The hold up is preventing the commissioning of billions of litai worth of construction jobs in Lithuania. Photo by Nathan Greenhalgh.
VILNIUS — Part of Lithuania’s economic stimulus plan to distribute loans for apartment renovation projects is stalled at the starting line as banks are refusing to loan the government-delegated funds.
The banks are unwilling to loan the money, two-thirds their own capital and and one-third European Union structural funds, because the government has only guaranteed 80 percent of the loan and the recipients do not have sufficient assets to post as collateral. As a result, not one litas of the three billion litai (€868 million) designated in March for the renovation of private and public Soviet-era apartment buildings in 280 comunities has left bank coffers.
“I would hope that the promises and demonstrate clear results, because so far the only visible ones are high interbank interest and strong shrinking loan portfolio, which is indicative of a very different approach,” Mykolas Majauskas, the Lithuanian prime minister’s economic adviser, told Baltic Reports. “Bank activities in the latter complicate the government’s efforts to promote industry and create the right conditions for economic recovery. We are raising this issue and presenting it not only to the bank managers, but also the Scandinavian banking supervisory authorities and other responsible authorities until positive changes in the credit market can be seen.”
The Lithuanian Bank Association says that given the lack of assets of loan recipients, the government must agree to guarantee the loans 100 percent.
“The problem is that the renovating communities have no assets. The banks provide loans only when there is adequate security, and in the absence of state guarantees or collateral for the loans, its the banking business’ point of view that it’s quite risky, ” Stasys Kropas, president of the Lithuanian Banking Association, told the press Friday.
Lithuania’s construction industry has been one of the hardest-hit sectors of the economy by the economic crisis. The amount of construction projects nationwide in the second quarter of 2009 was only 46 percent of the amount in the corresponding period during the previous year, according to the government statistics department.
Micro-credit flowing out
The other part of the economic stimulus program, micro-credit for small to medium-sized enterprises, has been much more successful than the apartment renovation program.
More than €500 million has been released into the economy through the economic stimulus plan, Majauskas said. However, there’s no evidence the influx of money is turning around the country’s declining economy.
