The EU’s executive body allowed Lithuania to use the flexibility clause in the Stability and Growth Pact, noting that the country’s planned major structural reforms of the pension system and labor relations may have a positive impact on the long-term sustainability of public finances and employment.
Lithuania was thus given the green light for an additional deviation of 0.4 percent of GDP in 2017 from the medium-term budgetary objective of a deficit of up to 1 percent of GDP. The country was previously granted a 1 percent deviation due to the pension reform underway since the start of this year.
Lithuania’s 2017 Stability Program provides for a general government deficit of up to 0.4 percent due to the major labor market and pension system reforms.
“Increasing tax compliance, which would help collect budget revenue and improve the fairness of the tax system and the efficiency of the economy, remains an important task in the tax system,” Arnoldas Pranckevičius, head of the European Commission Representation in Lithuania, told reporters on Monday.
In its country-specific recommendations released on Monday, the European Commission also recommends that Lithuania “address skills shortages through effective active labor market policy measures and adult learning and improve educational outcomes by rewarding quality in teaching and in higher education”.
The Commission’s recommendations are to be endorsed by EU leaders n June.
Lithuanian President Dalia Grybauskaitė asked the EU’s executive body to allow Lithuania to use the flexibility clause and have a higher public finance deficit, saying that it was necessary for the country to carry out structural reforms in the labor market, education, social protection and healthcare.