Latviski English По-русски
Saturday 29.02.2020 | Name days:

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

Gints Miķelsons put in charge of Latvian Construction Contractors Partnership

From 1 March 2020 onward Gints Miķelsons, who has been the head of Latvian Sustainable Construction Council will be in charge of the Latvian Construction Contractors Partnership, as confirmed by construction contractors.

While Latvia’s GDP grows 2.2%, other Baltic States experience more rapid growth

In 2019, Latvia experienced the slowest GDP growth among Baltic States, according to data from Latvia’s Central Statistical Bureau of Latvia.

Latvia’s GDP growth reportedly 2.2% in 2019

Compared to 2018, the economic growth continued and Gross Domestic Product increased by 2.2 %. In 2019, GDP at current prices amounted to EUR 30.5 billion. Compared to Q3, in Q4 2019 GDP at constant prices grew by 0.1 %, according to seasonally and calendar adjusted data.

Retail trade turnover in Latvia up 2.6% in January

Compared to January 2019, total retail trade turnover rose by 2.6 % in January 2020. Turnover of retail trade in food products grew by 4.4 %.

Vilnis Ķirsis to remain in charge of Unity’s faction in Riga

On Thursday, 27 February, Vilnis Ķirsis was once again picked as the head of Unity party’s faction in Riga, as confirmed by the party.

Latvia and USA sign joint declaration to enhance 5G network security

On Thursday, 27 February, Latvia’s Foreign Affairs Minister Edgars Rinkēvičs and US Secretary of State Mike Pompeo sign a joint US-Latvian declaration on 5G network security, as reported by Foreign Affairs Ministry.

Estonian Tallink Grupp sees profit growth of EUR 9.7 million on year

Estonian provider of ferry transport and related services Tallink Grupp has worked in 2019 with a net profit of 49.7 million euros, according to its unaudited financial results of the year, as reported by Estonian public broadcaster ERR.

Jakrins reportedly a beneficiary in a company that organizes Brasas and Deglava bridge repairs

Long-standing Riga City Council official Emīls Jakrins, who was in charge of the Transport Department not long ago, is beneficiary and factual owner of LLC TecPro Construction, which is a contractor to Lithuanian company Kauno tiltai, which has been hired by the city council to repair Brasas and Deglavas bridges, as reported by Diena newspaper, referencing unofficial information.

UK ready to switch to WTO trade rules if no EU by end of year

The British government has declared that unless concessions are made by Brussels in EU-UK talks on their future cooperation, the former EU member would trade with the bloc on WTO rules from 2021, British news portal The Guardian reports.

Residents able to submit compulsory income declarations by 1 June; VID urges using EDS

March 2020 will mark the beginning of the three-month period within which all residents for whom it is compulsory will be able to submit their income declaration for 2019. This period will last three years for residents for whom this process is voluntary, as reminded by the State Revenue Service.

Lithuanian border guards start informing travellers about the situation with Covid-19

As the new coronavirus Covid-19 continues spreading in Europe, Lithuanian border guards have begun informing travellers from Latvia and Poland about necessary protective measures.

Turkish soldiers killed in Syria, in regime airstrike, Ankara says

In the current epicentre of the Syrian civil war, 33 soldiers of the NATO member state Turkey have been killed as Syrian government military aviation carried out attacks on Turkish military posts set up in its neighbouring country, German broadcaster DW reports citing Ankara.

Weather in Latvia to be winter-like at week’s end

Weather in Latvia is expected to be winter-like at the end of the week – air temperature is expected to drop below 0° C at night in most of the country. In some areas cold snap may be felt during the day, as reported by Latvian Environment, Geology and Meteorology Centre.

First coronavirus infection case found in Lithuania

The first coronavirus infection case is confirmed in Lithuania, as mentioned in Lithuanian government’s statement released on Friday, 28 February, as reported by

SPKC urges passengers of 26 February Istanbul-Riga flight to respond

Latvia’s Disease Control and Prevention Centre is looking for passengers who flew together with confirmed coronavirus patient from Istanbul to Riga on Wednesday, 26 February.

Regional hospitals in Latvia report high demand for protective clothing

Because of the outbreak of the new coronavirus Covid-19, demand has considerably increased for individual protective clothing, which forces prices to go up, as reported by heads of hospitals.

Rail Baltica not just marvelled, but cussed too in Lithuania

If implemented, the ambitious 5.8-billion euro Rail Baltica project aiming to build a nearly 1000-kilometer rail link from Helsinki to Poland through Lithuania, Latvia and Estonia will be a major infrastructural achievement of the Baltics, but the possibility of dashing at the now surreal speed of 250 kilometres per hour as soon as in 2026, when the project is slated for completion, comes at expense of many land owners in Lithuania’s six municipalities, which will be crossed by the European-gauge tracks.

Construction costs in Latvia up 2.8% in January

Compared to December 2019, the level of construction costs in Latvia fell by 0.2 % in January 2020. Labour remuneration of workers reduced by 0.9 %, prices of building materials – by 0.1 %, but maintenance and operational costs of machinery and equipment – rose by 0.2 %.

In Greece, violent protests against new migrant camps continue for 3rd day

In Greece, continued protests and clashes have resulted in over 60 people suffering injuries as people on the islands of Lesbos and Chios protest against the construction of new migrant centres, British public broadcaster BBC reports.

Minister says Latvia’s initiated territorial reform will create more sustainable municipalities

The report from the European Commission mentions that Latvian government’s initiated administrative territorial reform will create more sustainable municipalities with greater capacity and ability to provide services of comparable quality, as reported by Environment Protection and Regional Development Ministry.

Latvian Saeima changes the prosecutor general’s selection order

On Thursday, 27 February, Latvia’s Saeima approved amendments to the order under which the country’s prosecutor general is selected.

Textile producer in Lithuania complies with Greenpeace standards in industrial textile making

Lithuanian textiles producer Utenos Trikotažas has been deemed by environmental protection organisation Greenpeace as complying with the standards of the later as to not using hazardous chemicals and being fair and transparent in its business, LRT reports.

From March onward prices of alcoholic beverages to increase in Latvia

Through a measured and gradual increase of excise tax rate policy, starting with 1 March 2020 the excise tax rate for alcoholic beverages in Latvia will increase, as confirmed by the State Revenue Service.

435 whistle-blower reports received in eight months in Latvia

In the first year of the Whistleblowing Law, Latvian central state institutions have received 435 reports from whistle-blowers, as reported by the State Chancellery.

Estonia finds first positive coronavirus case

In Estonia, the first case of a person being infected with the novel coronavirus has been found, stated Estonian Social Affairs Minister Tanel Kiik on Thursday, February 27, as cited by Estonian public broadcaster ERR.

Do NOT follow this link or you will be banned from the site!