Business, Economics, Legislation, Lithuania, Markets and Companies

Heads of the largest trade unions, business federations and a foreign investor group joined Prime Minister Andrius Kubilius to sign the National Agreement today in Vilnius, along with associations of farmers, pensioners and others. Altogether, signatories representing more than 350,000 individuals and 5,500 companies agreed to the plan of fiscal discipline and economic stimulus. "This agreement, which follows months of negotiations, enshrines our common responsibility and mutual commitments for preserving Lithuania's solvency and restoring its competitiveness," Lithianian Prime Minister Andrius Kubilius said. "such open dialogue and social solidarity will help maintain order and reduce tensions as we work to resolve the complex and often painful challenges of the current unprecedented crisis," he said.

Parties to the National Agreement agreed that, even after budget cuts this year equivalent to 7% of GDP, further consolidation is needed in order to bring the fiscal deficit back below the euro-adoption limit of 3% of GDP as soon as possible and prevent an excessive build-up of public debt. The government will reduce civil servant wages by an average 10% and streamline or eliminate many state institutions. It will also reduce pensions and maternity benefits, but in a way that least influences the poorest. The government pledged not to introduce new taxes or increase tax rates in the next two years, except for a maximum 2 percentage point increase in the social security tax, and to consider reducing the corporate profit tax by 5%age points to 15%. Business associations, for their part, will encourage member companies to avoid lay offs, conscientiously pay taxes and wages, and maintain support for social projects.

To promote economic recovery and improve the business climate, parties to the National Agreement agreed to launch a large-scale, high-value public-private partnership to build and renovate public buildings and infrastructure throughout Lithuania. The programme will create or maintain more than 30,000 jobs. Meanwhile, the government will simplify and shorten administrative procedures for companies to get EU structural funds and construction permits and for business regulation in general. It will also offer low-interest loans for start-up companies, and will initiate public projects to employ workers from distressed companies. Finally, the social partners committed themselves to regular consultations on the implementation of the National Agreement, and to work together in solidarity and dialogue to resolve other economic, energy, transportation and social problems.

Commenting on the agreement, Danas Arlauskas, Head of the Lithuanian Business Employers' Confederation (LVDK), praised the government for finding the political will to join social partners at the negotiating table and reach broad agreement. "It's a sensible democratic approach, which helps eliminate the sources of unnecessary tension in society," Danas Arlauskas said.