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Austerity hit poor hardest

  • 2011-12-07
  • From wire reports

VILNIUS - Lithuania’s austerity measures, which are similar in size to those facing Greece, on a relative basis, boosted income inequality to the widest in the European Union, reports Bloomberg. Lithuania implemented austerity measures equal to 12 percent of GDP in 2009-2010. Pension cuts may be reversed, however, after the economy grew 6.7 percent in the third quarter, the second-fastest pace in the EU.

Greece, where GDP contracted 5.2 percent in the same period, is in the midst of budget cuts worth 16 percent of economic output, data from the International Monetary Fund show. “The blow was very painful to the poor,” said Vilija Tauraite, an economist for SEB Bank in Vilnius.

“Lithuania’s fiscal discipline has been extremely severe in the past three years and it’s now crucial to ease the burden because these people are hanging on the precipice of poverty. Their quality of life is far worse than the situation of pensioners in Southern Europe,” she added.

Pensioners’ costs surged faster than the average inflation rate because the consumer basket for retirees includes more spending on food and utilities, Tauraite said.

On average, prices have risen 4.3 percent for retirees since pension cuts began in January 2010, during which time the average inflation rate was 2.5 percent, she added.