COMMISSION STAFF WORKING DOCUMENT Assessment of the 2012 national reform programme and convergence programme for LITHUANIA Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on Lithuania’s 2012 national reform programme and delivering a Council Opinion on Lithuania’s updated convergence programme for 2012-2015
Date: 2012-05-30
Institutions: European Commission
Subjects: Lithuania, administrative reform, banking system, budget deficit, competitiveness, economic growth, economic situation, labour market, pension scheme, public debt, tax system, youth unemployment

EUROPEAN COMMISSION 

Brussels, 30.5.2012  
SWD(2012) 319 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2012 national reform programme and convergence programme for 
LITHUANIA 

Accompanying the document 

Recommendation for a  

COUNCIL RECOMMENDATION 

on Lithuania’s 2012 national reform programme and delivering a Council Opinion on 
Lithuania’s updated convergence programme for 2012-2015 

{COM(2012) 319 final} 

EN 

   EN 

 
 
 
 
  
 
 
 
CONTENTS 

EXECUTIVE SUMMARY ................................................................................................. 3 

1. 

INTRODUCTION....................................................................................................... 4 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES .......................................... 5 

2.1.  Recent economic developments and outlook .................................................... 5 

2.2.  Challenges ......................................................................................................... 6 

3.  ASSESSMENT OF POLICY AGENDA .................................................................... 7 

3.1.  Fiscal policy and taxation.................................................................................. 7 

3.2.  Financial sector................................................................................................ 13 

3.3.  Labour market, education and social policy.................................................... 14 

3.4.  Structural measures promoting growth and competitiveness.......................... 17 

3.5.  Modernisation of public administration .......................................................... 20 

4.  OVERVIEW TABLE................................................................................................ 22 

5.  ANNEX ..................................................................................................................... 26 

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EXECUTIVE SUMMARY 

After a strong rebound in 2011, Lithuania's economic activity is expected to increase by 
2.4% in 2012. Unemployment is foreseen to decrease gradually from its former peaks to 
13.8%  in  2012;  however,  unemployment  remains  high  particularly  among  young  and 
unskilled workers. 

Helped  by  robust  economic  growth  in  2011,  Lithuania's  general  government  deficit 
narrowed to 5.5% of GDP, and is expected to decrease further to 3.2% of GDP in 2012. 
Lithuania  made  progress  in  improving  tax  collection  and  reforming  its  state-owned 
enterprises.  

Lithuania continues to face important policy challenges:  demographic developments cast 
a doubt on Lithuania’s long-term fiscal sustainability, especially of its pension system. A 
low  labour  force  participation  rate,  very  high  youth  unemployment,  shortage  of  skilled 
labour and skill mismatches, aggravated by high emigration, are other major concerns in 
the medium to long term. The growing poverty and social exclusion threatens to put an 
even  higher  strain  on  public  finances  in  the  near  future.  The  country’s  infrastructure, 
particularly  its  energy  system,  lacks  competition  and  interconnections,  thus  hindering 
growth. Low energy efficiency, especially of buildings, as well as the low level of R&D 
spending  and  poor  performance  in  innovation,  are  pressing  issues.  Modernising  public 
administration  and  finalising  the  reform  of  state-owned  enterprises are also essential  to 
boosting competitiveness. 

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1. 

INTRODUCTION 

Procedural aspects 

In June 2011, the Commission proposed six country specific recommendations1 (CSRs) 
for economic  and structural  reform policies for Lithuania. In July 2011, the Council  of 
the European Union adopted these recommendations2, which concerned public finances, 
the pension system, the labour market, state-owned enterprises, energy, competition and 
the business environment. 
In  November  2011,  the  Commission  published  its  Annual  Growth  Survey  for  20123 
(AGS  2012)  presenting  the  basis  for  building  the  necessary  common  understanding  of 
the priorities for action at national and EU level in 2012. It focused on five priorities — 
growth-friendly fiscal consolidation, restoring normal lending to the economy, promoting 
growth  and  competitiveness,  tackling  unemployment  and  social  consequences  of  the 
crisis,  and  modernising  public  administration  —  and  encouraged  Member  States  to 
implement them in the 2012 European Semester. 

Against  this  background  Lithuania  presented,  in  April  2012,  updates  of  its  national 
reform  programme  and  convergence  programme,  detailing  progress  made  since  July 
2011 and plans going forward. 

This Staff Working Document assesses the state of implementation of the 2011 CSRs as 
well as the AGS 2012 in Lithuania, identifies current policy challenges and, in this light, 
examines the country’s latest policy plans. 

Overall assessment 

Overall,  Lithuania  has  made  progress  in  implementing  the  2011  recommendations.  On 
the  positive  side,  economic  growth  was  robust  in  2011  and  the  country  managed  to 
reduce its fiscal deficit. In addition, the country took further steps towards improving tax 
collection  and  reforming  its  state-owned  enterprises.  Notwithstanding  these  important 
achievements,  reform  efforts  were  limited,  in  particular  regarding  the  labour  market, 
social policies, energy efficiency and the energy sector. The challenges identified in July 
2011 and reiterated in the AGS 2012 therefore remain valid in these areas. Regarding the 
pension system, Lithuania took a first important step by approving a gradual increase in 
the pension age to 65 years for both men and women by 2026. Nevertheless, without a 
comprehensive pension reform the long-term sustainability of public finances is at risk. 

Lithuania  faces  the  most  pressing  challenges  in  public  finances,  the  labour  market,  the 
energy sector and in relation to poverty or social exclusion. The budget deficit has to be 
further reduced to reach the medium-term objective. This would also help maintain the 
confidence of financial markets. A low labour force participation rate, shortage of skilled 
labour and skill mismatches, aggravated by high emigration, are other major concerns in 
the  medium  to  long  term,  given  population  ageing.  The  growing  poverty  and  social 
exclusion threatens to put an even higher strain on public finances in the near future. The 
lacks  competition  and 
country’s 
interconnections  and  thus  is  a  factor  that  hinders  growth.  Low  energy  efficiency, 
especially of buildings, as well as the low level of R&D spending and poor performance 

infrastructure,  particularly 

its  energy  system, 

1   SEC(2011) 823 final of 7 June 2011 
2   2011/C 210/01 of 12 July 2011 
3   COM(2011) 815 final of 23 November 2011 

4

 
 
 
                                                 
in  innovation  are  pressing  issues.  Finally,  in  light  of  persistent  uncertainties  in 
international financial markets, prudent and pre-emptive policies in financial regulation 
and supervision remain important. 

The policy plans submitted by Lithuania are relevant and substantiated, but in some areas 
they  do  not  address  the  challenges  in  a  comprehensive  way.  The  national  reform 
programme contains further plans (until the end of 2012) to maintain financial stability, 
foster  employment  (particularly  among  young  people), 
the  business 
environment  and  regulation,  further  restructure  state-owned  enterprises  (SOEs),  and 
improve  energy  connections  and 
include 
implementing social insurance reform, continuing reforms in the energy and health care 
sectors, as well as improving the business environment and conditions for research and 
innovation. 

infrastructure.  Medium-term  plans 

improve 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1.  Recent economic developments and outlook 

Strong  economic  expansion  prior  to  the  financial  crisis  was  accompanied  by  growing 
imbalances  and  other  signs  of  overheating,  which  led  to  a  deep  economic  recession  in 
2009 (real GDP shrank by 14.8 %). Lithuania returned to growth in 2010 (+1.4 %) as a 
result of an internal devaluation. In 2011, economic growth picked up significantly and 
reached  5.9 %,  despite  the  ongoing  fiscal  consolidation.  Substantial  nominal  wage 
decline and productivity improvements fostered competitiveness and Lithuania took full 
advantage  of  growing  export  markets.  Corporate  profits  as  well  as  employment 
increased. Consequently, private consumption and investment growth gained momentum, 
and domestic demand took over as the main driver of economic growth. However, at the 
end of the year, Lithuania started to feel the repercussions of the slowdown in the EU. In 
addition,  the  bankruptcy  of  the  domestic  bank  Snoras  in  November  2011  further 
dampened consumer confidence and business expectations. 

Despite  strong  growth  in  2011,  unemployment  remains  high,  standing  at  13.9%  at  the 
end of the year, especially among young people, and skill mismatches have appeared in 
some sectors. Inflation (HICP) rose in 2011 on the back of higher energy and food prices, 
reaching an annual average of 4.1 % compared to 1.2 % in 2010.  

Going  forward,  Lithuania’s  economy  will  be  affected  by  the  ongoing  recession  in  the 
euro  area.  Lower  external  demand  and  economic  uncertainty  are  likely  to  dampen 
prospects for the Lithuanian economy in 2012, and a rebound is expected only in 2013.  
Overall, real GDP is projected to increase by 2.4 % in 2012 and 3.5% in 2013. Inflation is 
forecast  to  decrease  in  2012,  driven  by  lower  commodity  and  food  prices  as  well  as 
weaker domestic demand. This downward trend should continue in 2013 due mainly to 
expected  weaker  oil  prices.  The  unemployment  rate  will  remain  in  double  figures  in 
2012-2013 as the situation on the labour market is expected to improve only marginally. 

According  to  the  convergence  programme,  GDP  growth  could  average  3.85%  in  2014-
2015, in the absence of adverse financial and external developments. This should further 
lower  the  unemployment  rate  to  around  10%  in  2015.  However,  unfavourable 
demographic tendencies will have the effect of reducing Lithuania’s potential growth in 
the  medium  and  long  term.  Therefore,  the  government  will  have  to  undertake  a  broad 
range of structural reforms in order to keep growth at this level. 

5

 
 
 
The national reform programme was approved by the government on 23 April 2012 and 
the convergence programme was adopted on 25 April 2012. Both were presented to the 
Lithuanian Parliament’s European Affairs Committee, where they were debated without 
being voted upon; there was thus no formal parliamentary approval of the programmes. 
Although  stakeholders  were  consulted  in  the  process,  they  did  not  provide  comments. 
The  convergence  programme  was  submitted  to  the  European  Commission  on  27  April 
2012  and  the  national  reform  programme  on  30  April  2012,  together  with  the 
commitments  made  by  Lithuania  under  the  Euro  Plus  Pact.  The  programmes  are 
consistent with the guidance provided by the Secretariat-General of the Commission and 
the code of conduct. They outline in an integrated manner the fiscal consolidation efforts, 
the  key  structural  reforms  and  the  reforms  that  underpin  macroeconomic  stabilisation. 
Both documents share the same economic outlook, which is broadly in line with the most 
recent Commission forecast. The 2012 convergence report will assess the progress made 
by  Lithuania  in  fulfilling  its  obligations  regarding  the  achievement  of  economic  and 
monetary union.  

2.2.  Challenges  

Lithuania needs to speed up its reform agenda to improve its growth potential. Although 
the  main  policy  challenges  for  the  country  have  remained  broadly  unchanged  since  the 
European  Semester  2011,  some  new  areas  that  have  been  identified  merit  closer 
government attention.  

In  particular,  continued  growth-friendly  fiscal  consolidation  is  required  to  reach  the 
medium-term  objective  (MTO)  for  the  deficit  and  maintain  the  confidence  of  financial 
markets. Lithuania has scope for making use of less distortive and more growth-friendly 
taxation;  moreover,  tax  collection  and  administration  could  be  further  improved. 
Lithuania’s high energy intensity remains an issue that could be addressed through a shift 
in  taxation  towards  energy  use  as  identified  in  the  2011  Commission  Staff  Working 
Paper. The structural weaknesses of the fiscal framework require attention: low share of 
growth-enhancing expenditure, weak monitoring of budget implementation and a lack of 
enforceable  and  binding  expenditure  ceilings  in  the  multi-annual  budgetary  planning. 
Demographic  developments  cast  a  doubt  on  Lithuania’s  long-term  fiscal  sustainability 
and  a  comprehensive  pension  reform,  targeting  both  sustainability  and  adequacy  of 
pensions, remains an important issue. 

Regarding labour supply, the main challenge is to increase labour force participation by 
improving  flexibility  of  contractual  arrangements,  enhancing  labour  market  relevance 
and quality of skills and making better use of active labour market policies. The situation 
among  young  people  and  unskilled  workers  is  particularly  worrying.  Skill  mismatches 
have appeared in some sectors and long-term unemployment has increased in Lithuania. 
Another important challenge, also highlighted in the Annual Growth Survey for 2012, is 
the fight against youth unemployment. Despite robust growth, the youth unemployment 
rate  is  one  of  the  highest  in  the  EU  (32 %),  and  young  people  often  lack  the  necessary 
skills or qualifications to find a job. 

Weaknesses in the area of business conditions, despite some progress, and the quality of 
education  and  low  R&D  investment  continue  to  restrict  growth  and  competitiveness  in 
Lithuania.  Limited  competition  among  electricity  suppliers,  poor  interconnections  with 
other  Member  States,  ageing  generation  capacity,  and  the  absence  of  alternative  gas 
supply  routes  keep  energy  prices  high.  Furthermore,  energy  efficiency,  especially  of 
buildings,  is  an  urgent  challenge.  Enterprises  would  greatly  benefit  from  further 
improvements  in  the  business  environment,  while  notable  progress  has  been  made  on 
6

 
 
 
improving start-up conditions and reducing the time taken to obtain construction permits. 
Modernising public administration and finalising the reform of state-owned enterprises is 
also essential to boosting competitiveness. 

Since  2011  a  new  challenge  has  arisen.  Lithuania  is  the  EU  country  with  the  highest 
income  inequality  and  has  the  fourth  highest  rate  of  poverty  or  social  exclusion.  It  is 
particularly worrying that, despite economic growth, these rates have increased further. 
So far, the causes have not received the required policy attention and the plans presented 
in the national reform programme are not specific enough. 

3.  ASSESSMENT OF POLICY AGENDA  

3.1.  Fiscal policy and taxation 

Budgetary developments and debt dynamics 

In its 2012 convergence programme, Lithuania confirms to correct the excessive general 
government  deficit  by  2012  and  to  progress  towards  the  medium-term  budgetary 
objective (MTO). The programme confirms  the previous MTO, i.e. a structural general 
government surplus of 0.5 % of GDP, which adequately reflects the requirements of the 
Stability and Growth Pact, and outlines a consolidation of at least 1 percentage point per 
year,  planning  a  balanced  budget  by  2015.  In  structural  terms,  the  planned  annual 
progress  towards  the  MTO  is  slightly  higher  than  0.5%  of  GDP,  on  the  basis  of  the 
recalculated  structural  balance  from  the  programme  (using  the  commonly  agreed 
methodology for calculating the structural budget balance).  

Lithuania  took  steps  to  implement  the  fiscal  CSR.  Some  temporary  measures  adopted 
during  the  crisis  concerning  social  benefits  have  been  made  permanent,  and  tax 
compliance  and  administration  were  reinforced.  According  to  the  2012  spring  forecast, 
Lithuania’s general government deficit decreased from 7.2 % of GDP in 2010 to 5.5 % of 
GDP  in  2011,  somewhat  worse  than  the  target  of  5.3 %  of  GDP  set  in  the  2011 
convergence programme due to unforeseen calls on state-guarantees on corporate loans 
and a higher than planned deficit of local governments. This reduction was the result of 
consolidation efforts on the back of robust economic growth reaching 5.9 % in 2011. The 
adjustment  has  largely  relied  on  expenditure  restraint.  The  structural  deficit  decreased 
from 5.1 % of GDP in 2010 to 4.6 % in 2011. 

The 2012 budget targets a further reduction in the deficit to 3.0% and includes additional 
structural  measures:  mainly  substantial  cuts  in  expenditure  and  additional  non-tax 
revenue (see the Box 1 below). The 2012 spring forecast expects the general government 
deficit to decline to 3.2 % of GDP. Compared to the previous programme, the current one 
projects both revenue and expenditure lower in absolute terms, and by 3.4-3.6 precentage 
points lower in terms of GDP. The programme envisages lower tax revenue due to less 
favourable economic growth assumptions, and lower non-tax revenue, mainly related to 
EU grants, as well as lower current expenditure following further cuts in the 2012 budget 
and  lower  public  investment  as  the  main  drivers.  The  Commission  and  the  national 
authorities broadly agree on the macroeconomic outlook for 2012 and 2013. 

7

 
 
 
Box 1. Main budgetary measures 

  Revenue 

Expenditure

2011 

Increase in excise duties (+0.1 % of GDP)  Cuts  in  government  spending,  including 
extension  of  the  public  sector  wage 
freeze (-1.0 %) 

Continuing 

freeze 
including pensions (-0.6 %) 

in  social  benefits, 

Reduction 

in  social  benefits,  mainly 

maternity benefits (-0.2 %) 

2012 

Increase  in  dividends  from  state-owned 

Cuts in government spending (-0.5 %) 

companies (+0.5 % of GDP) 

Introduction  of  ‘luxury  tax’  on  residential 

properties (+0.02 %) 

Reduction in transfers to the second pillar 

pension funds (+0.1 % of GDP) 

Sales of carbon rights (+0.3 % of GDP) 

Abolition  of  reduced  VAT  rate  for  hotels 

(+0.02 % of GDP) 

Increase in excise duties (+0.02 %) 

Increase in retirement age (-0.1 % of GDP) 

Cut in road investment (-0.03 % of GDP) 

Continuing  public  sector  wage  freeze  (-

0.5 % of GDP) 

Reversal  of  previous  temporary  cuts  in 

social insurance pensions (+0.5 %) 

Continuing cuts in state pensions (-0.1 %) 

Reduction in social benefits, mainly health 
care and maternity benefits (-0.5 %) 

2013 

  Changes to land tax (+0.1 % or higher) 

Reversal  of  the  public  sector  wage  freeze 

Increase  in  transfers  to  the  second  pillar 

(+0.5 %) 

pension funds (+0.2 % of GDP) 

Increase in retirement age (-0.1 % of GDP) 

Environmental  investment  following  sales 

of carbon rights (+0.3 % of GDP) 

Note: The budgetary impact in the table is the impact reported in the programme, i.e. by the 
national  authorities.  A  plus  sign  means  that  revenue/expenditure  increases/decreases  as  a 
consequence  of  this  measure.  The  degree  of  detail  reflects  the  type  of  information  made 
available in the stability or convergence programme and, where available, in a multiannual 
budget.  

The budgetary adjustment in 2012 has a strong focus on expenditure-reducing measures, 
which should contribute some 1.3 % of GDP, whereas revenue is expected to increase by 
around 0.9 % of GDP. According to the 2012 spring forecast, the revenue-to-GDP ratio is 

8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
projected to increase from 32.0 % in 2011 to 33.5 % in 2012 and the expenditure-to-GDP 
ratio is expected to fall from 37.5 % to 36.7 %, broadly in line with the 2012 convergence 
programme. 

Overall,  these  steps  have  put  Lithuania  on  track  to  reduce  the  deficit  further  under  the 
EDP. The  2012  spring forecast indicates that the country is likely to reduce its general 
government deficit to close to 3 % of GDP (the reference value of the Treaty) in 2012. 

The average annual fiscal effort over the period 2010-2012 is expected to be lower than 
recommended  by  the  Council  despite  fiscal  consolidation  efforts.  The  2012  spring 
forecast  sees  the  structural  balance  decreasing  substantially,  from  a  deficit  of  5.1%  in 
2010  to  4.6%  of  GDP  in  2011  and  2.9%  of  GDP  in  2012,  0.3  pp.  higher  than  the 
(recalculated)  structural  balance4  forecast  by  the  Lithuanian  authorities.  The  average 
annual  fiscal  effort  over  the  reference  period  amounts  therefore  to  1.1%  of  GDP, 
substantially  below  the  recommended  2.25  percentage  points  of  GDP.  The  structural 
balances  are  strongly  affected  by  extensive  revision  of  potential  growth  following  the 
boom  and  bust  Lithuania’s  economy  experienced  before  and  during  the  crisis.  The 
Commission  has  revised  Lithuania’s  potential  growth  downwards  to  0.3%  in  2011  and 
1.6 % on average in the period 2011-2015, much lower than its growth performance in 
2011 and the forecast for 2012/13. Therefore part of the budgetary improvement which 
comes from fiscal consolidation should be attributed to cyclical changes.  

Going forward, the 2012 convergence programme targets a general government deficit of 
2.0 % of GDP in 2013 and a further improvement until a balanced budget is reached in 
2015.  It  is,  however,  not  specified  how  such  progress  will  be  made.  Based  on  the 
Commission  2012  spring  forecast,  a  further  slight  decrease  in  the  general  government 
deficit to 3.0 % of GDP is expected in 2013 as the overall expenditure increase will be 
contained by the state budget expenditure rule but some temporary measures are set to be 
reversed, including the freeze of government wages. Therefore, the difference is mainly 
due to the no-policy-change assumption as budgetary targets in the programme represent 
targets  requiring  unspecified  measures.  The  deficit  targets  presented  in  the  2012 
convergence  programme  differ  slightly  from  those  presented  in  the  previous  one.  The 
planned  consolidation  path  is  somewhat  slower  due  to  the  projection  of  subdued 
macroeconomic  growth,  especially  in  2012.  From  2013  onwards  consolidation  will 
mainly be driven by significant cuts in current expenditure.  

The  2011  recommendation  on  fiscal  consolidation  required  that  Lithuania  should  make 
adequate  progress  towards  the  MTO,  i.e.  a  structural  general  government  surplus  of 
0.5 % of GDP, which is not expected to be achieved within the programme period. This 
recommendation  was  also  reflected  in  general  terms  in  the  AGS  2012.  The  budgetary 
adjustment needed to reach the target has been gradual over the period 2011-2012 with 
an average annual fiscal effort of around 1.1 % of GDP. As the (recalculated) structural 
deficit  is  projected  to  stand  at  2.6 %  of  GDP  in  2012,  the  average  annual  fiscal  effort 
between  2013  and  2015  is  set  at  around  0.6%  of  GDP,  slightly  above  the  standard 
benchmark  of  0.5 %  of  GDP.  Based  on  the  information  on  structural  measures  for  the 
period  2013-2015  contained  in  the  2012  convergence  programme,  timely  progress 
towards the MTO will demand significant additional efforts.  

4 Cyclically adjusted balance net of one-off and temporary measures, recalculated by the Commission on 
the basis of the information provided in the programme, using the commonly agreed methodology. 

9

 
 
 
                                                 
The  measures  adopted  or  announced  so  far,  while  relevant  and  corresponding  to  the 
specific  recommendations  of  the  AGS  2012,  lack  ambition  and  sometimes  credibility. 
The adopted changes in the retirement age will yield substantial savings only in the long 
run. The announced concept of social security system reform is ambitious compared to 
the  overall  policy  challenge  but  very  sensitive  and  subject  to  political  decisions, 
especially  in  view  of  the  general  elections  planned  in  autumn  2012.  Consequently, 
significant changes cannot be excluded at this stage and a proper assessment has to wait 
until the final version is formally adopted.  

The  analysis  of  the  development  of  the  structural  balance  is  complemented  by  an 
assessment of the expenditure benchmark. According to the information provided in the 
2012  convergence  programme,  the  growth  rate  of  government  expenditure,  net  of 
discretionary revenue measures, over 2013 will not exceed a rate which is lower than the 
reference  medium-term  rate  of  potential  GDP  growth  (0.77%)  and  which  ensures  an 
annual  structural  adjustment  towards  the  MTO  by  0.5%  of  GDP  (-0.58%).  However, 
according  to  the  Commission’s  2012  spring  forecast,  the  expenditure  growth  rate  of 
around 2.23% in 2013 far exceeds the benchmark, which indicates that progress towards 
the  MTO  might  not  be  sufficient.  In  2014  the  programme  target  is  in  line  with  the 
expenditure  benchmark,  while  it  foresees  much  stronger  expenditure  growth  in  2015 
(3.04%) than would be needed to progress towards the MTO. Based on the 2012 spring 
forecast,  it  is  unlikely  that  the  2013  target  will  be  met  without  additional  measures.  It 
will therefore be even more difficult to meet targets in 2014-2015. 

At  the  same  time,  expenditure  cuts  should  be  structured  in  such  a  way  as  not  to 
undermine medium-term growth prospects, as mentioned in the AGS 2012. This aspect 
deserves  particular  attention  as  further  savings  in  Lithuania  could  be  achieved  through 
structural  fiscal  reforms  and  better  targeting  and  improving  tax  collection  (see  section 
below on taxation) rather than expenditure cuts. Prioritising growth-friendly expenditure 
such  as  public  investment,  R&D,  education  and  training  is  important  to  enhance 
Lithuania’s growth. 

Furthermore, the projected consolidation path is subject to a number of risks. Lithuania’s 
economic growth, and thus its tax revenues, may evolve less dynamically than expected, 
as  the  growth  prospects  of  this  small  open  economy  depend  considerably  on  the 
development  of  its  main  trading  partners.  In  addition,  volatile  financial  markets  may 
result in a rise in the government’s interest cost, thus putting additional pressure on the 
state  budget.  Considering  the  substantial  consolidation  efforts  needed,  there  are  also 
implementation risks in view of upcoming elections in autumn 2012.  

The  general  government  debt  increased  substantially  during  the  crisis  from  15.5 %  of 
GDP in 2008 to 38.0 % of GDP in 2010 and stabilised at 38.5% of GDP in 2011. Both 
the  Commission  and  Lithuania  expect  it  to  remain  well  below  60 %  of  GDP  over  the 
programme  period;  thus,  the  debt  reduction  benchmark  is  not  applicable.  Nevertheless, 
the Commission’s 2012 spring forecast is for public debt to rise to around 41 % of GDP 
in 2013, while the 2012 convergence programme expects it to drop to 38.6 % in 2013 and 
further to 34.9 % in 2015.  This divergence stems mainly from the 1 pp difference in the 
deficit  forecast  in  2013,  which  relates  to  the  application  of  the  no-policy-change 
assumption in the Commission’s 2012 spring forecast. In addition, the GDP forecast in 
the convergence programme is slightly higher (0.2 pp) than predicted in the 2012 spring 
forecast. 

Long-term sustainability 

10

 
 
 
 
Lithuania’s  long-term  change  in  age-related  expenditure  is  above  the  EU  average.  The 
initial  budgetary  position  adds  to  the  long-term  costs.  Under  a  no-policy-change 
assumption, debt would increase to 44.6% of GDP by 2020. Therefore, additional fiscal 
consolidation is needed beyond the forecast horizon to put debt on a downward path. Full 
implementation  of  the  convergence  programme  would  be  enough  to  put  debt  on  a 
downward  path  by  2020.  Recent  pension  reform  measures  have  contributed  to 
improvement  of  fiscal  sustainability,  but  further  comprehensive  reforms  are  needed  to 
curb  the  projected  substantial  increase  in  age-related  expenditure.  Ensuring  continued 
sufficient  primary  surpluses  over  the  medium  term,  as  planned  in  the  convergence 
programme, would further improve the sustainability of public finances.  

Fiscal framework 

Lithuania’s  medium-term  budgetary  framework  specifies  revenues  and  expenditure  of 
the national budget for three years. The fiscal framework also includes four fiscal rules, 
applicable separately to central and local levels of government. At the central level, the 
government  has  to  respect  a  limit  on  net  borrowing  and  take  into  account  revenue  and 
expenditure rules for the state budget. The revenue rule calls for the deficit of the state 
budget  to  be  reduced  by  the  estimated  ‘excess’  revenue  of  the  current  year.  The 
expenditure rule links expenditure ceilings to revenues. For the local governments, there 
is a balanced budget rule. 

However, the framework has failed to prevent pro-cyclical fiscal policy in years of high 
growth,  and  the  rules  are  not  sufficiently  binding.  They  lack  a  robust  enforcement 
mechanism, e.g. automatic spending cuts or sanctions for non-compliance. Moreover, the 
fiscal framework suffers from a non-transparent budgetary process, including appropriate 
reporting of revenue and expenditure executions, insufficient monitoring of fiscal target 
execution and the comparability of budgetary indicators on cash and accrual bases. 

Lithuania has taken some further steps to strengthen its fiscal framework, implementing 
the  2011  recommendation  in  this  area.  The  work  on  reform  of  budget  planning  and 
execution  is  progressing.  Some  concepts  and  draft  laws  have  been  presented  to  the 
public,  but  the  government  has  not  yet  approved  them.  If  adopted,  these  laws  would 
increase  transparency,  monitoring  and  execution  of  the  budgetary  process,  since  they 
provide  for  an  independent  body  located  in  the  State  audit  office,  and  introduce  other 
measures. Of particular relevance is the aim to improve accountability within the fiscal 
framework. The draft laws propose to tighten rules on treasury reserves and to allocate 
greater  responsibilities  to  the  Ministry  of  Finance.  The  new  legislation  would  also 
enhance  and  reinforce  the  binding  character  of  the  medium-term  framework.  However, 
these reform proposals are currently subject to public consultation, and it is unclear when 
and in what form this legislation will be adopted and implemented. These plans therefore 
are  relevant,  but  still  need  to  be  approved.  Finally,  there  has  been  some  progress  with 
adjusting the national classification of public accounts to the ESA95 standards. 

Tax system 

The  Lithuanian  tax  system  is  characterised  by  significant  tax  evasion  and  low 
administrative  efficiency.  Tax  compliance  shows  scope  for  improvement,  with  the 
shadow economy being perhaps as large as 30 % of GDP, well above the EU average of 
15.9 %.  Lithuania  has  potential  for  increasing  VAT  efficiency  as  estimates  of  the  VAT 

11

 
 
 
‘compliance gap’5 point to widespread VAT fraud and evasion. Administrative costs per 
collected  revenue  are  relatively  high  and  the  time  costs  of  paying  taxes  for  businesses 
could be further reduced. The Lithuanian government has adopted a comprehensive tax 
compliance  strategy  and  a  plan  of  measures  for  2011-2012.  Cash  registers  have  been 
introduced  for  food  products  in  markets  and  border  controls  strengthened.  Measures 
implemented in 2011 to reinforce tax compliance and administration have strengthened 
the tax bases and yielded additional revenue. Efforts and implementation will continue in 
2012 and beyond. The measures taken are relevant and progress is being made as these 
measures enter into force. However, there is still room to step up efforts in this respect. 

In 2010 Lithuania had the lowest tax-to-GDP ratio in the EU and has not increased major 
taxes in recent  years. Fiscal  consolidation  so far is mainly due to expenditure restraint. 
Since Lithuania shows an unsustainable initial budgetary position, there is scope to look 
at  additional  tax  revenue  sources  that  are  least  detrimental  to  growth.  In  particular, 
Lithuania  has  scope  for  less  distortive  and  more  growth-friendly  taxation.  The  tax 
structure  relies  on  taxing  labour  and  consumption,  while  at  the  same  time  taxes  on 
property and environment are among the lowest in the EU. 

The tax burden on labour has been steadily decreasing over the last decade and is now 
slightly below the EU average. The tax burden on the low-skilled is also below the EU 
average.  Capital  taxation,  which  is  considered  as  the  most  detrimental  to  growth,  is 
favourable in Lithuania. The implicit tax rate on capital was 10.9 % in 2010 and is one of 
the lowest in the EU, partly due to generous exemptions and lower rates for SMEs. The 
implicit tax rate on consumption of 18.2 % (in 2010) is one of the lowest in the EU. The 
standard VAT rate is 21 % and Lithuania applies two reduced rates (of 5 % and 9 %) only 
to a limited number of goods and services. 

Revenue from environmental taxes is the third lowest in the EU. This is largely due to 
the transport taxes (excl. fuel), which are the lowest in the EU. Lithuania is among the 
few  European  states  not  to  have  motor  vehicle taxation (no  road tax or car registration 
tax). The car fleet in Lithuania remains one of the most energy-intensive in the EU. The 
same  applies  to  the  energy  intensity  of  production.  The  implicit  tax  rate  on  energy 
consumption  was  the  seventh  lowest  in  the  EU  in  2010  whereas  energy  taxes  in  GDP 
terms are only slightly below the EU average. Regarding the implementation of the 2011 
recommendation  to  take  action  to  ‘shift  taxation  towards  energy  use’,  only  a  few 
measures have been taken 

The composition of tax revenue is quite favourable, as a large part is raised from indirect 
taxes  that  are  less  distortive  for  growth.  However,  recurrent  property  taxes  or 
environmental taxes are relatively low. Going forward, Lithuania could broaden the tax 
base, improve efficiency of tax collection, eliminate existing tax exemptions and extend 
use of environmental and recurrent property taxes. The latter could be used much more to 
shift taxation towards a growth-friendly tax policy in line with the 2011 recommendation 
on  energy  taxation.  The  government  has  so  far  addressed  only  some  of  these  crucial 
aspects of taxation. 

5  The  ‘compliance  gap’  is  the  difference  between  accrued  VAT  receipts  and  the  theoretical  net  VAT 

liability for the economy given the VAT rate structure. 

12

 
 
 
 
                                                 
3.2.  Financial sector 

Financial stability 

Foreign-owned banks, in particular Scandinavian banking groups, play an important role 
in Lithuania’s financial sector. In total, foreign subsidiaries manage 90 % of the banking 
system assets; 69 % are controlled by the three largest banks. The financial crisis severely 
hit  the  banking  system,  but  it  managed  to  absorb  adverse  economic  shocks  thanks  to 
support  from  parent  foreign  banks  and  determined  policy  action  by  the  Lithuanian 
authorities.  In  2011,  banking  profits  reached  pre-crisis  levels  and  the  loan  portfolio 
quality started improving. The share of non-performing loans fell to 21.1% in 2011 from 
23.3%  in  2010  (compared  to  the  EU  average  of  7%  in  2010)  as  clients  that  had 
previously  been  regarded  as  insolvent  started  to  repay  business  and  consumer  loans. 
Capital and liquidity ratios are well above the regulatory minima for the banking system 
as  a  whole,  with  the  capital  adequacy  ratio standing at  13.5% and the  liquidity  ratio  at 
44%6. 

As  recommended  in  the  AGS  2012,  Lithuania  started  to  address  the  weaknesses  of  its 
regulatory and supervisory framework. It has adopted a new macro-prudential instrument 
to  avoid  re-emergence  of  unsustainable  credit  and  house  price  developments.  The 
Regulation  for  Responsible  Lending  came  into  effect  on  1  November  2011  and  has 
several  objectives:  protecting  the  population  against  too  high  a  financial  burden  and 
insulating  the  financial  system  and  ultimately  the  Lithuanian  economy  against  shocks. 
The  regulation  forces  credit  institutions  to  respect  clear  limits  when  they  evaluate  the 
solvency of clients and issue loans. This relevant measure should allow for more normal 
lending patterns to business and to private households, without the excessive risk-taking 
of the pre-crisis period, in line with the AGS 2012. 

In addition, the legislators decided to centralise financial supervision entirely within one 
institution,  the  Bank  of  Lithuania.  A  new  supervision  service  established  as  of  January 
2012 is tasked with supervising commercial banks, other credit and payment institutions, 
securities  and  insurance  markets,  as  well  as  investigating  disputes  between  consumers 
and financial institutions. The new model of supervision is expected to be more effective 
as  well  as  cost-efficient  and  should  lead  to  reinforced  stability  of  the  financial  system 
since it will put more emphasis on macro-prudential, systemic risk supervision as well as 
on consumer protection and education. 

The  importance  of  close  financial  supervision  was  demonstrated  in  the  wake  of  the 
bankruptcy  of  a  domestically  owned,  medium-sized  bank,  Snoras,  in  November  2011. 
Through  immediate  action  the  Lithuanian  authorities  maintained  confidence  among 
consumers and investors and ensured that other banks were not affected. Going forward, 
continued  scrutiny  of  the  banking  sector  and  pre-emptive  financial  supervision  are 
required to avoid similar events like Snoras. 

Funding of the economy 

Credit  to  enterprises  started  to  increase  in  the  last  quarter  of  2011,  after  a  continuous 
decline  since  2009,  when  the  credit  bubble  burst. However, lending remains  low  given 
the  continuing  deleveraging  process.  The  government  continues  to  support  SMEs 

6 The source of the financial soundness indicators in this paragraph is the IMF. 

13

 
 
 
                                                 
through  EU  structural  funds7  and  SMEs  have  no  major  problems  in  obtaining  finance 
beyond those difficulties usually experienced by smaller enterprises. It is weak demand 
and a lack of good  projects that is holding back lending rather than supply constraints. 
The  venture  capital  market  is  embryonic  and  not  a  significant  source  of  finance  for 
SMEs. 

Overall,  Lithuania  is  addressing  the  lessons  learned  from  the  financial  crisis  with  the 
recently  adopted  measures,  but  needs  to  follow  closely  their  implementation  and 
performance, so as to adjust them if required. 

3.3.  Labour market, education and social policy 

During  and  after  the  financial  crisis  Lithuania’s  labour  market  proved  to  be  highly 
flexible  in  wage  determination,  which  contributed  to  regaining  competitiveness  and 
ultimately  economic  growth  in  2010  and  2011.  The  labour  market  remains  one  of  the 
daunting challenges the country has to tackle if it wants to maintain its growth potential 
and counteract negative demographic and social developments. 

The overall low participation rate is an important concern. Only 68 % of the population 
in  the  20-64  age  group  are  active  on  the  labour  market.  Particularly  worrying  is  the 
situation  among  young  people  and  unskilled  workers.  The  youth  unemployment  rate  is 
one  of  the  highest  in  the  EU  (32 %)  and  the  unemployment  rate  of  the  low-skilled  is 
second highest in the EU (39.5%). Long-term unemployment rose from 1 % to 8 % over 
the  last  three  years.  In  addition,  skill  mismatches  have  appeared  in  some  sectors  and, 
together with insufficiently flexible labour legislation and a social assistance system that 
contains disincentives to work, hinder employment growth. 

These issues were identified by last year’s CSRs and reiterated in this year’s AGS. The 
government  has  acknowledged  them  in  the  national  reform  programme  and  set  an 
employment target of 72.8 % for 2020. This objective is very ambitious compared to the 
current situation and requires additional forward-looking efforts. Lithuania has taken or 
is  planning  a  set  of  measures  targeting  older  workers,  youth  and  unskilled  persons.  In 
addition, it intends to reduce skill mismatches and amend the labour legislation to make 
it more flexible and reform the social assistance system. 

Regarding  labour  market  flexibility,  the  Law  on  Temporary  Employment  Agencies  to 
facilitate  short-term  employment  entered  into  force  on  1  December  2011.  The  law 
defines employment relations between temporary employees and temporary employment 
enterprises.  However, its impact may not be significant, since temporary work agencies 
were already operating in Lithuania previously. Instead, a comprehensive review of the 
labour law could identify unnecessary restrictions and administrative hurdles that prevent 
flexible contractual agreements, such as dismissal provisions and flexible working time 
arrangements. Lithuania attempted to facilitate fixed-term employment by allowing use 
of  fixed-term  contracts  in  newly  created  jobs.  However,  this  measure  expires  in  July 
2012.  Discussions  on  changing  the  Labour  Code  have  started,  but  no  agreements  have 
been reached so far. The national reform programme presents a number of measures to 

7 Currently, there are two holding funds in operation funded by the ERDF with a total allocation of EUR 228 million, 
one  fund administered by the EIF (EUR 170 million from ERDF) and one administered by INVEGA (EUR 58 
million from ERDF). Implementation on the ground started to take off in 2011 and further progress is expected in 
2012.  

14

 
 
 
 
                                                 
ease  the  regulative  and  administrative  burden  for  employers  and  employees.  It  is, 
therefore, very important that these plans are realised swiftly and efficiently. 

As  regards  older  worker  employment,  Lithuania  continued  to  implement  the  Active 
Ageing Strategy. However, its general nature and a lack of quantifiable indicators, a clear 
timetable  and  financial  means  do  not  allow  its  impact  to  be  assessed  and  call  its 
credibility  into  question.  A  new  strategy  after  2013  could  address  these  shortcomings. 
However,  the  national  reform  programme  does  not  present  any  plans  in  this  regard. 
Fiscal disincentives for people of pensionable age (lower pensions for those who receive 
employment-related  income)  expired  at  the  end  of  2011.  However,  the  new  pension 
legislation  has  expanded  the  possibilities  for  early  retirement  (no  longer  limited  to  the 
long-term unemployed). This in part counteracts the removal of fiscal disincentives. 

The  challenge  of  youth  unemployment  (above  30 %  at  the  end  of  2011)  became 
especially evident during the crisis, which revealed that young people do not possess the 
skills and practical experience demanded by employers. Addressing it was identified as 
one  of  the  main  priorities.  Following  the  European  Council  of  30  January  2012,  the 
Lithuanian  authorities  and  the  Commission  examined  measures  for  reducing  youth 
unemployment,  including  changes  to  the  regulatory  framework  and  reallocation  of  the 
European  Structural  Funds.  As  a  result,  it  was decided to re-focus the European Social 
Fund  (ESF)  in  the  period  2012-2013,  implying  that  around  18  000  additional  young 
people  could  benefit  from  ESF  support  in  Lithuania.  The  national  reform  programme 
reflects  this  initiative  and  the  government  is  implementing  active  labour  market  policy 
measures,  training  of  entrepreneurial  skills,  vouchers  for  vocational  training,  job 
experience,  first  job  subsidies8  and  support  for  apprenticeship  schemes,  internship  and 
volunteering.  Furthermore,  from  the  European  Regional  Development  Fund  (ERDF), 
young  people  could  receive  support  for  start-ups,  coaching  and  information  about 
business  financing  as  well  as  grant  schemes  for  SMEs.  However,  additional  efforts  are 
needed to ensure a smooth transfer from education to the labour market. To address the 
problem  of  skills  mismatch,  Lithuania  is  developing  a  system  of  qualification  demand 
forecasting, which should help to align training with labour market demands. 

The key tool for improving employability, active labour market policy, struggles to cope 
with the increasing number of unemployed. The activation rate in Lithuania is among the 
lowest  in  the  EU  and  the  financial  allocations  to  the  active  labour  market  policy  are 
decreasing.  Hence,  it  is  essential  to  improve  its  coverage,  focus  and  efficiency.  It  is 
important to limit public works to the most vulnerable and provide more labour market 
relevant  re-skilling  and  up-skilling  programmes.  To  this  end,  the  vocational  training  of 
the  unemployed  was  reformed  in  January  2012.  A  voucher  scheme  was  introduced  to 
allow job seekers to choose their trainers, including potential employers. The measure is 
relevant, but it needs to be based on sufficient financial resources, transparent and simple 
implementation procedures and efficient quality control. The other active labour market 
policy measures would benefit from a similar review and refocusing. 

Lithuania  faces  important  challenges  in  education  with  regard  to  the  transition  from 
education to the labour market, underachievement in general education, and availability 
of pre-school education and care, as well as adult learning. Lithuania seeks to sustain the 
level of tertiary attainment above 40 % (43.8 % in 2010) by introducing measures such as 

8  The  employer-paid  social  insurance  contributions  have  been  reduced  from  31 %  to  7.7 %  for  persons  starting  their 

first job until July 2012. 

15

 
 
 
                                                 
a  state-supported  study  loan  scheme,  social  scholarships,  financial  support  for  students 
with  disabilities,  and  targeted  scholarships  for  certain  study  programmes.  The  ongoing 
higher education reform mainly aims at improving quality and consolidating institutions. 
The  government  is  also  tackling  mismatches  between  the  supply  of  graduates  and  the 
labour  market  needs.  Lithuania  has  made  progress  in  increasing  the  number  of  maths, 
science  and  technology  graduates.  Currently,  the  early  school  leaving  rate  is  below  the 
EU average (at 8.1 % in 2010). To keep it below 9 % by 2020, Lithuania is implementing 
measures  involving  collection  of  data  on  potential  drop-outs,  targeting  priority  groups, 
aiming  to  raise  the  quality  of  education  and  targeted  support.  The  impact  of  these 
measures is still to be seen; however, Lithuania’s target for early school leavers could be 
set to a higher level. 

In  general,  considering  all  the  measures  taken,  in  terms  of  ambition  and  adequacy 
Lithuania  has  addressed  the  country-specific  recommendations  related  to  the  labour 
market only partially. Additional measures to enhance participation in the labour market 
especially for young people, unskilled and older workers, and to improve labour market 
flexibility are necessary. 

Lithuania’s  social  security  system  is  posing  several  challenges.  Firstly,  its  pension 
system needs to be reformed to become sustainable in the long run, while safeguarding 
its  adequacy  aspects.  Secondly,  the  financial  crisis  has  exposed  a  sizeable  number  of 
people  to  the  risk  of  poverty  or  social  exclusion  and  resulted  in  greater  income 
inequality.  These  challenges  were  highlighted  in  the  AGS  2012.  In  addition,  the  first 
challenge was identified in last year’s CSRs and Lithuania has started to tackle it. 

Lithuania’s  pension  system  is  currently  underpinned  by  favourable  demographics  but 
these will change in the future. The old-age dependency ratio is projected to more than 
double  by  2060.  At  the  same  time,  the  working-age  population  is  expected  to  drop  by 
35.8 %, compared with 13.5 % for the EU-27. These developments cast serious doubts on 
the sustainability of the pension system. Adequacy also remains an issue, as the share of 
the population 65+ living in poverty or social exclusion is well above the EU average. A 
relevant first step was taken in June 2011, when the Lithuanian Parliament amended the 
Law on State Social Insurance Pensions and approved a gradual increase in the pension 
age to 65 years for both men and women by 2026. However, this alone will not ensure a 
sustainable  and  adequate  retirement  income  in  the  future,  and  supplementary  measures 
are  needed.  These  could  include  linking  the  pensionable  age  and  future  benefits  to 
demographic  factors,  establishing  clear  rules  for  indexation,  reforming  of  pension 
accumulation system and promoting occupational pension funds. In addition, elimination 
of  incentives  to  early  retirement  and  implementation  of  active  ageing  measures  would 
enable people to work longer. 

Lithuania  could  in  addition  make  better  use  of  supplementary  voluntary  pension 
provision, which remains marginal at 0.1 % of the labour force. In addition, there is the 
possibility  to  establish  occupational  pension  schemes  (pension  plans  created  by  an 
employer for the benefit of an employee), though none have been created so far. If they 
were  taken  up  on  a  broader  scale,  they  would  ease  the  burden  of  the  social  security 
system and at the same time improve the adequacy of future pension incomes. 

Around one third of the Lithuanian population is at risk of poverty or exclusion as they 
live  in  households  with  very  low  work  intensity  or  are  materially  deprived.  This  is  the 
fourth  highest  value  in  the  EU.  Single  parents,  families  with  three  or  more  children, 

16

 
 
 
unemployed  persons,  single  adults  and  retired  persons  are  particularly  vulnerable.  The 
relatively low level of social assistance benefits together with limited quality training and 
active labour market policy measures put vulnerable groups particularly at risk of long-
term exclusion. Lithuania is also the EU country with the highest income inequality. Its 
causes have not received a lot of policy attention until now. Some measures have been 
taken to ensure more equity, such as a tax-exempt threshold, introduction of equivalent 
scales into the social benefits scheme and compensations. Despite these efforts, income 
inequality and poverty or social exclusion were still increasing in 2010, which suggests 
that  these  measures  may  not  be  sufficient  to  tackle  the  growing  poverty  or  social 
exclusion and income inequalities. 

In  2011,  Lithuania  amended  the  Law  on  Cash  Social  Assistance  to  reform  the  social 
support  system  as  of  January  2012.  It  has  launched  a  pilot  model  of  social  support 
distribution,  changed  the  method  for  calculating  the  amount,  introduced  certain  work 
incentives  and  increased  coverage.  The  social  assistance  reform  is  a  step  towards 
reducing disincentives to work (in-work benefits for the long-term unemployed, gradual 
decrease  of  social  benefits  for  non-working  recipients  of  workable  age)  and  close 
monitoring  of  the  reform  is  required  to  see  if  it  can  overcome  low  wage  traps  and 
ultimately  encourage  employment  without  aggravating  the  situation  of  the  most 
vulnerable.  The  reform  could  also  benefit  from  additional  emphasis  on  labour  market 
inclusion  measures,  e.g.  by  providing  activation  measures  for  long-term  social 
beneficiaries. 

Lithuania  has  addressed  the  recommendations  related  to  social  policies  only  partially. 
More determined efforts are needed to reform the pension system. The effectiveness of 
the social protection system is still hampered by inadequate assistance and coverage and 
could  be  better  targeted.  However,  the  national  reform  programme  does  not  present  a 
clear solution. High income inequalities remain an important issue. 

3.4.  Structural measures promoting growth and competitiveness 

Lithuania’s  economy  has  been  undergoing  a  substantial  adjustment  in  recent  years.  To 
enhance its growth potential, it is important that the country tackles the challenges that 
were identified in the European Semester 2011 and the AGS 2012. The modernisation of 
the country is a key issue in that respect, especially regarding its business environment 
and infrastructure, innovation frameworks, energy dependency and efficiency. 

State-owned enterprises 

The government has been undertaking  a  far-reaching reform of state-owned enterprises 
(SOEs)  since  2010.  The  objective  is  to  restructure  corporate  governance,  increase 
transparency and separate ownership and regulatory functions (and increase competition 
and efficiency). The reform is relevant and involves legislative as well as organisational 
changes. Major progress was made in all areas in 2011. In particular, transparency and 
accountability  have  significantly  improved  as  reports  are  now  published  on  a  quarterly 
and  annual  basis  and  clear  enterprise  objectives  have  been  established.  However,  the 
government has postponed some parts of the reform, in particular the recommendations 
on separation of commercial and non-commercial activities of SOEs, and guidelines on 
separation  of  ownership  and  regulatory  functions.  These are to  be approved  in  the first 
half of 2012 according to the national reform programme. As a result, the corresponding 
CSR has only been partially implemented. 

17

 
 
 
Energy efficiency 

Lithuania  has  made  some  progress  in  implementing  the  2011  recommendation  on 
improving  the  energy  efficiency  of  buildings.  According  to  the  national  reform 
programme,  85  multi-apartment  buildings  were  modernised  in  2011.  Moreover,  EU 
structural  funds  for  2007-2013  for  the  renovation  of  public  buildings  were  already 
depleted  and  assigned  to  concrete  projects.  With  the  aim  of  increasing  efficiency,  the 
renovation  of  public  buildings  is  well  under  way  with  financing  allocated  to  66 
additional  projects  in  2011.  In  contrast,  progress  has  been  slower  with  respect  to  the 
ERDF-funded  JESSICA  Holding  Fund,  under  which  an  estimated  1 000  buildings  are 
expected  to  be  upgraded  by  the  end  of  the  programming  period.  At  the  beginning  of 
2012, there were about 50 projects signed and another 200 in the pipeline. However, only 
4 official multi-apartment renovation projects were finalised using JESSICA. Therefore, 
the  government  approved  a  revision  of  the  Multi-Apartment  Building  Modernisation 
Programme  in  December  2011.  The  new  approach  is  less  ambitious  and  is  expected  to 
deliver lower savings. In general the target number of buildings to be renovated has been 
reduced; however, additional financial support to renovation projects with large potential 
for  energy  efficiency  improvements  is  planned.  While  the  programme  has  sufficient 
relevance,  subsidies  available  in  other  policy  areas  might  counteract  the  impact  of 
JESSICA and the Ignalina NPP closure funds, which can also be used for renovation of 
buildings.  Low-income  households  are  entitled  to  receive  subsidies  to  cover  increased 
energy costs. Furthermore, Lithuania is applying a 9 % reduced VAT rate to residential 
heating until the end of 2012. Taken together, these two measures reduce the incentives 
for  inhabitants  of  residential  buildings  to  improve  their  energy  efficiency.  Considering 
that  in  Lithuania  there  are  above  30 000  multi-apartment  houses  with  very  low  energy 
efficiency performance, further substantial and accelerated efforts are needed to improve 
energy efficiency of buildings.  

Competition  

As  regards  strengthening  competition,  investigations  undertaken  so  far  by  the  National 
Competition  Council  have  provided  no  indications  that  the  Lithuanian  retail  market  is 
subject  to  anti-competitive  practices  or  a  high  degree  of  concentration  significantly 
different  from  other  EU  Member  States.  In  any  event,  the  Lithuanian  Competition 
Council is best placed to monitor the situation and act if required. Since March 2012 it 
has  become  an  independent  body  and  has  received  new  powers  to  control  competition 
across all sectors. In particular, the ability to set its priorities for conducting infringement 
investigations  and  sector  inquiries  as  well  as  concentrating  its  resources  on  the  most 
important  cases  is  an  improvement  that  should  allow  the  Competition  Council  to  act 
more effectively in the future. 

Infrastructure 

Lithuania’s  gas  and  electricity  market  is  suffering  from  market  isolation  and  a  lack  of 
supply  alternatives.  To  address  this  problem  in  the  gas  sector,  the  government  is 
considering  several  investment  projects  in  transmission  gas  system  and  interconnection 
capacity, such as the diversification of natural gas supply with a regional LNG terminal 
in  the  Baltic  States.  In  the  electricity  sector,  the  planned  interconnections  with  Poland 
and  Sweden  should  ease 
insufficient 
interconnections hinder the emergence of competition in energy markets. Concentration 
remains high (above 90 %) in both the gas and electricity markets. Electricity prices are 
still  regulated  until  2015.  Lithuania  has  transposed  the  Directives  of  the  Third  Energy 

this  problem  once 

implemented.  The 

18

 
 
 
Package  and  now  needs  to  implement  them  after  adopting  key  legislation  in  both  the 
electricity and gas sectors. 

Lithuania’s renewables targets for 2020 are 23 % of total energy consumption and 10 % 
of  consumption  in  the  transport  sector.  By  2009,  Lithuania  had  already  achieved  its 
interim  2011/2012  target.  However,  progress  on  non-cost  barriers  to  large-scale 
development of renewable energy, particularly in the electricity sector, is relatively slow. 

Furthermore,  Lithuania’s  transport  infrastructure  continues  to  restrict  growth.  In  rail, 
only  7 %  of  the  tracks  are  electrified  and  average  speed  is  low.  The  country  has  only 
limited  connections  to  Poland  and  Western  Europe.  The  ongoing  Rail  Baltica  project, 
connecting  major  EU  rail  networks  with  North-eastern  Europe,  has  recently  received 
priority  in  the  TEN-T  policy  review.  Progress  can  be  expected  once  the  participating 
countries have agreed on a common approach within the deadline set by the Commission 
to  receive  EU  structural  fund  support.  Lithuania  still  has  to  overcome  some 
administrative, technical and regulatory obstacles to create an efficiently functioning rail 
market.  In  particular,  the  rail  sector  requires  attention  since  the  independence  of 
infrastructure  management  from  rail  operations  has  not  been  ensured.  Lithuania 
continues to benefit greatly from cohesion policy over the period 2007-2013 with a total 
allocation  of  nearly  EUR  6.8 bn,  with  priorities  focusing  on  innovation  and  balanced 
growth.  The  financial  progress  is  more  than  satisfactory  with  nearly  48 %  of  payments 
already made by the Commission. The level of contracted projects is satisfactory — 89 % 
for  the  ERDF  (European  Regional  Development  Fund)  and  CF  (Cohesion  Fund) 
programmes — although some sectors, such as R&D and ICT, need further attention. 

R&D and innovation 

The Lithuanian economy’s low level of innovation is a significant weakness. The country 
ranks among the poorest performers in the EU.9 Compared to the current level of R&D 
spending,  Lithuania  has  set  a  very  ambitious  national  R&D  intensity  target  at  1.9 %  of 
GDP  by  2020.  R&D  expenditure  has  stagnated  at  around  0.8 %  of  GDP,  almost 
unchanged  since  2004,  and  is  one  of  the  lowest  in  the  EU.  This  low  R&D  level  is 
worrying  because  it  has  important  repercussions  on  the  wider  economy,  in  which  the 
scientific  and  technological  performance  and  export  structure  are  poor.  In  order  to 
improve  the  situation,  Lithuania  has  been  conducting  deep  reforms  of  its  science  base, 
including  development  of  five  clusters  (called  ‘Science  valleys’  and  funded  by  the 
ERDF) integrating higher-education institutions, research institutions and businesses in a 
number  of  scientific  and  technological  areas.  These  clusters  are  complemented  by 
financial incentives, in particular an R&D tax credit in place since 2008, intensive use of 
structural  funds  and  innovation  vouchers.  Furthermore,  new  legislation  which  proposes 
to  allow  public  authorities  to  use  up  to  5 %  of  their  procurement  budgets  to  purchase 
R&D-related  products  and  services  is  being  debated  in  the  Lithuanian  Parliament.  The 
target date for implementation is 2013. 

The  reform  of  the  science  base  is  expected  to  make  the  Lithuanian  research  and 
innovation  system  more  efficient  and  productive  in  the  years  to  come.  However, 
scientific  and  technological  areas  where  Lithuania  can  be  internationally  competitive 
would merit much more focus and concentration of resources. Demand-side measures for 

9  Ranking  based  on  business  expenditure  on  research  and  development  in  manufacturing:  21/25;  services:  23/25, 
patent intensity in manufacturing: 26/27; share of high-tech (also high and medium tech) in manufacturing: 23/25. 
It is the worst performer in the EU regarding the share of knowledge-intensive services. 

19

 
 
 
                                                 
innovation  are  clearly  less  developed.  Removing  obstacles  to —  and supporting — the 
growth of innovative companies would be beneficial to future economic growth as these 
companies  can  be  a  key  engine  of  structural change. Financing the  very  early  phase of 
the development of a new technology-based business is often difficult and would benefit 
from  public-sector  support,  to  enable  the  founders  to  subsequently  leverage  private 
funds.  Also,  in  order  to  improve  the  capacity  of  the  country  to  exploit  research  results 
commercially,  there  is  an  urgent  need  to  develop  a  culture  of  entrepreneurship  and 
innovation,  skills  in  higher  education  and  in  the  public  research  sector,  as  well  as  the 
right incentives and training for researchers in the public sector to engage in knowledge 
transfer and commercialisation activities. 

Environment 

Lithuania  has  committed  itself  to  limiting  the  increase  in  greenhouse  gas  emissions  to 
15% (compared to 2005) by 2020. According to Lithuania’s latest projections, emissions 
are expected to increase by 23% in this period, leading to a shortfall of the target by 8 
percentage points. This underachievement could be mostly due to the country’s relatively 
high  energy  intensity  (twice  the  EU  average).  House  heating,  particularly  in  multi-
apartment  buildings,  and  the  emission-intensive  transport  sector,  particularly  that  of 
passenger  cars,  are  important  contributors  with  potential  for  cuts.  Therefore,  additional 
efforts  need  to  be  made  to  ensure  that  Lithuania  meets  its  greenhouse  gas  emissions 
target.  

Lithuania also has substantial room for improvement in its waste management system as 
more than 90 % of municipal waste is landfilled, and its recycling rate of 4 % is one of 
the  lowest  in  the  EU.  If  the  country  wants  to  reach  its  recycling  targets,  steps  towards 
encouraging resource efficiency could be taken in the form of landfill taxes, increasing 
producer responsibility, or favouring prevention and participation in separate collection. 

3.5.  Modernisation of public administration 

The functioning of public administration, policy design and delivery are weaknesses of 
public  institutions  in  Lithuania.  To  implement  the  2011  recommendation  on  start-up 
conditions and delivery of construction permits, reforms have been enacted (like online 
registration, no more notary involvement) that allow a public limited company (PLC) to 
be registered seven days faster,  while reducing the costs of registration by 65 %. There 
has  been  some  improvement  in  delivery  of  construction  permits.  The  number  of 
procedural requirements has been reduced from 17 to 14 with time savings of 50 % (28 to 
14  days).  Lithuania  has  fully  implemented  the  2011  recommendations  for  start-up 
conditions and construction permits. 

Lithuania  is  undertaking  a  major  regulatory  reform  project,  intended  to  streamline 
business  inspection  institutions.  Currently  business  inspections  are  carried  out  by  more 
than 70 public institutions; the reform aims at consolidating these into nine clusters by a 
target date of 2013/2014. This reduction will be supplemented by draft guidelines, which 
should  provide  for  less  frequent,  less  burdensome  and  more  targeted  and  standardised 
inspections.  Some  progress  has  been  made  already  and  the  reform  is  on  track  for 
completion by the target date. 

Moreover, Lithuania is trying to change other aspects of its administration, though these 
attempts to reform the civil service are lacking a systemic approach and a clear strategy. 
The previous strategy on public administration reform ended in 2010 and was replaced in 
February  2012.  Although  its  principles  and  objectives  are  relevant,  its  ambition  and 
20

 
 
 
credibility  will  depend  on  the  action  plan,  and  more  in  particular  on  concrete  actions 
aiming  at  strengthening  result-  and  client-oriented dimensions of public administration. 
This  could  be  achieved  through  the  introduction  of  quality  management  systems  and 
service quality standards in the public sector. Better implementation of the principles of 
the European Administrative Space could be achieved through designing the recruitment 
and career paths of civil servants, as well as by encouraging and improving the mobility 
of  public  servants  between  different  public  institutions,  while  continuing  skills 
development. 

Although the online availability of public services for citizens increased in 2011 to 69%, 
it is still far below the EU average. Take-up by citizens is also far below the EU average 
although slightly increasing. Availability is higher for services for businesses (at 75%), 
though still below average. Finally, take-up by businesses exceeds the EU average by 20 
percentage points and is the third highest value in the EU. 

To  improve  the  business  environment,  Lithuania  has  set  an  objective  of  reducing  the 
administrative  burden  on  enterprises  by  30 %  by  the  end  of  2012.  The  2010  law  on 
restructuring  of  enterprises  offers  enterprises  experiencing 
temporary  financial 
difficulties more flexibility and the possibility of restructuring instead of bankruptcy. In 
addition,  the  government  has  proposed  further  measures  —  a  proposal  to  simplify 
employment procedures and recent tax administration reforms. The legislation still needs 
to  be  approved  and  put  in  place  before  the  impact  can  be  properly  assessed.  Overall, 
modernising  of  public  administration  remains  one  of  the  challenges  for  the  Lithuanian 
government and is in line with the AGS 2012 priorities. 

21

 
 
 
4.  OVERVIEW TABLE  

2011 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

CSR  1:  Adopt  additional  fiscal  measures  of  a 
permanent  nature  by  the  time  of  the  2012  budget  to 
correct the excessive deficit in line with the Council 
recommendations  under  the  EDP.  Reinforce  tax 
compliance  and  take  full  advantage of the economic 
recovery  to  further  accelerate  deficit  reduction  and 
ensure  progress  towards  the  medium-term  objective 
by  at  least  0.5  %  of  GDP  annually.  Strengthen  the 
fiscal  framework, 
introducing 
enforceable  and  binding  expenditure  ceilings  in  the 
medium-term budgetary framework. 

in  particular  by 

CSR 2: Adopt the proposed implementing legislation 
on  Pension  System  Reform.  In  order  to  enhance 
participation  in  the  labour  market,  remove  fiscal 
disincentives  to  work,  especially  for  people  at 
pensionable age. 

CSR  3:  Enhance 
labour  market  flexibility  by 
amending  the  labour  legislation  to  make  it  more 
flexible  and  to  allow  better  use  of  fixed-term 
contracts.  Amend  the  relevant  legislation  to  ensure 
that  the  social  assistance  system  does  not  contain 
disincentives to work. 

CSR  4:  Implement  all  aspects  of  the  State-owned 
enterprise  reform  package  by  the  end  of  2011, 
ensuring  a  separation  of  ownership  and  regulatory 
functions,  clear  enterprise  objectives,  enhanced 
transparency  and  a  separation  of  commercial  and 
non-commercial activities. 

CSR  5:  Improve  the  energy  efficiency  of  buildings, 
including  through  a  rapid  implementation  of  the 
Holding  Fund,  and  take  steps  to  shift  taxation 
towards energy use. 

the 

2012 

budget,  which 

Lithuania has partially implemented the CSR. 
received 
The 
parliamentary  approval  in  December  2011, 
targets a general government deficit of 3 % of 
GDP,  which  is  consistent  with  the  aim  to 
correct  the  excessive  deficit  by  2012  if  fully 
implemented.  Some  of 
temporary 
measures adopted during the crisis concerning 
social  benefits  have  been  made  permanent. 
Tax  compliance  and  administration  were 
reinforced  in  2011  and  this  strengthened  the 
tax  bases  and 
revenues.  The 
improved 
medium-term objective of a structural surplus 
of  0.5 %  of  GDP  is  not  expected  to  be 
achieved until 2014. Measures have yet to be 
specified and structural reforms accelerated. If 
adopted, draft laws would improve budgetary 
process  and  execution  by  establishing  an 
independent  body.  There  are  also  plans  to 
tighten rules on treasury reserves.  

Lithuania has partially implemented the CSR. 
Gradual  increase  in  the  pensionable  age  is  a 
step in the right direction but further steps are 
yet  to  be  taken.  The  restoration  of  full 
pensions  to  working  pensioners  has  removed 
fiscal  disincentives  to  work  for  people  of  or 
approaching pensionable age.  

the 

Lithuania has partially implemented the CSR. 
to 
No 
labour 
significant  changes 
legislation  were  made 
in  2011.  The 
amendment  to  allow  fixed-term  employment 
contracts in ‘newly created’ jobs expires on 31 
July  2012.  The  social  assistance  reform  is  a 
step towards reducing disincentives to work. 

Lithuania has partially implemented the CSR. 
Draft  ownership  guidelines  were  prepared  at 
the  beginning  of  2012.  No  full  separation  of 
ownership 
is 
significantly 
envisaged.  Lithuania 
advanced 
transparency 
regards 
objective. Separation of commercial and non-
commercial activities is postponed until 2012.  

regulatory 
has 
the 

functions 

and 

as 

implementation 

Lithuania  has  only  partially  implemented  the 
CSR.  The  Programme  for  the  Modernisation 
of  Multi-apartment  Houses,  and  in  particular 
the 
JESSICA 
mechanism,  has  been  stalling  for  the  last  few 
years.  Minor  measures  were  implemented 
regarding  shifting  taxation  towards  energy 
use.  

the 

of 

CSR  6:  Take  steps  to  improve  start-up  conditions 
and  the  delivery  of  construction  permits,  and  to 
strengthen  competition  in  the  energy  and  retail 

Lithuania has fully implemented the business-
conditions  part  of  the  CSR,  while  it  has  only 
partially  implemented  the  competition  part, 

22

 
 
 
 
 
sectors. 

especially  in  relation  to  the  energy  sector. 
Improvement  has  been  made 
in  formal 
requirements  for  start-up  conditions.  The 
number  of  procedural 
for 
delivery  of  construction  permits  has  been 
reduced  and  timing  has  been  reduced  nearly 
by  half.  The  National  Competition  Council 
was given new powers to control competition 
in different sectors in March 2012.  

requirements 

Euro Plus Pact (national commitments and progress) 

on 

laws 

include 

Commitments  to  further  improve  public  finance 
sustainability 
facilitating 
accumulation  of  funds  in  the  State  Treasury  reserve 
for  times  of  economic  difficulties,  promoting  a 
anti-inflationary  budgetary  policy, 
responsible 
ensuring sustainability and adequacy of pensions and 
social  benefits,  and  optimising  the  State  Social 
Insurance  Fund  (SSIF)  as  well  as  the  healthcare 
network. 

to 

foster  employment 

focus  on 
Commitments 
labour  participation  and  promoting 
increasing 
include 
employment  of  young  people.  These 
providing  conditions 
flexible  employment 
for 
agreements,  promoting  self-employment,  providing 
incentives  to  employ  young  people,  installing  a 
demand 
system 
forecasting and reforming the planning of vocational 
training for unemployed persons. 

qualification 

long-term 

for 

Commitments to foster competitiveness presented by 
the  government  focus  on  education  (improving 
quality  and  ensuring  greater  consolidation  of  the 
higher-education  network), 
innovation  (fostering 
protection of industrial property rights and promotion 
Innovation  Voucher 
of  clustering 
scheme) and improving administrative efficiency (by 
reducing  overall  administrative  burden  and  unifying 
remuneration  terms  for  employees  performing  work 
of  the  same  complexity  and  requiring  the  same 
qualifications  in  different  entities  funded  by  the 
State). 

through 

the 

laws  on 

Lithuania  has  only  partially  implemented  the 
commitments.  Draft 
facilitating 
accumulation  of  funds  in  the  State  Treasury 
reserve  have  been  prepared  but  not  yet 
adopted. Ensuring sustainability of pensions is 
part  of  the  social  security  system  reform, 
which  Lithuania  has  started  to  implement. 
Restructuring  of  the  SSIF  administration  was 
adopted  by  the  government  in  July  2011  and 
will be implemented from 2012. 

implemented 
increasing 
age  will  help  boost 

Lithuania  has  partially 
the 
commitments.  Gradually 
the 
the 
pensionable 
participation of older workers, if supported by 
active  ageing  measures,  but  will  have  no 
effect  on  other  population  groups  where  low 
participation  remains  an  issue.  No  significant 
changes  to  the  labour  legislation  have  been 
made so far. The Law on Vocational Training 
was amended and the Ministry of Economy is 
going  to  organise  forecasting  of  qualification 
demand.  Employing  young  unemployed  is 
temporarily  subsidised.  Expenses  related  to 
the  acquisition  of  a  business  certificate  are 
reimbursed to registered unemployed persons. 
A  new  system  of  training  based  on  ‘training 
vouchers’  will  allow  job-seekers  to  choose 
their trainers, including potential employers.  

implemented 

the 
Lithuania  has  partially 
commitments.  Progress  has  been  made  in 
consolidating  the  higher-education  network 
and  the  merger  of  some  universities.  A  new 
Law on Education and Science transferred the 
ownership of intellectual property rights from 
the  State  to  the  higher-education  institutions. 
Five  thematic  ‘valleys’  are  being  developed. 
The government is also keeping up its efforts 
to  raise  the  quality  of  higher  education  and 
address the mismatches between the supply of 
tertiary education graduates and labour market 
needs.  The  implementation  of  the  Innovation 
Voucher  scheme  is  on  track.  Reducing  the 
administrative  burden  has  been  slower  than 
planned and no progress has been made so far 
on unifying remuneration in the public sector, 
but  the  relevant  legislation  is  planned  to  be 
drafted in 2012.  

Commitments  to  contribute  to  financial  stability  Lithuania  has  partially 

implemented 

the 

23

 
 
 
 
 
include laws on financial stability, the Provisions for 
Banks’  Organisation  of  Internal  Control  and  Risk 
Assessment,  and  the  Plan  for  the  Prevention  and 
Management of Financial Crises. It was also decided 
to  devote  special  attention  to  actions  promoting  the 
cooperation between Lithuanian institutions and their 
counterparts in the Nordic and other Baltic States in 
the area of crisis prevention and management. 

commitment.  The  Law  on  Financial  Stability 
provides 
for  consolidation  of  measures 
strengthening  financial  stability  and  enhances 
the  readiness  to  manage  crisis  situations, 
while  contributing  to  higher  stability  in  the 
financial  sector.  In  addition,  amendments  to 
other  legal  acts  made  factoring,  reforming, 
and  sales  process  of  problematic  banks  more 
efficient.  

Europe 2020 (national targets and progress) 

Employment  rate  target  (population  aged  20-64): 
72.8 % 

R&D target: 1.9 % 

The  employment  rate  of  the  population  aged 
20-64 was 67.2 % in 2009, 64.4 % in 2010 and 
67.2 %  in  2011.  The  objective  of  72.8 %  by 
2020  is  very  ambitious  compared  to  the 
current  situation.  The  key  tool  for  improving 
employability  —  the  active  labour  market 
policy  — helped in making progress towards 
the objective (68.0 % in Q4 2011) but the high 
number  of  unemployed  is  still  a  challenge. 
Little  progress  has  been  made 
towards 
achievement of the target.  

target  of  Lithuania 

is  very 
The  R&D 
ambitious  compared  to  the  current  level  of 
R&D  spending.  Gross  domestic  expenditure 
on  R&D  was  0.84 %  of  GDP  in  2009  and 
0.79 % in 2010. The capacity of the country to 
increase  R&D 
intensity  has  not  been 
demonstrated  for  the  last  seven  years.  No 
progress has been made towards achievement 
of the target. 

Greenhouse  gas  emissions  target:  +15 %  (compared 
to 2005 emissions, ETS (Emissions Trading System) 
emissions are not covered by this national target) 

The  non-ETS  greenhouse  gas  emissions  were 
reduced  by  11%  between  2005  and  2010, 
which corresponds to the current ETS scope.  

Renewable energy target: 23 % 

Energy  efficiency  —  reduction  in  primary  energy 
consumption by 2020: 1.14 Mtoe 

Early school leaving target: <9 % 

Tertiary education target: 40 % 

24

The  share  of  renewable  energy  in  gross  final 
energy consumption increased to 17 % in 2009 
and to 19.7 %% in 2010. Lithuania has already 
achieved  its  2011/2012  interim  renewable 
energy target. 

The  energy  efficiency  objectives  are  set 
according 
to  national  circumstances  and 
national formulations. As the methodology for 
expressing 
the  2020  energy  consumption 
impact of these objectives in the same format 
was  agreed  only  recently,  the  Commission  is 
not yet able to present this overview. 

Early  leavers  from  education  and  training 
(percentage of the population aged 18-24 with 
at  most  a  lower  secondary  education  and  not 
in further education or training) stood at 8.1 % 
in 2010. Lithuania’s early school leaving rate 
is  below  the  EU  average.  The  national  target 
set  for  2020  is  to  keep  this  rate  below  9 %. 
The target has been achieved. 

Tertiary  educational  attainment  stood  at 
40.6 %  in  2009,  and  43.8 %  in  2010.  The 

 
 
 
 
Target  on  the  reduction  of  population  at  risk  of 
poverty or social exclusion: 814 000 

target has been achieved. 

Due  to  the  increase  in  the  number  of  people 
who are severely materially deprived or live in 
households  with  very  low  work  intensity,  the 
national  target  has  become  difficult  to  reach. 
The  number  of  people  at  risk  of  poverty  or 
social  exclusion  increased  from  985 000  in 
2009  to  1 109 000  in  2010.  The  deterioration 
of  the  situation  means  that  no  progress  has 
been made towards achievement of the target. 

25

 
 
 
 
5.  ANNEX 

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)
General government (%  of GDP)
Net lending (+) or net borrowing (-)
Gross debt
Net financial assets 
Total revenue 
Total expenditure
  of which: Interest
Corporations (%  of GDP)
Net lending (+) or net borrowing (-)

Table I. Macro economic indicators 

1995-
1999

2000-
2004

2005-
2008

2009

2010

2011

2012

2013

4.5
-5.8
10.5
7.0
9.6
21.9
12.8

-4.4
15.9
32.9
35.4
39.9
0.9

7.0
-0.7
0.6
7.8
14.1
20.6
14.3

-2.3
21.8
9.9
33.0
35.3
1.3

7.1
7.2
5.8
8.6
6.0
25.4
15.6

-1.3
17.2
9.3
33.3
34.6
0.7

-14.8
-9.9
4.2
-24.7
13.7
17.2
13.2

-9.4
29.4
-2.6
34.3
43.8
1.3

1.4
-8.4
1.2
1.6
17.8
16.3
17.5

-7.2
38.0
-12.9
33.7
40.9
1.8

5.9
-3.3
4.1
5.3
15.4
17.6
17.3

-5.5
38.5
n.a
32.0
37.5
1.8

2.4
-2.5
3.1
2.6
13.8
18.2
17.6

-3.2
40.4
n.a
33.5
36.8
2.1

3.5
-1.4
2.9
3.8
12.7
19.2
18.6

-3.0
40.9
n.a
33.1
36.1
2.0

-6.3

-2.8

-4.8

16.7

13.5

n.a

n.a

n.a

n.a
n.a
n.a
n.a

n.a
n.a
n.a
n.a

n.a
n.a
n.a
n.a
n.a
n.a

-94.1
2.8
9.6
35.8

-86.0
-2.4
16.2
23.6

-85.3
-1.7
13.7
31.1

-97.5
-1.1
18.5
33.2

-103.6
2.8
3.2
31.7

-0.7
41.8
31.3
17.3
11.4
2.5

0.8
36.9
31.1
10.0
10.6
1.8

-1.5
39.5
33.4
10.8
18.0
0.8

-0.1
38.4
35.2
14.3
19.6
3.1

-3.6
37.3
34.2
12.8
12.8
-0.8

Net financial assets, non-financial corporations
Net financial assets, financial corporations
Gross capital formation
Gross operating surplus
Households and NPISH (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Gross wages and salaries
Net property income
Current transfers received
Gross saving
Rest of the world (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Net exports of goods and services
Net primary income from the rest of the world
Net capital transactions 
Tradable sector
Non-tradable sector
  of which: Building and construction sector
Real effective exchange rate (index, 2000=100)
Terms of trade in goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between actual and potential gross domestic product at 2000 market prices.
2 The indicator for domestic demand includes stocks.
3  Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within two 
weeks. The labour force is the total number of people employed and unemployed. The unemployment rate covers the age group 15-74.

7.1
66.1
-1.5
2.2
4.4
52.0
38.1
6.0
131.1
105.2
166.4

-9.7
52.3
-10.6
-2.6
1.6
53.2
36.8
8.9
124.3
108.1
145.8

-5.7
35.8
-6.1
-1.7
0.3
55.5
33.8
5.8
103.3
101.4
125.2

-10.0
19.3
-10.3
-1.5
-0.1
54.1
34.5
6.5
82.6
90.6
120.3

0.5
n.a
-2.3
-3.4
2.5
n.a
n.a
n.a
115.6
104.4
185.4

1.0
n.a
-1.5
-3.7
2.5
56.1
33.6
5.8
118.5
105.1
182.4

4.9
66.1
-1.3
-1.3
3.8
55.2
34.5
5.3
119.9
106.0
175.1

n.a
n.a
n.a
n.a
n.a
n.a

n.a
n.a
n.a
n.a

n.a
n.a
n.a
n.a
n.a
n.a

0.3
n.a
-2.6
-3.3
2.3
n.a
n.a
n.a
114.4
104.4
186.9

Source :
Commission spring 2012 forecast

26

 
 
 
 
 
 
 
Table II. Comparison of macroeconomic developments and forecasts 

Real GDP (% change)
Private consumption (% change)
Gross fixed capital formation (% change)
Exports of goods and services (% change)
Imports of goods and services (% change)
Contributions to real GDP growth:
- Final domestic demand
- Change in inventories
- Net exports
Output gap1
Employment (% change)
Unemployment rate (%)
Labour productivity (% change)
HICP inflation (%)
GDP deflator (% change)
Comp. of employees (per head, % change)
Net lending/borrowing vis-à-vis the rest of the 
world (% of GDP)

2011
COM CP
5.9
6.1
17.1
13.7
12.7

5.9
6.1
17.1
13.7
12.7

2012
COM CP
2.5
4.5
2.5
0.9
1.8

2.4
3.0
4.8
4.3
4.5

2013
COM CP
3.7
3.7
5.4
8.2
8.5

3.5
3.4
8.2
6.0
6.2

6.8
-1.4
0.5
-3.3
2.0
15.4
3.8
4.1
5.3
3.4
1.0

5.4
n.a.
0.5
-3.5
2.0
15.4
3.8
4.1
5.3
3.9
0.9

2.5
0.2
-0.2
-2.5
0.6
13.8
1.8
3.1
2.1
2.1
0.5

3.3
n.a.
-0.8
-2.5
0.7
14.0
1.8
2.7
1.7
-1.5
1.6

3.9
0.0
-0.4
-1.4
0.5
12.7
3.0
2.9
3.0
3.3
0.3

4.1
n.a.
-0.4
-0.9
0.8
12.8
2.8
3.1
3.2
4.6
0.8

2014
CP
3.4
5.1
3.6
9.4
9.8

3.9
n.a.
-0.5
0.1
0.9
11.5
2.4
3.5
3.4
6.0
0.7

2015
CP
4.3
4.0
6.5
7.7
8.1

4.8
n.a.
-0.4
1.7
0.9
9.8
3.4
3.5
3.4
7.2
0.7

Note:
1In percent of potential GDP, with potential GDP growth according to the programme as recalculated by the Commission.

Source :

Commission spring 2012 forecasts (COM); Convergence programme (CP).

27

 
 
 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

2011

2012

2013

2014

2015

Change: 
2011-2015

Revenue
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure

of which:

Compensation of employees
Intermediate consumption
Social payments
Subsidies
Gross fixed capital formation
Other (residual)
- Interest expenditure
General government balance (GGB)
Primary balance
One-off and other temporary measures
GGB excl. one-offs
Output gap2
Cyclically adjusted balance2
Structural balance
Change in structural balance
Structural primary balance3
Change in structural primary balance
Expenditure benchmark
Public expenditure growth4 (real)
Reference rate5,6
Lower reference rate5,7
Deviation in % of GDP 
   from applicable reference rate
Two-year average deviation in % of GDP 
   from applicable reference rate

3

COM
32.0

COM
33.5

11.6
4.4
10.2
5.8
37.5

11.9
4.6
10.2
6.8
36.8

CP
33.8

12.2
4.4
10.1
7.1
36.8

COM
33.1

11.9
4.7
9.8
6.7
36.1

CP
31.4

12.5
4.4
9.7
4.8
33.4

CP
30.2

12.3
4.5
9.7
3.7
31.3

CP
30.0

12.4
4.5
9.7
3.4
30.1

35.7

34.7

34.6

34.0

31.3

29.3

28.3

10.1
5.6
13.2
0.4
4.2
2.1
1.8
-5.5
-3.7
0.0
-5.5

-3.3

-4.6

-4.6

-2.8

9.8
5.0
12.9
0.4
4.3
2.3
2.1
-3.2
-1.2
0.3
-3.5

-2.5

-2.6

-2.9
1.8

-0.8
2.0

-4.64

2.21

0.77
-1.90

8.9
5.1
12.9
0.4
4.9
2.4
2.2
-3.0
-0.9
0.3
-3.3

-2.5

-2.3

-2.6
2.0

-0.4
2.4

-6.26

2.21

0.77
-2.09

9.5
4.6
12.5
0.4
4.6
2.5
2.0
-3.0
-0.9
-0.5
-2.5

-1.4

-2.6

-2.1
0.8

0.0
0.8

2.23

2.21

0.77
0.48

8.9
5.2
12.5
0.4
2.8
1.6
2.1
-2.0
0.1
0.3
-2.3

-0.9

-1.8

-2.1
0.6

0.0
0.5

-0.58

2.21

0.77
-0.36

8.5
4.9
11.6
0.3
2.5
1.3
2.0
-1.0
1.0
0.5
-1.5

0.1

-1.0

-1.5
0.5

0.5
0.4

0.44

2.21

0.77
-0.09

9.0
5.2
10.6
0.3
1.9
1.2
1.8
0.0
1.8
0.4
-0.4

1.7

-0.4

-0.8
0.7

1.0
0.5

3.04

2.21

0.77
0.57

n.a.

n.a.

-0.71

-1.23

-0.23

0.24

CP
-2.0

0.8
0.1
-0.5
-2.4
-7.4

-7.4

-1.1
-0.4
-2.6
-0.1
-2.3
-0.9
0.0
5.5
5.5
0.4
5.1

4.9

4.2

3.8

3.8

-

-

-
-

-

Notes:
1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically-adjusted balance according to the programme as recalculated by the Commission on the 
basis of the information in the programme.
3Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures.
4M odified expenditure aggregate used for the expenditure benchmark, growth rates net of non-discretionary changes in unemployment benefit 
and of discretionary measures.
5The reference rates applicable to 2014 onwards will be available from mid-2012. For illustrative purposes, the current reference rates have 
also been applied to the years 2014 onwards.
6The (standard) reference rate applies starting in the year following the one in which the country reaches its M TO.
7The lower reference rate applies as long as the country is adjusting towards its M TO, including the year in which it reaches the M TO.

Source :
Convergence programme (CP); Commission spring 2012 forecasts (COM); Commission calculations.

28

 
 
 
 
Table IV. Debt dynamics 

Average 
2006-10

23.5
3.9

3.2
0.1

1.0
-0.2
-0.7
0.6

2011

38.5
0.5

3.7
-2.0

1.8
-2.0
-1.8
-1.1

2012

2013

COM

40.4
1.9

1.2
0.4

2.1
-0.9
-0.8
0.3

CP

40.2
1.7

0.9
0.5

2.1
-0.9
-0.6
0.3

COM

40.9
0.5

0.9
-0.4

2.0
-1.3
-1.1
0.0

CP

38.6
-1.6

-0.1
-0.5

2.1
-1.4
-1.2
-1.0

2014
CP

36.7
-1.9

-1.0
-0.5

2.0
-1.2
-1.3
-0.4

2015
CP

34.9
-1.8

-1.8
-0.8

1.8
-1.5
-1.2
0.9

0.0

0.0

0.0

0.0

(% of GDP)

Gross debt ratio1
Change in the ratio
Contributions 2 :

1. Primary balance
2. 'S now-ball' effect

Of which:
Interest expenditure
Growth effect
Inflation effect

3. S tock-flow adjustment

Of which:
Cash/accruals diff.
Accum. financial assets

Privatisation

Val. & residual effects

Notes:
1End of period.
2The snow-ball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP 
growth and inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash 
and accrual accounting, the accumulation of financial assets, and valuation and other residual effects. 

Source :
Convergence programme (CP); Commission spring 2012 forecasts (COM); Commission calculations.

29

 
 
 
 
 
Figure. Medium-term debt projection 

(% of GDP)
50

Gross debt as % of GDP - LT - Medium term debt projections

45

40

35

30

25

20

15

10

5

0

0
0
0
2

2
0
0
2

4
0
0
2

6
0
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

6
1
0
2

8
1
0
2

0
2
0
2

COM no-policy change scenario
COM + Shock ( -1p.p. in the short-term/long-term interest rate on maturing and new debt from 2014)
COM + Shock (+1p.p. in the short-term/long-term interest rate on maturing and new debt from 2014)
COM consolidation scenario (0.5% per year on SB) in order to achieve MTO
COM consolidation scenario (1% per year on SB) in order to achieve MTO
SP scenario

Table V. Long-term sustainability indicators 

LT

EU27

no-policy 
change 
scenario 

Programme 
(SP) 
scenario

no-policy 
change 
scenario 

SCPs 
scenario

S2
of which:

Initial budgetary position (IBP)
Long-term change in the primary balance (LTC)
 of which:
Pension
Care (HC and LTC)
Others

S1 (required adjustment)*

4.3

0.8
3.5

2.7
1.1
-0.3
-0.1

3.4

-0.2
3.6

2.9
1.0
-0.3
-1.8

2.9

0.7
2.3

1.1
1.5
-0.3
2.2

0.7

-1.6
2.4

1.2
1.5
-0.3
-0.1

Debt,  % of GDP (2011)
Age-related expenditure, % of GDP (2011)
Notes:
The ‘no policy change’ scenario depicts the sustainability gap under the assumption that the budgetary position evolves 
according to the spring 2012 forecast until 2013. The ‘stability programme’ scenario depicts the sustainability gap under the 
assumption that the budgetary plans in the programme are fully implemented).     

38.5
18.1

82.8
25.8

*  The required adjustment of the primary balance until 2020 to reach a public debt of 60% of GDP by 2030.
Source:
Commission, 2012 stability and convergence programmes.

30

 
 
 
 
 
Table VI. Taxation 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)
Decomposition by economic function (% of GDP)1
     Consumption

              of which:

              - VAT

             - excise duties on tobacco and alcohol

             - energy

             - other (residual)

     Labour employed

     Labour non-employed

     Capital and business income

     Stocks of capital/wealth
     p.m.  Environmental taxes2
3
VAT efficiency
     Acctual VAT revenues as % of theoretical revenues at standard rate

2001

28.5

2005

28.4

2007

29.5

2008

30.0

2009

29.2

2010

27.1

11.5

10.7

11.3

11.3

11.2

11.5

7.3

1.2

1.8

1.1

7.1

1.2

1.7

0.7

8.1

1.3

1.6

0.3

8.0

1.5

1.5

0.4

7.4

1.6

1.9

0.3

7.9

1.5

1.8

0.3

15.3

14.2

14.2

14.5

14.7

13.1

0.1

1.3

0.7

2.5

0.2

2.7

0.6

2.3

0.2

3.2

0.6

1.8

0.3

3.4

0.5

1.6

0.3

2.6

0.7

2.0

0.3

1.7

0.7

1.9

50.7

51.6

60.9

57.7

46.3

49.0

Note: 
1 T ax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission (2012), 

T axation trends in the European Union, for a more detailed explanation.

2 T his category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.

3 T he VAT  efficency is measured via the VAT  revenue ratio. T he VAT  revenue ratio is defined as the ratio between the actual VAT  revenue collected and the revenue that 

would theoretically be raised if VAT  was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due to large exemptions 

or the application of reduced rates to a wide range of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection gap'). See European 

Commission (2011), T ax reforms in EU Member States, European Economy 5/2011, for a more detailed explanation.

Source: Commission services

31

 
 
 
 
Table VII. Financial market indicators 

2007

2008

2009

2010

2011

81.3
…
…

98.4
80.5
83.4

81.6
81.3
84.8

93.3
78.8
…

82.8
80.9
83.7

1.0
10.9
25.9
42.9
60.0
161.9
0.0
…
59.3

4.6
12.9
13.5
18.8
27.1
196.1
0.0
…
62.4

Total assets of the banking sector (% of GDP)
Share of assets of the five largest banks (% of total assets)
Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans) 1)
              - capital adequacy ratio (%) 2)
              - return on equity (%) 3)
Bank loans to the private sector (y-o-y % change)
Lending for house purchase (y-o-y % change)
Loan to deposit ratio
CB liquidity as % of liabilities
Banks' exposure to countries beneficiary of official financial assistance  (% of GDP)
Private debt (% of GDP)
Gross external debt (% of GDP) 4)
            - Public
            - Private
Long term interest rates spread versus Bund (basis points)*
Credit default swap spreads for sovereign securities (5-year)*
Notes: 
1) From 2005 to 2007, loans overdue 60 days and more. From 2008 onwards, non-impaired loans overdue more than 60 days plus impaired loans. 
Latest September 2011.
2) The capital adequacy ratio is defined as total capital devided by risk weigthed assets.Latest September 2011.
3) Net income to equity ratio. After extraordinary items and taxes. Branches of foreign banks are excluded. Latest September 2011.
4) Latest data 2011Q3.
* M easured in basis points.
Source :
Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission services (long-term interest rates), World Bank (gross external debt) and ECB (all other indicators).

23.3
14.8
-4.6
-6.5
0.0
145.8
0.0
…
62.5

19.3
14.2
-48.4
-8.9
-1.6
168.8
0.0
…
69.2

21.1
13.5
15.3
-7.0
-1.7
133.3
0.0
…
…

25.5
1078.2
482.6

25.9
162.3
529.2

24.1
255.2
234.9

25.0
282.3
258.9

25.3
32.9
…

32

 
 
 
Table VIII. Labour market and social indicators 

Labour market indicators
Employment rate 
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women 
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment 
(% of total employment)
Part-time employment of women  
(% of women employment)
Part-time employment of men  
(% of men employment)
Fixed term employment 
(% of employees with a fixed term contract)
Unemployment rate1 (% of labour force)
Long-term unemployment2  (% of labour force)
Youth unemployment rate 
(% of youth labour force aged 15-24)

Youth NEET3 rate (% of population aged 15-24)

Early leavers from education and training (% of 
pop. 18-24 with at most lower sec. educ. and not 
in further education or training)
Tertiary educational attainment (% of population 
30-34 having successfully completed tertiary 
education)
Labour productivity per person employed 
(annual % change )
Hours worked per person employed  (annual % 
change)
Labour productivity per hour worked (annual % 
change; constant prices)
Compensation per employee (annual % change; 
constant prices)
Nominal unit labour cost growth (annual % 
change)

2006

2007

2008

2009

2010

2011

71.6

72.9

72.0

67.2

64.4

67.2

1.7

2.3

-0.9

-6.8

-5.1

2.0

68.3

69.5

68.8

67.5

65.1

66.7

75.2

76.5

75.5

66.9

63.6

67.7

49.6

53.4

53.1

51.6

48.6

50.5

10.1

8.7

12.2

10.4

8.0

4.5

5.6

2.5

9.8

8.2

8.2

7.1

3.5

4.3

1.4

8.2

7.0

7.4

6.9

8.8

5.0

2.4

5.8

1.2

13.4

8.5

9.7

7.1

2.2

13.7

3.2

29.2

8.2

9.5

6.8

2.4

17.8

7.4

35.1

8.9

12.4

13.5

7.4

8.7

8.1

38.9

38.9

41.6

43.7

46.4

5.9

-0.8

6.7

9.4

10.2

6.8

1.1

5.7

4.8

6.6

3.6

1.6

1.9

4.2

10.4

-8.6

-2.3

-6.5

-6.4

-1.4

2.4

6.9

1.0

5.8

-2.9

-7.3

-9.1

8.9

10.7

7.0

2.8

15.4

8.0

32.9

:

:

:

3.8

-1.3

5.2

-1.8

-0.3

-5.4

Real unit labour cost growth (annual % change)

3.3

-1.9

0.6

Notes:

1 According to ILO definition, age group 15-74)
2 Share of persons in the labour force who have been unemployed for at least 12 months.
3 NEET are persons that are neither in employment nor in any education or training.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

33

 
 
 
 
 
Table VIII. Labour market and social indicators (continued) 

Expenditure on social protection 
benefits (% of GDP)
Sickness/Health care
Invalidity
Old age and survivors
Family/Children
Unemployment
Housing and Social exclusion n.e.c.
Total
of which:  Means tested benefits
Social inclusion indicators
Risk-of-poverty or exclusion1 (% of total 
population)
Risk-of-poverty or exclusion of children (% of 
people aged 0-17)
Risk-of-poverty or exclusion of elderly (% of 
people aged 65+)
At-risk-of-poverty rate2 (% of total population)
Value of relative poverty threshold (single 
household per year) - in PPS
Severe material deprivation3  (% of total 
population)
Share of people living in low work intensity 
households 4 (% of people aged 0-59 not 
student)
In-work at-risk-of poverty rate (% of persons 
employed)

Notes:

2005

2006

2007

2008

2009

3.83
1.32
5.40
1.17
0.37
0.00
13.2
0.27

4.10
1.35
5.23
1.14
0.40
0.00
13.4
0.23

4.26
1.44
6.00
1.20
0.39
0.00
14.4
0.20

4.60
1.62
6.40
1.87
0.39
0.00
16.1
0.26

5.40
2.09
8.37
2.83
0.90
0.00
21.3
0.49

2006

2007

2008

2009

2010

35.9

28.7

27.6

29.5

33.4

37.2

29.9

29.4

31.0

34.3

41.3

20.0

39.1

19.1

38.1

20.0

35.8

20.6

30.0

20.2

2772

3428

4170

4382

3615

25.3

16.6

12.3

15.1

19.5

8.3

9.9

6.4

8.0

5.1

6.9

9.2

9.4

10.4

12.3

1 People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) 
and/or suffering from severe material deprivation (SM D) and/or living in households with zero or very low 
work intensity (LWI).

2 At-risk-of poverty rate: share of people with an equivalised disposable income below 60% of the national 
equivalised median income. 

3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or 
utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have 
a washing machine, viii) have a colour TV, or ix) have a telephone.

4 People living in households with very low work intensity: share of people aged 0-59 living in households 
where the adults work less than 20% of their total work-time potential during the previous 12 months.

Sources: 
For expenditure on social protection benefits ESSPROS; for social inclusion EU-SILC.

34

 
 
 
 
 
Table IX. Product market performance and policy indicators 

Performance indicators

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, water 
(annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Patent intensity in manufacturing2 (patents of the 
EPO divided by gross value added of the sector)

Policy indicators

Enforcing contracts3 (days)
Time to start a business 3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

2002-
2006

5.9

8.1

2007

2008

2009

2010

2011

6.8

3.1

3.6

1.7

-8.6

6.9

2.8

-3.2

17.6

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

2.7

0.3

2002-
2006

n.a.

n.a.
0.7

31.4

4.8

0.2

3.3

0.2

-25.1

20.9

n.a.

n.a.

n.a.

n.a.

2007

2008

2009

2010

2011

210

26
0.8

38.0

210

26
0.8

39.9

275

26
0.8

40.6

275

22
0.8

43.8

5.2

4.7

4.9

n.a.

n.a.

275

22
n.a.

n.a.

n.a.

Notes:
1Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2 Patent data refer to applications to the European Patent Office (EPO). They are counted according to the year in which 
they were filed at the EPO. They are broken down according to the inventor's place of residence, using fractional counting if 
multiple inventors or IPC classes are provided to avoid double counting. 
3 The methodologies, including the assumptions, for this indicator are presented in detail on the website 
http://www.doingbusiness.org/methodology. 

*figure for 2007.

Source :

Commission, World Bank - Doing Business  (for enforcing contracts and time to start a business) and OECD (for the 
product market regulation indicators). 

35

 
 
 
 
 
 
 
 
 
 
 
Table X. Indicators on green growth 

Lithuania

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users 
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS
Transport energy intensity
Transport carbon intensity
Change in the ratio of passenger transport and GDP

Security of energy supply
Energy import dependency
Diversification of oil import sources 
Diversification of energy mix
Share of renewable energy in energy mix

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €
%

%
HHI
HHI
%

2001-
2005

0.58
1.37
2.17
n.a.
-1.5%
14
0.98
17.6%
9.2%

0.24
8.6
n.a.
n.a.
n.a.
0.0%
n.a.
0.66
2.06
n.a.

48.0%
n.a.
0.32
8.2%

2006

2007

2008

2009

2010

0.44
1.20
2.13
0.39
-3.3%
13
3
12.4%
6.2%

0.20
8.6
0.05
0.01%
0.03%

27.8%
0.56
1.69
3.9%

63.4%
0.96
0.27
9.3%

0.44
1.17
2.30
0.34
-4.2%
13
5.2
12.2%
6.0%

0.19
9.0
0.05
0.00%
0.02%
3.8%
23.9%
0.56
1.66
-9.2%

62.3%
0.93
0.28
8.8%

0.43
1.09
2.37
0.31
-5.8%
13
9.1
11.1%
5.5%

0.15
8.7
0.08
0.00%
0.02%
4.0%
25.4%
0.52
1.53
-5.9%

59.2%
0.93
0.28
9.2%

0.46
1.15
1.89
n.a.
-4.2%
13
12
13.6%
7.0%

0.17
8.1
0.09
0.00%
0.01%
4.4%
26.8%
0.46
1.35
n.a.

51.2%
0.99
0.29
10.5%

0.36
n.a.
n.a.
n.a.
-7.2%
14
6.4
n.a.
n.a.

n.a.

n.a.
0.10
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

n.a.

n.a.
n.a.
n.a.
n.a.

Country-specific notes: 
The year 2011 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN explanations given below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic M aterial Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by M ember States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport (in kgoe) divided by gross value added of industry (in EUR) 
Transport carbon intensity:  greenhouse gas emissions in transport divided by gross value added of the transport sector
Passenger transport growth : measured in %-change in passenger kilometres
Energy import dependency: net energy imports divided by gross inland energy consumption incl. of international bunkers

Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 

Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels

Share of renewable energy in energy mix: percentage-share in  gross inland energy consumption, expressed in tonne oil equivalents

36

 
 
 
 
 
 
37