VILNIUS — Months of negotiations over cuts and tax hikes culminated Wednesday when the Lithuanian government signed an agreement with trade unions and business associations.
The trade unions and business associations signed off on the government’s previous decisions to cut expenditures while increasing taxes to prevent an unmanageable deficit in light of declining revenue caused by the economic crisis. The three parties also agreed to create a neo-corporatist tripartite body to approve any further austerity measures.
Lithuanian Prime Minister Andrius Kubilius is trumping the agreement as an attestation of national unity in the face of the economic crisis. Photo by Nathan Greenhalgh.
“This agreement, which follows months of negotiations, enshrines our common responsibility and mutual commitments for preserving Lithuania’s solvency and restoring its competitiveness,” Prime Minister Andrius Kubilius announced Wednesday evening. “Such open dialogue and social solidarity will help maintain order and reduce tensions as we work to resolve the complex and often painful challenges of the current unprecedented crisis.”
Dubbed the “National Accord,” the agreement stipulated that even after budget cuts this year equivalent to 7 percent of gross domestic product, further consolidation is needed in order to bring the fiscal deficit back below the Maastricht limit of 3 percent of GDP and prevent an excessive build-up of public debt. The government will reduce civil servant wages by an average 10 percent and streamline or eliminate many state institutions. It will also reduce pensions and maternity benefits.
Not all the unions that were previously in negotiations with the government signed the agreement — some walked off after it became clear their demands would not be met. However, the government is stressing the unity the agreement brings in the face of the challenge the crisis has created for Lithuania’s economy and government finances.
“It’s important because maybe it’s the first time in my life that the government is providing such cruel measures and it’s important to do it not alone,” Ridas Jasiulionis, an adviser to the prime minister, told Baltic Reports.
Opposition parties in the parliament think otherwise, castigating the agreement as a public relations stunt.
“This is just another public relations campaign designed to mask the tragic reality of today’s erosion of humane government policy,” Valentinas Mazuronis, a Seimas member of the Order and Justice Party, told Lietuvos Rytas Thursday. “The impression is that Kubilius and the government are not really seeking consensus, but are agreeing to meet the interests of particular groups. Moreover, the common interests of Lithuanian citizens are the opposite of this.”
Within the ruling coalition there is dissension over exactly what unpopular austerity measures to take, enough so that Kubilius reached out to the opposition Labor Party last week in an effort to strengthen the coalition. The government contends that the “National Accord” will help get the painful cuts passed.
“Of course it will help,” Jasiulionis told Baltic Reports. “With four months of negotiations it was interesting, it was tough sometimes, but the will for agreement was there all the time.
There were some organizations which left the agreement, but still the main organizations have kept their responsibility for the big picture and I think it will last.”
The labor unions and business associations that signed the agreement say that while they are not happy about the measures, they understand their necessity in the face of the government’s fiscal problems.
“The decision to sign the national agreement was not taken very easily,” Rimantas Šidlauskas, newly-appointed general director of the Association of Lithuania Chambers of Commerce, Industry and Crafts told Baltic Reports. “We are not enthusiastic about it, but we make note the government has to have such a plan … there are some positive things in the agreement.”
Šidlauskas said the business associations were pleased that the government pledged not to introduce new taxes or increase tax rates in the next two years, except for a maximum 2 percentage point increase in the social security tax, and will consider reducing the corporate profit tax by 5 percentage points to 15 percent.
The trade unions are unhappy with the lower pensions and maternity benefits, but said the bargaining power the agreement promises will ensure that labor’s voice is heard.
“The pension level has been lowered, especially for those that are working. We are not happy with that but we are happy that we have a bargaining procedure,” Danutė Šlionskienė, international secretary for the Lithuanian Trade Union Confederation, told Baltic Reports.
Šlionskienė said the union would refrain from protests as long as the three-way agreement is honored.
“It depends on our government and our employer,” Šlionskienė said. “Only if tripartite council agrees, they will change something.”
The Seimas 2010 budget approval process will take place in November and December.
