BNS: Lithuania's economy either to recover in 2011, or to collapse - PM
Updated 2009-02-03
VILNIUS, Feb 03, BNS - Prime Minister Andrius Kubilius expects Lithuania's economy to recover in a couple of years. He admits, however, that the state may go bankrupt or ask international financial institutions for help if the authorities fail to manage public finances.
"The year 2011 will be the year of our victories: we have to win the European basketball championship that will take place in Lithuania, and, as shown by available information, the economy will recover that year," he said during the TV broadcast Svarbus Pokalbis (Important Conversation) of Baltijos Televizija (Baltic TV channel) and the Lietuvos Zinios daily.
Larger than anticipated budget deficit would be disastrous for the country, which had been stated clearly by both the European Commission (EC) and the International Monetary Fund (IMF), he said. According to him, Lithuania has minimal chances to borrow on international markets and finance its deficit.
"Apart the deficit, which we have cut by 5 billion litas (EUR 1.45 b), we will have to refinance 3 billion litas in existing loans this year. If we fail to do that, Lithuania will just go bankrupt. Lithuania's decision to take the path of budget regulation is the usual condition set by IMF when extending a loan to a country," Kubilius said.
He admitted, however, that Lithuania might have to ask IMF for aid in several months.
"Economic developments in Lithuania and in the world are difficult to forecast. We are working in several directions. We have worked out a 4 billion litas economic stimulus plan. If the budget revenues appear to be below the target, we will have to implement another plan - consider how we could balance the budget and reduce the expenditure. The third thing is how to guarantee the stability of financial institutions active in Lithuania,"
Prime Minister said.
He denied that the economic recovery plan being worked out by the government was essentially the rescue plan for Scandinavian banks operating in Lithuania.
"This is a wrong interpretation. I do not say that we will focus on the rescue of banks or that we have any extreme problems now. However, we have to pay more attention to this issue. I definitely disagree with those who - kind of contemptuously - claim that the government is concerned with banks. We have to take care of them! Otherwise, if any problems emerge, the situation will be very bad," Kubilius said.
