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Lithuanian report Lithuanian report
by Euro Reporter
2012-10-19 10:44:39
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Lithuania says no to Nuclear Power Plant

In spite of the fact that 62.7 percent of Lithuanians did not support the idea of building the Visaginas NPP, the realization of the project with Latvia’s participation is still possible because the recent referendum followed a consultative goal. Latvenergo participates in the negotiations on behalf of Latvia. The final decision on Latvia’s participation in the project will be made by the Cabinet of Ministers.


Lithuanian cabinet approves 2013 budget cutting deficit to 2.5%

Lithuania’s government approved the 2013 budget draft with a deficit within the European Union limit of 3 percent of economic output.  Prime Minister Andrius Kubilius’s Cabinet, which may be ousted after parliamentary elections this month, proposes cutting the shortfall to 2.5 percent of gross domestic product from this year’s planned 3 percent, his office in Vilnius, the capital, said in an e-mailed statement today. The bill will now go to parliament for approval.  Opposition parties lured voters with pledges to boost wages and trim sales levies to oust Kubilius, whose austerity measures worsened the Baltic nation’s deepest recession in 2009 and 2010. Kubilius’s Homeland Union-Christan Democrats is third before second-round voting in single-mandate districts on Oct. 28.

The draft budget projects revenue, including aid from the EU and other international bodies, of 28.8 billion litai ($10.9 billion), with spending planned at 29.5 billion litai, leaving a gap of 697 million litai. GDP will grow 2.5 percent this year and 3 percent in 2013, the Finance Ministry estimates.  The heads of the opposition Labour and Social Democrat parties, who placed first and second in the first round of parliamentary elections on Oct. 14 and plan to work together in a new coalition, said in news conferences yesterday that they would seek to stimulate the economy without letting the fiscal deficit exceed the EU limit of 3 percent of GDP.

Separately, the Finance Ministry said today that Lithuania would need to borrow about 7.6 billion litai on domestic and international markets next year, including 6.7 billion litai to repay previous debt. A debt-repayment reserve of 2.1 billion litai has been built up to reduce refinancing risk, the ministry said on its website. It projected that government debt at the end of 2013 would be about 40.5 percent of GDP.


Lithuanians ditch government in austerity thumbs-down

Lithuania's newly-elected opposition tried to reassure financial markets on Monday it will not throw away fiscal prudence, after voters fed up with four years of harsh austerity measures ejected the government. An ex-Soviet state of about three million people, Lithuania crashed hard when the crisis hit four years ago. It slashed spending in response and, after a brutal recession, is now returning to economic health - but too late for voters who have seen their spending power eroded and unemployment soar. The failure of the government comes despite widespread praise abroad for a more resolute course on cutbacks than that taken by Greece and other euro zone countries struggling with debt.

The left-leaning coalition now likely to take over after Sunday's parliamentary election has promised to ease the pain by raising the minimum wage, shifting the tax burden towards the better off and postponing adoption of the euro. One coalition leader told Reuters the budget deficit might, at a later date, be allowed to go above the level that euro zone policymakers view as prudent. But the new government will have to walk a tightrope between pleasing voters and keeping markets happy. Lithuania is still heavily indebted, and if debt markets - which welcomed its predecessor's austerity drive - do not trust the plans to ease the belt-tightening, the cost of borrowing could go up so high the country plummets into another crisis.

Algirdas Butkevicius, the former finance minister who leads the opposition Social Democrats and is in the running to be new prime minister, said any softening of austerity would be gradual. "Our position is not be spending lavishly with borrowed money," he told a news conference on Monday. "First you have to earn money to get higher revenues for budgets." Credit default swaps tightened by three basis points on Monday, according to data from Markit, meaning the cost of insuring Lithuania's debt against default went up slightly. Market analysts said there was no immediate cause for alarm, but that there could be a negative reaction if further down the line the new coalition abandons turns out to be less thrifty than it says it will be.

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