VILNIUS — Gitanas Nausėda, an adviser to the SEB president, said employee wages in Lithuania must be cut further for the small Baltic state to remain competitive for exports.

Another option would be devaluing the country’s currency, a move that would the government is steadfastly against given the economic turmoil it would cause, as it would render most [private_supervisor]loan holders unable to pay their loans and mean that commodities such as fuel would be prohibitively expensive. Nausėda also does not support this, but said it could be the only viable option to restore competitiveness if labor costs aren’t reduced further.

“In the process of internal devaluation we achieved increasing some part of our competitiveness – the only way to increase export competitiveness, was to cut wages and sell products on the international market,“ Nausėda told Baltic Reports. “There was the option to devalue the currency to remain competitive, but this would have had many other implications.“

In 2009, net salaries decreased on average by 8.7 percent in Lithuania, a drop that made the country slightly more attractive than others for manufacturing and exporting. Lithuania has a large manufacturing sector and had to lay off scores of workers in 2009 to cope with falling orders.

“Probably still there will be pressure on wages and to make savings, but the biggest reduction was in 2009, and now [in 2010] we might see a further 2 percent reduction in salaries,” the analyst said.

Statistics show that he Lithuanian manufacturing sector had a roller coaster year in 2009. In April, the country exported €880 million worth of stock, but by the end of the year this number had climbed to €1.07 billion, a 22 percent increase. In the meantime, the country’s trade deficit ballooned out — in August, at its highest point, the country imported €169 million more than it exported, Lithuanian Statistics reported.

Litas devaluation

If wages do not fall fast enough, the country could be forced into a devaluation of the national currency, the litas. Nausėda is a firm opponent of the option.

“It would destroy the confidence in our system and there would be massive panic among savings holders and it would be a difficult time for the country,” Nausėda said. “Lithuania imports a lot of things like steel and oil that we pay in U.S. dollars and these would become more expensive in litas automatically.”

The analyst said that labor costs would reduce with a devaluation of the litas, but to the point where the imported materials would negate any positive effect from the savings made on salaries.

Consumers would be hit as well. After devaluation many bank loans would also become near to impossible for locals who would drown in debt. Most Lithuanian mortgages are held in euros because of the lower interest rates available than for the litas. However, if the currency was devalued, many would be forced into insolvency because of their inability to repay the loan. [/private_supervisor] [private_subscription 1 month]loan holders unable to pay their loans and mean that commodities such as fuel would be prohibitively expensive. Nausėda also does not support this, but said it could be the only viable option to restore competitiveness if labor costs aren’t reduced further.

“In the process of internal devaluation we achieved increasing some part of our competitiveness – the only way to increase export competitiveness, was to cut wages and sell products on the international market,“ Nausėda told Baltic Reports. “There was the option to devalue the currency to remain competitive, but this would have had many other implications.“

In 2009, net salaries decreased on average by 8.7 percent in Lithuania, a drop that made the country slightly more attractive than others for manufacturing and exporting. Lithuania has a large manufacturing sector and had to lay off scores of workers in 2009 to cope with falling orders.

“Probably still there will be pressure on wages and to make savings, but the biggest reduction was in 2009, and now [in 2010] we might see a further 2 percent reduction in salaries,” the analyst said.

Statistics show that he Lithuanian manufacturing sector had a roller coaster year in 2009. In April, the country exported €880 million worth of stock, but by the end of the year this number had climbed to €1.07 billion, a 22 percent increase. In the meantime, the country’s trade deficit ballooned out — in August, at its highest point, the country imported €169 million more than it exported, Lithuanian Statistics reported.

Litas devaluation

If wages do not fall fast enough, the country could be forced into a devaluation of the national currency, the litas. Nausėda is a firm opponent of the option.

“It would destroy the confidence in our system and there would be massive panic among savings holders and it would be a difficult time for the country,” Nausėda said. “Lithuania imports a lot of things like steel and oil that we pay in U.S. dollars and these would become more expensive in litas automatically.”

The analyst said that labor costs would reduce with a devaluation of the litas, but to the point where the imported materials would negate any positive effect from the savings made on salaries.

Consumers would be hit as well. After devaluation many bank loans would also become near to impossible for locals who would drown in debt. Most Lithuanian mortgages are held in euros because of the lower interest rates available than for the litas. However, if the currency was devalued, many would be forced into insolvency because of their inability to repay the loan. [/private_subscription 1 month] [private_subscription 4 months]loan holders unable to pay their loans and mean that commodities such as fuel would be prohibitively expensive. Nausėda also does not support this, but said it could be the only viable option to restore competitiveness if labor costs aren’t reduced further.

“In the process of internal devaluation we achieved increasing some part of our competitiveness – the only way to increase export competitiveness, was to cut wages and sell products on the international market,“ Nausėda told Baltic Reports. “There was the option to devalue the currency to remain competitive, but this would have had many other implications.“

In 2009, net salaries decreased on average by 8.7 percent in Lithuania, a drop that made the country slightly more attractive than others for manufacturing and exporting. Lithuania has a large manufacturing sector and had to lay off scores of workers in 2009 to cope with falling orders.

“Probably still there will be pressure on wages and to make savings, but the biggest reduction was in 2009, and now [in 2010] we might see a further 2 percent reduction in salaries,” the analyst said.

Statistics show that he Lithuanian manufacturing sector had a roller coaster year in 2009. In April, the country exported €880 million worth of stock, but by the end of the year this number had climbed to €1.07 billion, a 22 percent increase. In the meantime, the country’s trade deficit ballooned out — in August, at its highest point, the country imported €169 million more than it exported, Lithuanian Statistics reported.

Litas devaluation

If wages do not fall fast enough, the country could be forced into a devaluation of the national currency, the litas. Nausėda is a firm opponent of the option.

“It would destroy the confidence in our system and there would be massive panic among savings holders and it would be a difficult time for the country,” Nausėda said. “Lithuania imports a lot of things like steel and oil that we pay in U.S. dollars and these would become more expensive in litas automatically.”

The analyst said that labor costs would reduce with a devaluation of the litas, but to the point where the imported materials would negate any positive effect from the savings made on salaries.

Consumers would be hit as well. After devaluation many bank loans would also become near to impossible for locals who would drown in debt. Most Lithuanian mortgages are held in euros because of the lower interest rates available than for the litas. However, if the currency was devalued, many would be forced into insolvency because of their inability to repay the loan.[/private_subscription 4 months] [private_subscription 1 year]loan holders unable to pay their loans and mean that commodities such as fuel would be prohibitively expensive. Nausėda also does not support this, but said it could be the only viable option to restore competitiveness if labor costs aren’t reduced further.

“In the process of internal devaluation we achieved increasing some part of our competitiveness – the only way to increase export competitiveness, was to cut wages and sell products on the international market,“ Nausėda told Baltic Reports. “There was the option to devalue the currency to remain competitive, but this would have had many other implications.“

In 2009, net salaries decreased on average by 8.7 percent in Lithuania, a drop that made the country slightly more attractive than others for manufacturing and exporting. Lithuania has a large manufacturing sector and had to lay off scores of workers in 2009 to cope with falling orders.

“Probably still there will be pressure on wages and to make savings, but the biggest reduction was in 2009, and now [in 2010] we might see a further 2 percent reduction in salaries,” the analyst said.

Statistics show that he Lithuanian manufacturing sector had a roller coaster year in 2009. In April, the country exported €880 million worth of stock, but by the end of the year this number had climbed to €1.07 billion, a 22 percent increase. In the meantime, the country’s trade deficit ballooned out — in August, at its highest point, the country imported €169 million more than it exported, Lithuanian Statistics reported.

Litas devaluation

If wages do not fall fast enough, the country could be forced into a devaluation of the national currency, the litas. Nausėda is a firm opponent of the option.

“It would destroy the confidence in our system and there would be massive panic among savings holders and it would be a difficult time for the country,” Nausėda said. “Lithuania imports a lot of things like steel and oil that we pay in U.S. dollars and these would become more expensive in litas automatically.”

The analyst said that labor costs would reduce with a devaluation of the litas, but to the point where the imported materials would negate any positive effect from the savings made on salaries.

Consumers would be hit as well. After devaluation many bank loans would also become near to impossible for locals who would drown in debt. Most Lithuanian mortgages are held in euros because of the lower interest rates available than for the litas. However, if the currency was devalued, many would be forced into insolvency because of their inability to repay the loan.[/private_subscription 1 year]

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