Latviski English По-русски
Ceturtdiena 17.10.2019 | Name days: Karīna, Gaits

Lithuanian President Nausėda: pension raises must outpace wage growth

(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU

Linas Jegelevičius for the BNN

Can Lithuanian pensioners turn Lithuanian economy upside down?

Upon hearing the threats of Lithuania’s commercial banks what will happen to the economy if the ruling farmers and greens (LFGU) move forward with the proposal to tax bank assets, which is part of Lithuania’s plan to rake in additional 100 million euro for welfare spending, and the pensions, too, it may seem inevitable.

Low Lithuanian pensions

The average pension in Lithuania is currently 345 euros, however around 60 percent of venerable-age Lithuanians make ends meet with less than 300 euros a month. According to the Lithuanian Statistics, over a third of people over the age of 65 live in relative poverty.

According to Eurostat, in most of the 27 EU Member States for which 2017 data are available, the proportion of pensioners at risk of poverty lies between 10 per cent and 25 per cent. The four countries with an at-risk-of-poverty rate above 30 per cent in 2017 were Estonia (46 per cent), Latvia (44 per cent), Lithuania (37 per cent) and Bulgaria (32 per cent). In contrast, the lowest rates in 2017 were in France (7 per cent), Slovakia (8 per cent), Denmark, Hungary and Luxembourg (all 9 per cent).

Read more on this:

President got his own plan

Having devoted much of his attention for tackling poverty and social exclusion during his presidential campaign, Nausėda is demonstrating resolve to keep the promise, but his proposed ways as to how scoop up extra 100 million euro for that have already sparked major debates.

The president suggests raising the money by postponing planned cuts to income taxes, reducing the existing diesel fuel tax exemption for farmers, and raising taxes on non-employment-related income.

With the proposals under scrutiny, the head-of-the-state and his team were compelled to stave off criticism not only from some of the MPs and many economy pundits, but from farmers, who would be most affected by the implementation of the presidential proposal on diesel fuel, too.

EAP points at Poland’s example

The proposal to tax banking assets has been tabled by the Electoral Action of Poles (EAP) in Lithuania–Christian Families Alliance, which recently became part of the Lithuanian Farmers and Greens-led ruling coalition.  Its leader, Valdemar Tomaševski, exhorted all to deal with the issue of taxing banks additionally «very urgently».

«One of the sources (of extra budget revenue) is to tax bank assets. It is a lot of money; it could bring around 100 million euros into the budget,» Tomaševski said.

Thus the Poles seek essentially to replicate the bank asset tax law passed in Poland in early 2016. Poland’s Banking Tax Act applies to selected financial institutions − domestic banks, consumer lending institutions and insurance companies, as well as the branches of foreign banks and insurance companies operating in Poland.  The tax raises additional 1,3 billion euro for the Polish budget annually.

EAP wants a 0.4-percent annual tax on commercial bank assets.

Hungary was the first to introduce banks’ tax in 2010, at 0,5 per cent yearly. But under the pressure of international capital and European institution the country is now lowering the tax rate. Beside Poland and Hungary, Romania also collects an asset tax from banks.

Lithuanian banks bristle and threaten

But the story in Lithuania, where Scandinavian, not local capital banks play the first fiddle, is different.

After hearing the proposal on bank asset taxing, Lithuania’s banks have hit back, maintaining the levy would make loans for businesses and households more expensive and dampen economic growth.

In a swiftly organised press conference on Tuesday, the Association of Lithuanian Banks (LBA) lamented that the tax would slash between 150 and 450 million euros from the projected growth.

«We do not want to scare the society, only to present calculations of the possible effects of more or less irresponsible tax proposals,» said LBA president Mantas Zalatorius.

According to him, the tax would make banks raise interest rates on mortgages from 2.4 per cent to between 2.8 and 4.6 per cent. Business loans interest would rise to 3.8 per cent, from the current level of about 3 per cent. According to LBA, a preliminary impact analysis shows that the proposed tax may drive up prices for banking services by 8 per cent, or around 60 euro cents per customer monthly.

Lithuanian Prime Minister Saulius Skvernelis has said his government would support the tax. The Lithuanian Finance Ministry estimates that enactment of bank asset tax law would bring in around 40 million euros per year, not 100 million, which is the ruling party’s estimate.

Ruling LFGU leader: «It is blackmail»

The LFGU leader, Ramūnas Karbauskis, described as «blackmail» a statement by the Association of Lithuanian Banks. According to him, the association’s claims had «nothing to do with reality» and called its estimates on a hike in bank service prices «a clear lie».  Karbauskis promised to get in touch with the owners of two Swedish banks with operations in Lithuania, SEB and Swedbank, to find out if such statements «have anything to do» with their position.

Nausėda, a former banker (the new Lithuanian President has worked for SEB Lithuania bank for quite some time), did not comment anything on the proposal to tax bank assets, but upped his demands this week to raise pensions in the country. Moreover, the head-of-state wants pension raises to outpace wage growth. Nausėda’s team urged the parliament to pass a law on faster raises of pensions.

 Lithuania lags behind most EU member states

Retirement pensions in the country have been indexed to the growth of wages since 2018 and increased 7.5 per cent this year. Nausėda’s proposal would see gradually raising the index coefficient so that pensions rise faster than wages over the coming five years. It is essential to alleviate poverty among the elderly, Nausėda is convinced.

According to the president’s adviser Simonas Krėpšta, the president’s office will draft a separate proposal for faster pension raises.

Figures from the European Commission show that Lithuania spends less on social security than most EU members states. It also has one of the highest levels of income inequality.

Leave a reply

Drugstores should focus on health care over money-making, Estonian Minister says

As Estonia is working on a pharmacy regulation reform aimed at reducing the influence of drug wholesalers on pharmacies, Estonian Social Affairs Minister Tanel Kiik has said pharmacy services ought to be focused on healthcare instead of business.

Confiscated EUR 29 mln: Latvia waiting for evidence from Ukraine

As Ukraine seeks to recover from Latvia 29 million euros that have been confiscated by a Latvian court, Ukraine has to provide evidence as it has promised to do, according to Latvian President Egils Levits.

E-commerce for prison inmates considered in Estonia

Estonian prisoners could be allowed to buy products using rather than using current prison shops, such is the option considered at the country’s Centre of Registers and Information Systems.

Riga to keep cooperating with ticket servicing firm, allocating EUR 20.6 mln

Rīgas satiksme, the transport company of the Latvian capital, will not terminate cooperation with SIA Rīgas karte, meaning that the population would pay 20.6 million euros for it.

Video: Evacuation in Lithuania amid fire at tyre recycling plant

Alytus in southern Lithuania was hit by a cloud of black smoke from a fire at a large tyre recycling plant. A hospital nearby has been evacuated.

Von der Leyen’s commission postponed after three commissioner candidates rejected

The next European Commission is to begin its term in office later than expected as the November 1 coronation has been postponed so that three member states could offer new candidates to replace a trio rejected by the European Parliament.

Probing infections in Latvia, salmonella found in meat from Poland

As infection outbreaks in Latvia are under investigation, laboratory tests showed salmonella bacteria in Polish-origin poultry samples taken from SIA Gaļsaimnieks.

Germany to allow Huawei equipment on 5G networks

The Chinese tech giant Huawei will not be banned from the 5G mobile networks in Germany as Berlin stated it wants to create «a level playing field» for vendors.

OECD: Bribery prevention results in Latvia disproportionate to cross-border risks

Latvia’s results in fighting bribery are still disproportionate with the risks of cross-border bribery and money laundering the country is subjected to, says the Working Group on Bribery of the Organisation for Economic Co-operation and Development.

In pictures: Ukrainian President Zelenskiy in Latvia

Ukrainian President Volodymyr Zelenskiy and the Ukrainian first lady made an official visit to Latvia on Wednesday, October 16.

airBaltic not planning to cancel flights with Airbus A220

airBaltic does not plan to reduce its flights with the Airbus A220-300 plane, after Swiss International Air Lines decided to do this being concerned over the aircraft’s engine problems, according to a statement of the Latvian airline on social media.

PM Kariņš recommends spending confiscated EUR 29 mln as single investment

Latvian Prime Minister Krišjānis Kariņš has recommended the 29 million euros confiscated by the Riga Regional Court for being criminally-acquired to be spent on a one-off investment, according to an interview to LNT programme 900 sekundes.

Latvian security service develops terrorism financing prevention strategy

The Latvian State Security Service (VDD) has prepared its Strategy for the Prevention of Terrorism Financing 2019-2021 with its goal being improvements of the system of preventing such financing, developing Latvia’s abilities to fight such illegal attempts and to improve the country’s reputation in foreign financial markets.

Estonian President sends invitation to Russian President

Estonian head of state Kersti Kaljulaid has invited her Russian counterpart Vladimir Putin to visit the Baltic country during a gathering of Finno-Ugric peoples in 2020.

Riga transport company needs additional 2.9 million euros

Rīgas satiksme, the transport company of the Latvian capital, will request from the municipal budget an additional allocation of 2.9 million euros, said Rīgas satiksme’s council chairman in an interview with Latvijas radio.

Government decides: Latvia will have 39 municipalities

The Latvian government has backed the draft Law on Administrative Territories and Populated Places that sets forth cutting the number of municipalities in Latvia from 119 to 39.

Rail Baltica: In rebuilding of Riga Central Station deadlines and quality are key

In Rail Baltica, the new railway project, the rebuilding of the Riga Central Station is planned, where meeting deadlines and quality are key, said the head of Eiropas dzelzceļa līnijas, the company responsible for the project in Latvia, commenting on how the project could be affected by involved builders ReRe grupa being under the scrutiny of the Corruption Prevention and Combating Bureau and the Competition Council.

Deal or extension? Last day of Brexit talks on before decisive EU summit

The Brexit delegations from London and Brussels are on Wednesday, October 16, spending their last day of talks before a key European Union summit intended either to discuss a potential deal or to decide on an extension of the Brexit process.

Exclusive | Latvian MP: Top justice figures, Bičkovičs and Kalnmeiers, working like this in private sector, would be sacked long ago

The Moneyval report has told us not only that Latvia is unable to deal with financial crimes, but also that long court cases are under scrutiny. It is about the scale of money laundering – branding us a major power of money laundering. The expert committee also has questions: where are the guilty ones and where are the sentencing rulings? «The same Lembergs’ case; believe me, Moneyval is observing carefully, how it’s going forward,» MP Gatis Eglītis (NCP), the head of the Financial Sector Supervision Committee of Saeima Budget and Finance (Taxation), said in an interview with the BNN.

Latvian medical workers to hold unprecedented protests against funding cuts

Latvian Trade Union of Health and Social Care Workers has decided to hold protests it calls unprecedented against state budget plans that would result in reduced funding for health care, according to the LVSADA Council.

History repeating: Lemberg’s-linked medium recalls false news about Meroni

Once again, a medium linked to the criminally-accused Latvian politician Aivars Lembergs has been forced to admit its lies and to recall its unfounded claims directed at lawyer Rudolf Meroni. This time the recall has been published by Neatkarīgā Rīta Avīze daily.

Unity: Riga City Council tries to retain structure of despite liquidation

In the Riga City Council, opposition Unity faction fears a near-million increase of the municipality’s Public Relations Division could be coming in city budget effectively to transfer the structure of, the foundation up for liquidation.

Latvian minister: System wants its people as Prosecutor General, top court chairman

«There is information that the system prepares its heirs and wishes to appoint people close to it,» discussing reforms in the Latvian justice system, including the changing of the chairman of the Supreme Court and the Prosecutor General, has said the Latvian Justice Minister speaking to Latvijas Televīzija programme Rīta Panorāma.

Latvian coalition reaches deal to support changed administrative reform

Latvian government parties have agreed to support the country’s major administrative and territorial reform expanding the initial plan of cutting the number of municipalities in Latvia from 119 to 36.

Spain’s conviction of Catalan separatists sparks mass protests and clashes

The imprisonment of Catalan politicians and activists has sparked mass protests in the Spanish autonomous region leading to violent clashes with police and disruption of civil aviation. A total of 108 flights were cancelled on Monday