Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Lithuania and delivering a Council opinion on the 2020 Stability Programme of Lithuania
Date: 2020-05-20
Institutions: European Commission, Secretariat-General
Subjects: Lithuania, aid to undertakings, economic policy, economic recovery, economic reform, employment policy, epidemic, infectious disease, investment, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 20.5.2020  COM(2020) 515 final  Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Lithuania and delivering a Council opinion on the 2020 Stability Programme of Lithuania  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2020 National Reform Programme of Lithuania and delivering a Council opinion 
on the 2020 Stability Programme of Lithuania 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 5(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

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On  17  December  2019,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Strategy,  marking  the  start  of  the  2020  European  Semester  for  economic  policy 
coordination. It took due account of the European Pillar of Social Rights, proclaimed 
by the European Parliament, the Council and the Commission on 17 November 2017. 
On  17  December  2019,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission  also  adopted  the  Alert  Mechanism  Report,  in  which  it  did  not  identify 
Lithuania as one of the Member States for which an in-depth review would be carried 
out. On the same date, the Commission also adopted a recommendation for a Council 
recommendation on the economic policy of the euro area. 
The  2020  country  report  for  Lithuania3  was  published  on  26  February  2020.  It 
assessed  Lithuania’s  progress  in  addressing  the  country-specific  recommendations 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
SWD(2020) 514 final. 

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(3) 

(4) 

(5) 

(6) 

adopted by the Council on 9 July 20194, the follow-up given to the recommendations 
adopted in  previous  years and  Lithuania's progress  towards its national  Europe 2020 
targets.  

On 11 March 2020, the World Health Organization officially declared the COVID-19 
outbreak  a  global  pandemic.  It  is  a  severe  public  health  emergency  for  citizens, 
societies  and  economies.  It  is  putting  national  health  systems  under  severe  strain, 
disrupting  global  supply  chains,  causing  volatility  in  financial  markets,  triggering 
consumer  demand  shocks  and  having  negative  effects  across  various  sectors.  It  is 
threatening  people’s  jobs,  their  incomes  and  companies’  business.  It  has  delivered  a 
major  economic  shock  that  is  already  having  serious  repercussions  in  the  European 
Union. On 13 March 2020, the Commission adopted a Communication5 calling for a 
coordinated economic response to the crisis, involving all actors at national and Union 
level. 

Several  Member States have declared a state of  emergency or introduced emergency 
measures.  Any  emergency  measures  should  be  strictly  proportionate,  necessary, 
limited in time, and in line with European and international standards. They should be 
subject to democratic oversight and independent judicial review. 

On  20  March  2020,  the  Commission  adopted  a  Communication  on  the  activation  of 
the general escape clause of the Stability and Growth Pact6. The clause, as set out in 
Articles 5(1), 6(3), 9(1) and 10(3) of Regulation  (EC) 1466/97 and Articles 3(5) and 
5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in 
times  of  severe  economic  downturn.  In  its  Communication,  the  Commission  shared 
with the Council its view that, given the expected severe economic downturn resulting 
from  the COVID-19 outbreak, the  current  conditions  permit  activation of the clause. 
On  23  March  2020,  the  Ministers  of  Finance  of  the  Member  States  agreed  with  the 
assessment of the Commission. The activation of the general escape clause allows for 
a temporary departure from the adjustment path  towards the medium-term budgetary 
objective,  provided  that  this  does  not  endanger  fiscal  sustainability  in  the  medium 
term. For the corrective arm, the Council may also decide, on a recommendation from 
the Commission,  to  adopt  a revised  fiscal  trajectory. The  general  escape  clause does 
not suspend the procedures of the Stability and Growth Pact. It allows Member States 
to depart from the budgetary requirements that would normally apply while enabling 
the  Commission  and  the  Council  to  undertake  the  necessary  policy  coordination 
measures within the framework of the Pact. 

Continued  action  is  required  to  limit  and  control  the  spread  of  the  pandemic, 
strengthen  the  resilience  of  the  national  health  systems,  mitigate  the  socio-economic 
consequences through supportive measures for business and households and to ensure 
adequate  health  and  safety  conditions  at  the  workplace  with  a  view  to  resuming 
economic  activity.  The  Union  should  fully  use  the  various  tools  at  its  disposal  to 
support  Member  States’  efforts  in  those  areas.  In  parallel,  Member  States  and  the 
Union should work together to prepare the measures necessary to get back to a normal 
functioning of our societies and economies and to sustainable growth, integrating inter 
alia  the  green  transition  and  the  digital  transformation,  and  drawing  all  lessons  from 
the crisis. 

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OJ C 301, 5.9.2019, p. 117. 
COM(2020) 112 final. 
COM(2020) 123 final. 

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(7) 

(8) 

(9) 

The  COVID-19  crisis  has  highlighted  the  flexibility  that  the  single  market  offers  to 
adapt  to  extraordinary  situations.  However,  in  order  to  ensure  a  swift  and  smooth 
transition to the recovery phase and the free movement of goods, services and workers, 
exceptional  measures that prevent  the single market  from  functioning  normally must 
be removed as soon as they are no longer indispensable. The current crisis has shown 
the need for crisis preparedness plans in the health sector, which include in particular 
improved  purchasing  strategies,  diversified  supply  chains  and  strategic  reserves  of 
essential  supplies.  They  are  key  elements  for  developing  broader  crisis  preparedness 
plans.  
The  Union  legislator  has  already  amended  the  relevant  legislative  frameworks7  to 
allow  Member  States  to  mobilise  all  unused  resources  from  the  European  Structural 
and  Investment  Funds  so  they  can  address  the  exceptional  effects  of  the  COVID-19 
pandemic. Those amendments will provide additional flexibility, as well as simplified 
and streamlined procedures. To alleviate cash flow pressures, Member States can also 
benefit  from  a  100%  co-financing  rate  from  the  Union  budget  in  the  2020-2021 
accounting year. Lithuania is encouraged to make full use of those possibilities to help 
the individuals and sectors most affected by the challenges. 

The  socio-economic  consequences  of  the  pandemic  are  likely  to  be  unevenly 
distributed  across  Lithuanian  sectors  and  regions  due  to  different  specialisation 
patterns. This  entails a risk  of widening disparities within  Lithuania. Combined with 
the  risk  of  a  temporary  unravelling  of  the  convergence  process  between  Member 
States, the current situation calls for targeted policy responses. 

(10)  On 15 May 2020, Lithuania submitted its 2020 National Reform Programme and, on 
30  April  2020,  its  2020  Stability  Programme.  In  order  to  take  account  of  their 
interlinkages, the two programmes have been assessed at the same time. 

(11)  Lithuania is currently in the preventive arm of the Stability and Growth Pact. 

(12) 

(13) 

In  its  2020  Stability  Programme,  the  government  plans  the  headline  balance  to 
deteriorate from  a surplus of 0,3% of  GDP in  2019 to  a deficit of 11,4% of GDP in 
2020. The deficit is projected to decline to 3,9% of GDP in 2021. After increasing to 
36,3%  of  GDP  in  2019,  the  general  government  debt-to-GDP  ratio  is  expected  to 
increase  to  50,6%  in  2020  according  to  the  2020  Stability  Programme.  The 
macroeconomic and fiscal outlook is affected by high uncertainty due to the COVID-
19 pandemic. 

In response to the COVID-19 pandemic, and as part of a coordinated Union approach, 
Lithuania  has  adopted  budgetary  measures  to  increase  the  capacity  of  its  health 
system, contain the pandemic, and provide relief to those individuals and sectors that 
have  been  particularly  affected.  According  to  the  2020  Stability  Programme,  those 
budgetary  measures  amounted  to  6,8%  of  GDP.  The  measures  include  tax  deferrals, 
additional  funding  to  buy  medical  supplies,  subsidies  to  sustain  jobs  and  social 

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Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending 
Regulations  (EU)  No  1301/2013,  (EU)  No  1303/2013  and  (EU)  No  508/2014  as  regards  specific  measures  to 
mobilise  investments  in  the  healthcare  systems  of  Member  States  and  in  other  sectors  of  their  economies  in 
response to the COVID-19 outbreak (Coronavirus Response Investment Initiative) (OJ L 99, 31.3.2020, p. 5) and 
Regulation  (EU)  2020/558  of  the  European  Parliament  and  of  the  Council  of  23  April  2020  amending 
Regulations  (EU)  No  1301/2013  and  (EU)  No  1303/2013 as  regards  specific  measures  to  provide  exceptional 
flexibility for the use of the European Structural and Investments Funds in response  to the COVID-19 outbreak 
(OJ L 130, 24.4.2020, p. 1). 

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benefits to the self-employed and employees affected by the COVID-19 virus. As the 
Commission  analysis of  the design and implementation  of some measures  point to  a 
relatively  low  potential  take-up,  the  Commission  assumed  a  smaller  impact  of  the 
government  measures  on  the  public  finances.  In  addition,  Lithuania  has  announced 
discretionary  measures  that,  while  not  having  a  direct  budgetary  impact,  will 
contribute  to  the  crisis  response,  including  supporting  liquidity  to  businesses,  which 
the 2020 Stability Programme estimates at 3,8% of GDP. Those measures include loan 
guarantees (2,9% of GDP). Overall, the measures taken by Lithuania are in line with 
the guidelines set out in the Commission Communication on a coordinated economic 
response  to  the  COVID-19  outbreak.  The  full  implementation  of  those  measures, 
followed  by  a  refocusing  of  fiscal  policies  towards  achieving  prudent  medium-term 
fiscal  positions  when  economic  conditions  allow,  will  contribute  to  preserving  fiscal 
sustainability in the medium term. 

(14)  Based on the Commission 2020 spring forecast under unchanged policies, Lithuania’s 
general government balance is forecast at -6,9% of GDP in 2020 and -2,7% in 2021. 
The general government debt ratio is projected to remain below 60 % of GDP in 2020 
and 2021. 

(15)  On 20 May 2020, the Commission issued a report prepared in accordance with Article 
126(3)  of  the  Treaty  due  to  Lithuania’s  planned  breach  of  the  3%  of  GDP  deficit 
threshold in 2020. Overall, the analysis suggests that the deficit criterion as defined in 
the Treaty and in Regulation (EC) No 1467/1997 is not fulfilled.     

(16)  According to the Commission Spring 2020 forecast, Lithuania’s GDP is set to contract 
by 8% which is projected to be followed by a rapid recovery of 7,5% in 2021. In order 
to respond to the COVID-19 outbreak and to cushion the economic fallout, Lithuania 
put  forward  the  ‘Plan  for  Economic  Stimulus  and  Mitigation  of  Consequences  of 
COVID-19 Transmission’ on 16 March. The plan’s size amounts to EUR 2.5 billion or 
6.3%  of  the  country’s  gross  domestic  product  (GDP),  and  includes  up  to  EUR  500 
million or 1.3% of GDP to ensure necessary resources for the health system. A further 
EUR 500 million was allocated to protect jobs and income. The capacity of the state 
guarantee  funds  was  increased  by  EUR  500  million,  and  additional  state  guarantees 
amounting up to EUR 500 million were approved to stimulate the economy. In April, 
the  European  Commission  approved  several  Lithuanian  aid  schemes  to  support  the 
Lithuanian  economy  in  the  context  of  the  COVID-19  outbreak.  These  schemes  are 
designed to help businesses cover immediate working capital needs and continue their 
activities during and after the pandemic. Additionally, the Bank of Lithuania relaxed 
some  capital  requirements  for  commercial  banks  to  increase  lending  to  the  real 
economy. 

(17)  Health  outcomes  in  Lithuania  persistently  lag  behind  those  in  other  Member  States, 
due  in  part  to  suboptimal  efficiency  of  the  health  system,  which  suffers  from  low 
funding.  The  current  pandemic  has  subjected  the  system  to  additional  pressure  and 
highlighted  further  structural  challenges  which  include  slow  progress  in  improving 
quality of services, underinvestment in primary healthcare and no progress in adapting 
the hospital network to render it more efficient and responsive to needs.  The COVID-
19  crisis  is  also  exposing  health  inequalities  related  to  workforce  shortages  and 
geographical mismatches between services and needs. Lithuania needs to mobilise the 
resources needed to tackle the current crisis and to improve the resilience of its health 
systems  in  future. While immediate action is  focusing on strengthening capacities in 
terms of health workers, critical medical supplies and equipment in order to save lives 
during  the  pandemic,  longer  term  investments  should    be  scaled  up  to  improve  the 

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resilience  of  the  health  system  so  that  it  can  sustain  operations,  resume  its  optimal 
performance and prepare itself for new shocks. This will require allocating sufficient 
resources to improve  the accessibility, efficiency, and quality of the health system, so 
it  can  better  respond  to  the  challenges  of  growing  chronical  conditions,  aging  and 
persisting  heath  inequalities.  Primary  care  and  the  development  of  e-health  have  a 
central  role  to  play  in  this  regard.  Lithuania  should  also  ensure  that  recent 
improvements  to  the  affordability  of  healthcare  are  not  undermined.  Finally,  future 
resilience  will  also  require  enhancing  the  system’s  ability  to  reduce  unhealthy 
lifestyles  (one  of  the  other  important  factors  behind  poor  health  outcomes  in 
Lithuania)  and  greater  efforts  to  prepare  the  long-term  care  sector  to  deal  with  the 
ageing population.  

(18)  Before  the  COVID-19  pandemic,  labour  market  participation  was  high  and 
unemployment  was  low,  but  this  crisis  has  posed  new  challenges.With  the  help  of 
Union funding, Lithuania has implemented a short-time work scheme to  mitigate the 
effects of the pandemic on employment and introduced a number of other measures to 
mitigate  the  negative  effects  on  businesses  and  the  self-employed.  Before  the  crisis, 
the  coverage  of  Active  Labour  Market  Policy  measures  was  decreasing,  and 
participation  in  adult  learning  remained  low.  However,  higher  coverage  of  Active 
Labour  Market  Policy  measures  and  other  measures  to  reskill  and  upskill  the 
workforce  will  be  needed  to  help  the  unemployed  to  return  to  the  labour  market  as 
early  as  possible.  Strengthening  social  partners'  capacity  is  important  to  ensure  their 
meaningful and timely involvement in the design of the exit and recovery process. 

(19)  Whilst  steps  were  taken  before  the  crisis  to  address  the  risk  of  poverty  and  social 
exclusion,  for  example  by  increasing  universal  child  benefits  and  pensions,  poverty 
and  income  inequality  are  still  among  the  highest  in  the  EU.  Lithuania  has 
comparatively  low  public  expenditure  on  social  protection,  and  the  impact  of  social 
transfers  on  poverty  reduction  is  low,  and  assessed  as  critical  on  the  Social 
Scoreboard.  The  low  progressivity  and  ability  to  redistribute  of  the  tax  and  benefit 
system limits the country’s ability to finance public goods and services, and to reduce 
poverty  and  income  inequality.    The  negative  effect  of  the  COVID-19  pandemic  on 
employment and household income is likely to aggravate these problems. Temporary 
measures  such  as  revising  the  eligibility  rules,  the  amounts  and  duration  of  some 
benefits,  may  be    needed  to  ensure  that  the  situation  of  those  most  affected  by  the 
pandemic does not deteriorate. The social safety net  should be extended to support  all 
groups, including the self-employed, atypical workers and the most vulnerable people. 
The provision of the main social services and social housing needs to be strengthened 
to support those in need. 

(20)  Liquidity  support  to  businesses  through  public  sector  loans  and  guarantees,  with  a 
focus on small- and medium-sized enterprises (SMEs), has been of utmost importance, 
but  the  distribution  of  liquidity  support  to  firms  must  be  effectively  and  swiftly 
implemented by intermediaries and loan conditions must take account of to the crisis 
situation. In the process of designing and implementing these measures the resilience 
of the banking sector needs to be taken into account. Allowing deferred payments of 
taxes  and  social  contributions  and  speeding  up  contractual  payments  by  public 
authorities  can  also  help  improve  the  cash-flow  of  SMEs.  Newly-founded  start-ups 
and  scale-ups  may  need  specific  support,  e.g.  in  the  form  equity  stakes  by  public 
institutions  and  incentives  for  venture  capital  funds  to  increase  their  investments  in 
these  firms.  Efforts  should  be  maintained  to  reduce  unnecessary  regulatory  and 

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administrative  burdens  and  to  offer  efficient  digital  public  services  for  citizens  and 
businesses. 

(21)  Lithuania should ensure that its measures to promote economic recovery are forward-
looking  and  facilitate  the  digital  and  green  transitions,  where  there  are  a  number  of 
challenges to be tackled. For the former, digital skills are below the EU average, with 
SMEs reporting considerable difficulties in recruiting for ICT vacancies. While fibre 
deployment  is  above  EU  average,  both  for  urban  and  rural  areas,  fixed  broadband 
coverage and related take-up is very low and wide gaps remain between the cities and 
rural areas.  

(22)  To  foster  the  economic  recovery,  it  will  be  important  to  front-load  mature  public 
investment  projects  and  promote  private  investment,  including  through  relevant 
reforms. As regards the green transition, total greenhouse gas emissions in  Lithuania 
remain largely unchanged since 2010. Lithuania’s resource productivity is one of the 
lowest in the EU and circular (secondary) material use is well below the EU average. 
In  line  with  Lithuania’s  National  Energy  and  Climate  Plan,  improving  the  energy 
performance of buildings thanks to energy efficiency and renewable energy solutions, 
modernising heating systems and improving the sustainability of the transport sector, 
would  significantly  contribute  to  decarbonising  the  economy.  Targeted  public  and 
private  investments  aimed  at  tackling  these  issues,  and  others  with  a  significant 
environmental and health impact, can promote growth and resilience, and help ensure 
a sustainable recovery from the crisis.  Investments which have already been planned 
allow  for  the  swift  identification  of  projects  which  could  be  front-loaded  and 
contribute to  economic recovery, for   example in  building renovation  and renewable 
energy.  Preparatory  work  for  medium-term  recovery  measures  can  draw  on  Member 
States’ National  Energy  and Climate Plans, list  of Projects  of Common  Interest,  and 
infrastructure development plans. Furthermore, the Rail Baltica project and the energy 
interconnection projects are Lithuania’s key investment priorities aimed at improving 
its  safety  and  integration  into  the  EU  single  market.  The  programming  of  the  Just 
Transition Fund for the period 2021-2027 could help Lithuania to address some of the 
challenges  posed  by  the  transition  to  a  climate  neutral  economy,  in  particular  in  the 
territories  covered by  Annex D to  the  country  report. This  would allow  Lithuania to 
make the best use of that fund. 

to  address  medium- 

(23)  While the present recommendations focus on tackling the socio-economic impacts of 
the  pandemic  and  facilitating  the  economic  recovery,  the  2019  country-specific 
recommendations adopted by the Council on 9 July 2019 also covered reforms that are 
essential 
structural  challenges.  Those 
recommendations remain pertinent and will continue to be monitored throughout next 
year’s  European  Semester  annual  cycle.  That  also  applies  to  recommendations 
regarding investment-related economic policies. The latter recommendations should be 
taken  into  account  for  the  strategic  programming  of  cohesion  policy  funding  post-
2020, including for mitigating measures and exit strategies with regard to the current 
crisis. 

long-term 

to 

(24)  The  European  Semester  provides  the  framework  for  continuous  economic  and 
employment  policy  coordination  in  the  Union,  which  can  contribute  to  a  sustainable 
economy.  Member  States  have  taken  stock  of  progress  regarding United  Nations’ 
Sustainable  Development  Goals  (SDGs)  implementation  in  their  2020  National 
Reform  Programmes.  By  ensuring  the  full  implementation  of  the  recommendations 
below, Lithuania will contribute to the progress towards the SDGs and to the common 
effort of ensuring competitive sustainability in the Union.  

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(25)  Close coordination between economies in the economic and monetary union is key to 
achieve  a  swift  recovery  from  the  economic  impact  of  the  COVID-19.  Lithuania 
should,  as  a  Member  State  whose  currency  is  the  euro  –  and  taking  into  account 
political  guidance  by  the  Eurogroup  –  ensure  its  policies  remain  consistent  with  the 
euro area recommendations and coordinated with those of the other euro area Member 
States.  

(26) 

In  the  context  of  the  2020  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Lithuania’s  economic  policy  and  published  it in  the  2020 
country  report.  It  has  also  assessed  the  2020  Stability  Programme  and  the  2020 
National  Reform  Programme  and  the  follow-up  given  to  the  recommendations 
addressed  to  Lithuania  in  previous  years.  It  has  taken  into  account  not  only  their 
relevance for sustainable fiscal and socioeconomic policy in  Lithuania, but also their 
compliance with Union rules and guidance, given the need to strengthen the Union’s 
overall  economic  governance  by  providing  Union-level  input  into  future  national 
decisions.  

(27) 

In  the  light  of  that  assessment,  the  Council  has  examined  the  2020  Stability 
Programme and its opinion8 is reflected in particular in recommendation (1) below, 

HEREBY RECOMMENDS that Lithuania takes action in 2020 and 2021 to: 

1. 

2. 

3. 

In  line  with  the  general  escape  clause,  take  all  necessary  measures  to  effectively 
address the pandemic, sustain the economy and support the ensuing recovery. When 
economic  conditions  allow,  pursue  fiscal  policies aimed  at  achieving  prudent 
medium-term  fiscal  positions  and  ensuring  debt  sustainability, while  enhancing 
investment.  Strengthen  the  resilience  of  the  health  system,  including  by  mobilising 
adequate  funding  and  addressing  shortages  in  the  health  workforce  and  of  critical 
medical products. Improve the accessibility and quality of health services. 

Mitigate the impact of the crisis on employment. Increase the funding and coverage 
of active labour market policy measures and promote skills. Ensure the coverage and 
adequacy of the social safety net and improve the effectiveness of the tax and benefit 
system to protect against poverty. 

Support liquidity for businesses, especially for small- and medium-sized enterprises 
and  export-oriented  sectors.  Front-load  mature  public  investment  projects  and 
promote private investment to foster the economic recovery. Focus investment on the 
green and digital transition, in particular on  the coverage and take-up of very high-
capacity  broadband,  on  clean  and  efficient  production  and  use  of  energy,  and 
sustainable  transport.  Promote  technological  innovation  in  small  and  medium-sized 
enterprises. 

Done at Brussels, 

For the Council 
The President 

8 

Under Article 5(2) of Council Regulation (EC) No 1466/97. 

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