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Wednesday 22.01.2020 | Name days: Austris

Strained Lithuanian budget is desperate for additional sources of revenues

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Lithuania, Seimas, economy, GDP, relations, businessLinas Jegelevičius

With the adoption of the new year’s budget skidding, two major professional groups – teachers and doctors – have had this week their demand for higher salaries satisfied, thus deepening the holes in the shallowing budget. Where to scoop up money to patch all the gaps and satisfy all the demands? This week, Seimas, Lithuanian legislature, was in a frantic search for additional sources of revenues.

Teachers make a force in Lithuania

With the legislators mulling different variants, Lithuanian teachers, represented by at least four professional trade unions, staged a two-hour warning strike in several hundred Lithuanian schools to press their demand for more funding next year. The strike action was backed by all trade unions that signed in 2017 a collective agreement that envisioned allocating 117 million euros in additional funding for education in the 2020 budget. The government’s 2020 budget bill currently earmarks just over 55 million euros in extra funding for that purpose.

Aware of the national teacher strike a year ago, when the teachers besieged the Education and Science Ministry for nearly a month – it brought down the minister and shook up the Cabinet, Prime Minister Saulius Skvernelis obviously did not want to see the situation repeating itself. On Monday this week, his Government and teacher organisations signed a new collective agreement on teachers’ pay raise in 2020. «The salaries of pre-school teachers will go up to 30 percent and those of other teachers around 10 per cent,» stated Skvernelis after the signing.

Medics will see higher salaries too

Although Lithuanian medics stayed away from streets in demand for higher salaries, the Government allocated additional funding for their salaries in 2020 too – they will go roughly 15 per cent for doctors and ca 10 per cent for nurses. According to the Lithuanian statistics, the average salary of doctors in the year’s first quarter was 2305 euro and that of nurses – 1203 euro, both before the deduction of taxes. The Government has committed to increasing the salaries to 3250 euro and 1625 euro in 2020 respectively. But local medics that the author of the article spoke to sounded stunned about the numbers. «For us, they are from the realm of fantasies, a desirable wish,» a nurse from the Palanga hospital told BNN. She pondered that only medics in large national hospitals, not in small and medium-size hospitals can expect the money.

Uncertainty in near future

However, long-term, the future of Lithuania’s budget seems bleak. As an advancing country, Lithuania will inevitably see fewer euro from the EU coffers – in fact, Lithuania’s contribution to them will significantly grow, the country is plagued with scarcer labour resources, meaning that, in the years to come, there will be fewer taxpayers. In addition, with life expectancy increasing, the army of pensioners will grow. On top of that, Lithuania has committed to allotting 2,5 per cent of its GDP for defence until 2030, a strain to budget too. A whopping 55,2 per cent of respondents in a recent poll pointed out that they are against any military expenditure increase if authorities fail to provide larger additional funds for teachers, doctors and culture workers.

Others remain unhappy

Unhappy with the budget distribution for education workers, professors of Vilnius University have walked out this week from lecture halls for two days – also in demand for higher salaries. Besides, Arturas Žukauskas, rector of Vilnius University, has promised to train the university’s graduates before the upcoming general election next year and this way carry out an «intellectual intervention” into the Seimas, if the government fails to satisfy the demands of the academic community on funding for higher education. «We won’t stop, and we have a big portfolio of various social actions. One of them would be getting ready for the next Seimas election. We will invite all of our graduates running for parliament, irrespective of their party affiliation, to raise qualifications at Vilnius University,» the rector told journalists on Tuesday.

Under the collective agreement signed with four education trade unions on Monday, salaries for university workers will be raised by 10 per cent as of next September 1, although they have demanded a 20 per cent raise.

Where to get money?

With the 2020 budget bill being attached from all sides, Lithuanian Parliament is feeling a major headache – where to get additional revenues to satisfy all the demands?  Although there are proposals to tax property, polluting cars and bank assets to generate more tax money, the first victims of the frenetic parliamentary hunt for additional funds became booze lovers and farmers. On Tuesday, the lawmakers approved an increase in excise duties on retail prices for strong alcoholic beverages, gasoline and diesel fuel.  The excise tax rate for diesel fuel used in agriculture will rise by 4 euros, or 7.2 per cent, to 60 euros per 1,000 litres in January, a far cry from President Gitanas Nausėda’s move to increase the rate by 90 euros to 146 euros, and the government’s proposal to raise it by 25 euros, or 44.6 per cent, to 81 euros.  The amendments to the Law on Excise Duties were approved in a vote of 73 to none with six abstentions.

Farmers hit Vilnius streets on tractors

Anticipating unfavourable vote results, a couple thousand of Lithuanian farmers, many on their tractors, launched a warning protest across Lithuania on Tuesday against the government’s planned tax changes. An impressive «tractorcade» of tractors rattled Vilnius streets.  But the diesel tax increase is not enough to collect a debt-free new budget, experts say. The new taxes for major retailers and banks, proposed by the ruling Coalition, could be introduced in the middle of the next year at the earliest, Rima Baškienė, a deputy speaker of the Lithuanian parliament and a big-shot in in the ruling party, hinted this week. She also said that the proposed car pollution tax could also come into force in July.  Imposing a tax on major retailers’ turnovers and banking assets is believed could net over 300 million euros in taxes. The tax would allow collecting more budget revenue to increase pensions and the child benefit.

With Lithuanian gearing up for a new parliamentary election next fall, there will certainly be new initiatives for larger spending for different professional and societal groups. But will the budget hold the strain?

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