We are two to three quarters behind Latvia and Estonia. We have three quarters to get our plan working. Otherwise, we will have the same result," he said.
Kreivys said the government would identify priority economic sectors eligible for the most support. He said the summer, and the next few months before the distribution of money from the holding fund begins, will be the most difficult time for the country.
Call for aid
Kubilius has joined other regional heads of state in pressing the EU for more aid to Eastern Europe. He will attend an informal meeting on March 1 in Poland 's along with the prime ministers of Poland, Latvia, Estonia, the Czech Republic, Slovakia, Hungary, Romania and Bulgaria 's to hash out an aid proposal before a formal EU Summit later that month.
The meeting will focus on the economic and financial situation facing Central Europe, highlighting that countries in the region are among those most affected by the crisis in all of Europe, the prime minister said.
"Our goal is to suggest the European Council to arrive to a solution and authorize the European Commission and the Economic and Financial Affairs Council to adopt a special survival plan for Central Europe," Kubilius told the Baltic News Service.
Western European governments may be keener to dole out aid after Moody's published a report that Western European banks with subsidiaries in Eastern Europe could be downgraded as the their economies continue to
falter.
