BNS: Almunia urges Lithuania to implement adequate fiscal policy - daily
Updated 2009-05-14
VILNIUS, May 14, BNS - The reproaches of the European Commission (EC) on Lithuania for breaching the fiscal deficit limit could have been greater if not for the crisis. "We may say that larger deficit is a normal thing during this particularly difficult period. It is very difficult now, perhaps even impossible, to avoid further deterioration of financial position of the state," Joaquin Almunia, EU Commissioner for Economic and Monetary Affairs, said.
He added, however, that the crisis cannot be an argument supporting reckless spending, the Lietuvos Rytas daily reported on Thursday.
The commissioner noted that Vilnius complied with all three conditions for the opening of excessive deficit procedure against Lithuania. Although the excess of 0.2 percent [Lithuania's budget deficit made up 3.2 pct of GDP in 2008] might be considered minor, it was not brought about by exceptional circumstances. In other words, Lithuania was spreading out, although it was not necessary.
Moreover, Lithuania's budget deficit is not short-term. The Commission projects the country's budget deficit to reach 5.4 percent of GDP this year and 6 percent in 2010.
Asked whether Lithuania still had any chances to fix the budget hole by 2011-2012, when the government hopes to adopt euro, Almunia replied: "I cannot guess what may be in 2011 and whether Lithuania is able to fulfil the minimum requirements for the adoption of euro during this difficult period.
It would be a wrong strategy to announce a goal and then take no measures required. I hope that the government of your country will be consecutive about one measure during this difficult period - fiscal policy in the first place."
On the other hand, too stringent fiscal policy might bring about negative consequences when the economy was weakened, he added. "Fiscal measures should be applied very watchfully and combined with other economic policy instruments that support the recovery of economy. I know that Lithuania's government is considering possibilities to improve the use of assistance of the structural funds. They are very important for the economy. If used properly, these funds may generate up to 4 percent of economic growth," Almunia said.
Clear and reliable budget strategy was necessary in order to restore confidence and convince the markets that the public finances remained under control, he said.
"Otherwise the most vulnerable layers of society will suffer even more in future. They shall be supported, and not just with state allowances. It is necessary to restore the confidence of the markets, investors, consumers in the economic and financial policy," the commissioner said.
