Lithuanian energy security – a high salience issue

Lithuanian politicians keep on talking intensively at all levels about the Lithuania’s difficult situation in the energy sector and Lithuanian energy security which will be endangered when “Ignalina nuclear power plant” – the main provider of energy in Lithuania – has to be closed according to the Treaty of Accession to the European Union. For example, during the October European Council meeting, the Lithuanian President, Valdas Adamkus, emphasized that without the electricity interconnections with Sweden and Poland, Lithuania can face energy bankruptcy.[1] The Prime Minister, Andrius Kubilius, claims that the Russian and Ukrainian gas crisis has clearly demonstrated that each European state can face big problems of energy security. Following him, we have to do everything with the European Union that next year, i.e. after the closure of the “Ignalina nuclear power plant”, we will not come across such problems as Slovakia did.[2]

Victory of the right-wing parties in the national elections

In autumn of 2008, a new Lithuanian parliament was elected. The Conservative party, Homeland Union – Lithuanian Christian Democrats,[3] received the biggest number of seats in the Parliament (45 seats out of 141); the Lithuanian Socialdemocrats[4] got 25 seats; National Awakening Party[5] – 16 seats; right wing radical party Order and Justice[6] – 15 seats; Liberal Movement[7] – 11 seats; Liberal and Center Union[8] – 10 seats. Other 4 parties and independent members shared the remaining 25 seats. Therefore comparing with the last elections, the victory during those elections went to the right-wing parties.

Four parties formed the governing coalition: conservatives, the National Awakening Party, the Liberal Movement, and the Liberal and Center Union. After signing an agreement upon the coalition formation, the new government has declared to work for the following goals: to complete an audit of the current situation, initiate a plan for crisis management, and to take measures to fight corruption.[9]

Crisis management plan adopted to fight the crisis in Lithuania

Coalition government signed a plan to fight the economic crisis in Lithuania, which foresees various measures do deal with this challenge. As it is stipulated in the plan, “many macroeconomic indicators demonstrate that Lithuania faces the economic crisis and quickly declines into economic recession” and that the situation with state finances is difficult and the government sector deficit of 2008 is not equal to 0.5 percent of the gross domestic product (GDP) as planned, but might be as high as 2.5-3 percent GDP, and in 2009 might reach 4 percent instead of the planned 2.7 percent.[10]

According to the plan, actions are to be taken to decrease the wages of the highest Lithuanian officials (parliament members, government members, etc.) and the appropriations for different state institutions. It is also proposed to make changes to the tax system (to increase the VAT, while decreasing the personal income tax, and to eliminate different tax exemptions, etc.), while also stimulating business and balancing money flows. By implementing this plan it is expected to decrease the budget expenses by two billion Litas (the annual Lithuanian budget is about 20 billion Litas) and to increase the revenues to the budget by two billion Litas.

This plan currently has been probably the most discussed issue in Lithuania both by the politicians and the general public. There have been various evaluations of this government crisis management plan. Speaking about the evaluations of finance analytics, part of them criticize the plan, others call it not a good one but inescapable, the rest of them say that this plan is a far-reaching but unpopular move. Some recognized finance specialists would like to see a stricter plan. For example, European Commissioner from Lithuania, and former Finance Minister, Dalia Grybauskaitė, claimed that this plan is “yet to soft for Lithuania”, but she positively evaluated the government efforts to decrease internal consumption.[11] Finance analyst, Rimantas Rudzkis, is convinced that Lithuania will come across the recession despite the crisis management plan. According to him the “crisis management plan is already too soft, the situation is getting worse in the eyes; therefore, the plan should be revised. Government must borrow more bravely to safe enterprises”[12].

 

 

 

[1] Bernardinai (news portal): V. Adamkus įspėjo ES vadovus, kad Lietuvai gresia energetinis bankrotas (V. Adamkus warned the EU leaders that Lithuania might face the energy bancrupcy), 16 October 2008, available at: http://www.bernardinai.lt/index.php?url=articles/86364 (last access: 25 January 2009).
[2] Lithuanian government: Premjeras A. Kubilius susirūpinęs dėl energetinio saugumo (Prime Minister A. Kubilius is worried about the energy safety), press release, 12 January 2009, available at: http://www.lrv.lt/main.php?id=aktualijos_su_video/p.php&n=7004 (last access: 25 January 2009).
[3] Tėvynės sąjunga – Lietuvos krikščionys demokratai.
[4] Lietuvos socialdemokratų partija.
[5] “Tautos prisikėlimo partija” is a newly created party composed mainly of Lithuanian showmen.
[6] PartijaTvarka ir teisingumas.
[7] Lietuvos Respublikos liberalų sąjūdis.
[8] Liberalų ir centro sąjunga.
[9] Balsas (news portal): Pasirašytas susitarimas formuoti valdančiąją koaliciją (An agreement to form the ruling coalition has been signed), 27 October 2008, available at: http://www.balsas.lt/naujiena/220798/pasirasytas-susitarimas-formuoti-valdanciaja-koalicija-atnaujinta-11-50-nuotr-video/rubrika:naujienos-lietuva-politika (last access: 25 January 2009).
[10] Alfa (news portal): Ugnė Naujokaitytė, Andrius Sytas, Galutinai paaiškėjo antikrizinis planas (The anti-crisis plan has finally become clear), 15 November 2008, http://www.alfa.lt/straipsnis/10236732/?Galutinai.paaiskejo.antikrizinis.planas..plano.tekstas..apzvalga.=2008-11-15_12-12 (last access: 25 January 2009).
[11] Kauno diena (newspaper): D. Grybauskaitė: antikrizinis planas yra „per švelnus“ (D. Grybauskaitė: the crisis management plan is “too soft”), 10 December 2008, available at: http://kauno.diena.lt/naujienos/lietuva/d-grybauskaite-antikrizinis-planas-yra-per-svelnus-189207 (last access: 25 January 2009).
[12] Alfa (news portal): Kubilius: antikrizinis planas turėtų sušvelninti ekonomikos nuosmukį (Kubilius: crisis management plan should soften the economic recession), 20 January 2009, available at: http://www.alfa.lt/straipsnis/10247731 (last access: 25 January 2009).