New finance minister appointed

  • 2009-07-08

MOVING UP: President Adamkus (left) approved Simonyte to take over the finance ministry after Semeta left for the European Commission.

VILNIUS - Ingrida Simonyte has officially taken up the post of Lithuanian Finance Minister, replacing former Minister Algirdas Semeta who was delegated to the European Commission.
Simonyte has raised some fears among Lithuanian commentators even before taking over the finance minister's duties. Critics disagree with her assertions that a decrease of all social benefits, increasing of taxes, imposing new tax schemes, and establishing an older retirement age are the necessary steps for economic crisis management.

With Lithuania suffering under the crunch of the crisis and extensive expenditure cuts on the horizon, the Finance Ministry portfolio has become one of the most important in the country.
Simonyte, 34, took the oath of office on July 7. After taking the oath, Simonyte, a former deputy minister, warned she will resign if her strict saving program is not approved.
"It was not easy to make the decision [on taking up the post]" said Simonyte after the Lithuanian president signed the decree of her appointment on July 4. Simonyte warned she expects to be an "unpopular" minister.

"I think that the state should re-consider all Sodra's [state social security institution] budgetary benefits, as well as contributions, and 's it is more of a structural matter 's consider extending the retirement age" said Simonyte on June 29.
With regards to increasing the age of retirement, Simonyte has echoed the sentiments of Prime Minister Andrius Kubilius, who said that a transition to a retirement age of 65 is unavoidable, and recommended by the World Bank. At the moment, women retire at 60 in Lithuania and men at 62.5 years of age.

Semeta approved of his replacement.
"I think that Simonyte is the right person for this position" he said as Kubilius put forward Simonyte's candidature.

Lithuanian President Valdas Adamkus has generally evaluated the candidate positively, although he had previously stated that he does not support the idea of increasing taxes.
Simonyte argues for the increase of the value added tax (VAT) from 19 to 21 percent.
"Considering the present incomes and taxes, which have decreased significantly, we think that these 2 percent of VAT would improve the situation" said Simonyte.
She claimed that even though increasing taxes is not a pleasant decision to make, it is "justified and correct" at the moment, when the contributions are not sufficiently collected and big obligations have been undertaken in the past.

This measure will help the country save up to 300 million litas (86.89 million euros), the new finance minister claimed. She also said, however, that under the present circumstances it is possible that calculations will change and certain amounts will be under-collected.
The tax increase has been criticized by President Adamkus and some financial experts.  
"Talking about tax increases, I am categorically against. I think there is still plenty of space for decreasing [expenses] and I think it should be done, although not at the expense of the people" said Adamkus in June.

"It is enough, people are burdened with taxes already and yes, there is a class of population that barely make ends meet" the president said.

Gitanas Nauseda, a deputy president of the biggest commercial bank SEB, presented an analysis of SEB financial experts in the end of June. Nauseda, who had been one of the most likely candidates for finance minister in autumn of 2008, warned that further increases in taxes would lead to a dead end.
"Lithuania has reached the threshold where any increase in taxes would bring the opposite result, or at least not the one preferred. An increase of the VAT's base rate would mean that producers and traders that are losing profits or are on the edge of losing profits will no longer be capable of coping with the additional tax burden" said Nauseda.

If the tax burden was transferred on buyers, the consumption would fall even more and people would start choosing lower quality products and services, the finance expert said.
Simonyte commented that the gap between income and obligations can be managed by lowering expenses, increasing income, and using both of these methods. Nevertheless, the minister said the first method of saving is more efficient. 

"The textbook truth is that successful saving relies more on expenditure rather than income" said Simonyte, referring to the necessity to cut expenses for social security.
"Increase of VAT is not enough" she underlined shortly after taking her oath of office.
The new finance minister has also implied there might be some changes to sharing the burden by the employers and employees, and the retirement pension sum might be decreased.
Simonyte said these decisions will be discussed with society and the labor unions have been informed of the suggestions. She also confirmed that a real estate tax will be imposed, most realistically from 2011.

While asked about the planned decrease of maternity benefits, Simonyte replied that the obligations to child-raising mothers have been very big and the system in Lithuania is one of the most generous in the EU. Adequately lowering all social benefits, including the maternity benefit, is one of the methods to cut expenses, the minister said.

The composition of the Cabinet of ministers will have to be approved by newly elected President of Lithuania Dalia Grybauskaite, who is taking an oath on July 12. However, the president is unlikely to refuse Simonyte's candidacy for the post.
Notably, when Grybauskaite became a finance minister in 2001, Simonyte made a career as the head of the Tax Department at the ministry.

Simonyte is described as a professional high-rank public servant and not a politician. She does not have a clear political preference and is not a member of any political parties 's because of this she has recently been compared with Grybauskaite, who also claims to be politically independent.
Simonyte comes from Vilnius and holds a master of finances from Vilnius University; she has been working at the Finance ministry for the last 12 years.