Lithuanian President Dalia Grybauskaitė's veto would be a hard blow to the ruling coalition, which is struggling to unite it's own parties behind the controversial austerity measures.
VILNIUS — Lithuanian President Dalia Grybauskaitė said Monday she supports the 2010 draft budget, but will veto any social tax increase or pension cuts without compensation.
The government is struggling to balance the budget as the country faces its deepest recession since independence, during which tax revenues have fallen and social insurance payments have skyrocketed.
“In principle, I don’t have major objections to the central government budget,” Grybauskaitė told the press conference after meeting the prime minister and other coalition leaders, but is digging her heels in on coalitions’ proscribed pension cuts.
“Old-age pension is earned and it belongs to an individual by the right of private property. If we make any cuts, we must also set the time frame for compensation,” the president said in a press release. “I am resolute in my determination to protect the most vulnerable social groups, but given the country’s difficult economic situation, I nevertheless favor making cuts in some social benefits.”
The social fund SoDra may produce a deficit of over 2 billion litai in 2010 as unemployment surges and the need for social benefits grows.
“I would not sign the social security fund budget bill, if an increase of social tax by 2 percentage points would remain there,” Grybauskaite told journalists.
After the meeting, Prime Minister Andrius Kubilius told LNK TV that social insurance taxes for SoDra would not be increased as previously planned.
The ruling coalition has revised the 2 percent increase, but is yet to release information on how to get around the gap in the budget.
Unemployment benefits could be reduced and there could be a suspension to the personal choice citizens have where they can allocate 2 percent of income tax to be used for charity and support. Almost 60 million litai (€17.4 million) from income tax was transferred to charity last year.
“Talking seriously, we will solve this question and SoDra tax will not be raised,” Kubilius said.
The Lithuanian president can veto laws, including a budget law, but the parliament can overturn a veto by an absolute majority.
Grybauskaitė also said she had objected to cutting pensions without compensation, as well as social welfare cuts which would make matters worse for the disabled.
She also asked that parental leave benefits are cut by 10 percent from next July, rather than January as the government is planning. This winter will be hard financially for many families who struggle to adapt to life post-Ignalina after the country’s nuclear power plant is shut down.
At the same time, she pressed the government to stick to its plan to keep the public sector budget deficit under 9.5 percent of gross domestic product in 2010.
“The planned deficit should not be increased, and if the calculations change, [the government] will need to find other reserves to save,” Grybauskaitė said.
