Lithuania’s new Finance Minister Rimantas Šadžius says the government intends to negotiate with the European Commission for an exception when looking for ways to increase its defence spending.
According to him, Lithuania is at risk of exceeding the 3 percent of GDP budget deficit limit outlined in the Maastricht Treaty.
“One cannot rule out that based on the agreed trajectory, the budget deficit would exceed 3 percent in a given year, provided that in the future this excess would be compensated for, for example, by the entry into force of laws that provide for additional budget revenue,” Šadžius said in an interview with BNS.
His comment followed Prime Minister Gintautas Paluckas’ statement that his government would want some budget deficit exception in the context of the rapid increase in defence spending, which he had already discussed with European Commission Vice President Valdis Dombrovskis in Vilnius on Monday.
“Lithuania will have to submit its fiscal reform plan, the medium-term Fiscal Structural Plan, by the end of April. And this plan will set out our fiscal trajectory. It will be determined on a country-by-country basis, taking into account the need to respect the Maastricht criteria for a budget deficit below 3 percent of GDP and public debt below 60 percent of GDP,” the finance minister said.
“The EC’s conclusion on Lithuania’s draft budget for 2025 says there is a risk that we will breach the 3 percent budget deficit threshold in the future if we do not take appropriate measures, and the commission has identified what those measures should be, meaning revenue measures,” Šadžius added.
The country’s trajectory, he said, would be determined by its need to finance public investments that would strengthen the country’s economy, its ability to continue to grow and ensure its defence needs. This will be the subject of negotiations with the EC.
According to Šadžius, Lithuania would not yet be able to benefit from the almost 500 billion euro defence fund being set up by the EU countries, which would provide loans on concessional terms through the European Investment Bank (EIB), because there is simply no money in there.
However, he said that the EIB’s currently available facilities could be used, and he intends to discuss this with EIB Governor Nadia Calvino shortly.
Lithuania’s defence spending stands at 3.2 percent of GDP this year and is projected to reach 3.5 percent of GDP next year if the government uses the possibility to borrow an additional 800 million euros, which it proposes to provide for in the 2025 state budget. The Seimas will vote on this on Thursday.
Newsletter
Every Friday morning.
