Why is the European Commission repeating its recommendations for Lithuania?

The recommendations submitted to Lithuania by the European Commission are largely the same as they’ve been over the last few years, pointed out Swedbank economist Nerijus Mačiulis. According to him, this shows that Lithuania’s reforms are coming along very slowly.

DNB Bank‘s chief economist Jekaterina Rojaka said that some reforms, though implemented, have been implemented unsuitably, like pension growth linked to political activity rather than economic activity.

“It’s very important to emphasize those fields in which we can change something. The EC’s recommendations are essentially a wonderful gift for a politician, who can copy them for his election campaign. Many of the recommendations require a lot of effort, determination and time to implement them. Perhaps that’s why they aren’t that popular,” Rojaka told LRT Radijas. She also said that many other European countries were facing similar demographic challenges.

Mačiulis, however, said that Lithuania’s situation was unique: “Yes, this is a trend among developed states since life expectancies are rising, but Lithuania’s problem is unique. If we analyse Eurostat’s projections, Lithuania is the most rapidly ageing state in the EU. This is related to the very low birth rate after the restoration of independence and with the high rate of emigration of young, working-age people. The problem is becoming larger and will be especially acute in the middle of the next decade or even during the next two decades.”

Both economists criticised the government’s VAT cuts, which they said were ineffective and were part of the reason why the reforms were moving so slowly. “They’ve missed the point, that’s totally unrelated to increasing the purchasing power of the people who receive the lowest incomes. It’s essentially a subsidy for businesses. This sort of distraction and lack of a long-term strategy is why the reforms are essentially not happening,” said Mačiulis.

LRT