Grybauskaite speaks on the Lithuanian economy

VILNIUS - On July 12, Lithuanian President Dalia Grybauskaite gave a press conference in the presidential palace. The press conference marked her two years in office anniversary. She spoke on a wide spectrum of issues but, unlike her predecessors, she mostly focused on the economy and economy-related politics which, according to the Lithuanian constitution, is rather the prerogative of the PM. Regardless, Grybauskaite, enjoying her high ratings, can dictate to a large extent her agenda on the economy for PM Andrius Kubilius and his government due to the power of her popularity. Kubilius has similar economic views or, when some of their views differ, he usually obeys Grybauskaite.

Grybauskaite condemned talks in the EU about broad economic sanctions against Belarus. Such sanctions would push the entire Belarusian nation “into the embrace of Russia,” according to her. She spoke only in favor of those sanctions that target the top leadership of the Belarusian regime. Such statements are caused by geopolitics as well as the interest of Lithuanian business.

The president was asked what she thinks about the contradictions of the Lithuanian Roman Catholic Church against the draft law on artificial insemination. “I want more children to be born in Lithuania. The constitution states that the Church is separated from the state. This is why I would not comment on the actions of the other institution [the Church],” Grybauskaite answered. Lithuanian private medical companies, which are busy in the artificial insemination business, should be happy with her answer.
Grybauskaite said that the Lithuanian economy is recovering, although she urged caution due to the situation in Southern Europe, which can hit the entire EU. The fellow EU countries are the main export market for Lithuania. More than 70 percent of Lithuanian production goes for export and export is the main driving force of the Lithuanian economy.

She promised that there will be no more rise in taxes. Grybauskaite also urged the Kubilius government to consider simplifying state control procedures and annulling taxes for people who decide to start their own small business. Taxes for many businesses started by such people should not exist during their first year in business, according to her.
Grybauskaite mostly gains in popularity, presenting herself as a fighter against corruption. “We achieved a lot indeed in fighting corruption. The laws on property confiscation were adopted,” Grybauskaite said, adding that the bribe-taker will not be able to escape his or her private property confiscation even if he or she did pass officially that property on to the ownership of a sister, an aunt or some other related person.

Grybauskaite said that she expects quick adoption of laws which would enable excluding donations from business companies to political parties. “Political parties should be financed by their electorate and the state budget. I’ll initiate the law on political party financing,” Grybauskaite said. Both liberal parties, the Liberal Movement and the Liberal and Center Union, are the biggest receivers of donations from various companies and this fact probably results in those parties’ bigger interest in laws on business, than in liberal initiatives on the social life, which would be important for their potential electorate.

Grybauskaite emphasized that she will fight against monopolies and cartel agreements in the Lithuanian market. Such a fight would be appreciated by consumers, especially due to the galloping food prices, which now come rather close to the level of Western Europe, although production costs and wages are much lower in Lithuania. This level of food prices can provoke suspicion about some cartel agreements among the four major supermarket chains, as well as food producers. Of course, the Lithuanian supermarket chains can point to Riga and Tallinn, where the prices of basic food are almost identical to the prices in Berlin and, therefore, higher than in Vilnius. Nonetheless, the food prices in Warsaw are significantly lower than in the Baltic capitals and that could be partially caused by a too small number of competitors on the Baltic market.

The monopoly mentioned by name during Grybauskaite’s press conference was Gazprom, the sole gas supplier to Lithuania. Grybauskaite described the gas price, which is 15 percent higher than for Latvia and Estonia, as a “political price.” She criticized the Kubilius government for being too slow in construction of the Lithuanian LNG terminal. Grybauskaite said that the construction of the LNG terminal in Latvia, as the only terminal for all three Baltic States, would be irrelevant because Russia could find ways to take it under its own control. “It is why we, and the Estonians, will build our own LNG terminals,” Grybauskaite said. The Latvians want their project to be called as regional due to their financial problems – the ‘regional’ project would get the co-financing from the EU structural funds while Lithuania plans to build its LNG terminal without the EU co-financing.

Grybauskaite expressed her support for building of the new nuclear plant near the Lithuanian town of Ignalina. She also said that Latvia, despite the statement by Latvian President Andris Berzins about his country’s financial impotence regarding its participation in the Lithuanian nuke project, will participate in the project “in one way or another” – for example, by buying electricity produced by the new nuke.

On July 14, Romas Svedas, Lithuanian energy vice minister, announced that the competition to build the new nuclear plant in Lithuania was won by Japan’s Hitachi Ltd. together with Hitachi-GE Nuclear Energy Ltd. The nuke, providing 1,300 MW power, is expected to be built by 2020. Svedas rejected critical suggestions that are pointing to the Hitachi-built reactors at Fukushima. “Those were very old reactors. It is the same as comparing an old Mercedes to a new Mercedes,” Svedas said.

“It was the tsunami that caused the Fukushima accident. We don’t expect a tsunami in Lithuania,” Kubilius said at his press conference on July 15. In the case of failure to reach agreement with Hitachi, the Lithuanian government will start negotiations with another participant of the competition, the U.S.-based Westinghouse. The proposed price (it is kept secret) could be the reason for the victory of Hitachi – after the Fukushima accident, Hitachi has problems with getting new deals, according to energy expert Jurgis Vilemas. However, there could also be another reason for Vilnius’ choice: the Westinghouse-proposed reactor AP1000 is more modern, but it has no license yet, neither in the USA nor in Europe, though the U.S. Nuclear Regulatory Commission anticipates completing the overall design certification review for the AP1000 around September of 2011.

Earlier, on July 5, Hitachi had high-ranking talks with Gazprom in Moscow. It looked like the usual Russian maneuvers - the same Russian tactic, as in the case of South Korean KEPCO, which was expected to win the previous Vilnius-organized competition for construction of the Lithuanian nuclear plant. The South Koreans probably got a Russian offer they could not refuse and abandoned the competition in Lithuania before the official announcement of the winner. Hitachi seems to be more resistant to the Kremlin’s temptation. The Lithuanian nuke project makes Russian on-going nuclear plant projects in Russia’s Kaliningrad district and Belarus economically less relevant. The future of the Russian project in Belarus is misty also due to the quite possible economic and political turmoil in Belarus.