Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Lithuania
Date: 2024-06-19
Institutions: European Commission, Secretariat-General
Subjects: Lithuania, budget policy, economic policy, economic recovery, economic reform, employment policy, organisation of health care, professional qualifications, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 19.6.2024  COM(2024) 615 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Lithuania {SWD(2024) 600 final} - {SWD(2024) 615 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the economic, social, employment, structural and budgetary policies 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 Regulation (EU) 2024/1263 of the European Parliament and of the Council 
of  29  April  2024  on  the  effective  coordination  of  economic  policies  and  on  multilateral 
budgetary surveillance and repealing Council Regulation (EC) No 1466/971, and in particular 
Article 3(3) 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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Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council2,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021. The Recovery and Resilience Facility provides financial support to the Member 
States  for  the  implementation  of  reforms  and  investment,  entailing  a  fiscal  impulse 
financed by the EU. In line with the European Semester priorities, it helps achieve the 
economic  and  social  recovery  and  implement  sustainable  reforms  and  investment,  in 
particular  to  promote  the  green  and  digital  transitions  and  make  the  Member  States’ 
economies  more  resilient.  It  also  helps  strengthen  public  finances  and  boost  growth 
and job creation in the medium and long term, improve territorial cohesion within the 
EU and support the continued implementation of the European Pillar of Social Rights.  
The  REPowerEU  Regulation3,  adopted  on  27  February  2023,  aims  to  phase  out  the 
EU’s  dependency  on  Russian  fossil  fuel  imports.  This  would  help  achieve  energy 
security  and  diversify  the  EU’s  energy  supply,  while  increasing  the  uptake  of 

the  Recovery  and  Resilience  Facility 

OJ L 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj.  
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
(OJ  L  57,  18.2.2021,  p.  17),  ELI: 
establishing 
http://data.europa.eu/eli/reg/2021/241/oj.  
Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1), ELI: http://data.europa.eu/eli/reg/2023/435/oj.  

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(3) 

(4) 

(5) 

renewables,  energy  storage  capacities  and  energy  efficiency.  Lithuania  added  a  new 
REPowerEU chapter to its national recovery and resilience plan in order to finance key 
reforms and investments that will help achieve the REPowerEU objectives. 

On  16  March  2023,  the  Commission  issued  a  Communication  on  the  ‘Long-term 
competitiveness of the EU: looking beyond 2030’4, in order to inform policy decisions 
and  create  the  framework  conditions  for  increasing  growth.  The  Communication 
frames competitiveness along nine mutually reinforcing drivers. Among these drivers, 
access to private capital, research and innovation, education and skills, and the single 
market  emerge  as  paramount  policy  priorities  for  reform  and  investment  to  address 
current productivity challenges as well as to build up the long-term competitiveness of 
the EU and its Member States.  On 14 February  2024, the Commission  followed this 
Communication  with  the  Annual  Single  Market  and  Competitiveness  Report5.  The 
report  details  the  competitive  strengths  and  challenges  of  Europe's  Single  Market, 
tracking yearly developments according to the nine competitiveness drivers identified. 

On 21 November 2023, the Commission adopted the 2024 Annual Sustainable Growth 
Survey6, marking the start of the 2024 cycle of the European Semester for economic 
policy  coordination.  The  European  Council  endorsed  the  priorities  of  the  survey 
around  the  four  dimensions  of  competitive  sustainability  on  22  March  2024.  On  21 
November 2023, on the basis of Regulation (EU) No 1176/2011, the Commission also 
adopted  the  2024  Alert  Mechanism  Report,  in  which  it  did  not  identify Lithuania  as 
one of the Member States that may be affected or may be at risk of being affected by 
imbalances, and for which an in-depth review would be needed. On the same date, the 
Commission  adopted  an  opinion  on  the  2024  draft  budgetary  plan  of  Lithuania.  The 
Commission  also  adopted  a  recommendation  for  a  Council  recommendation  on  the 
economic policy of the euro area, which the Council adopted on 12 April 2024, as well 
as the proposal  for the  2024  Joint Employment Report analysing the implementation 
of  the  Employment  Guidelines  and  the  principles  of  the  European  Pillar  of  Social 
Rights, which the Council adopted on 11 March 2024. 

On  30  April  2024,  the  EU’s  new  economic  governance  framework  came  into  force. 
The  framework  includes  the  new  Regulation  of  the  European  Parliament  and  of  the 
Council  (EU)  2024/1263  on  the  effective  coordination  of  economic  policies  and 
multilateral  budgetary  surveillance  and  repealing  Council  Regulation  (EC)  No 
1466/97.  It  also  includes  the  amended  Regulation  (EC)  No  1467/97  on  the 
implementation  of  the  excessive  deficit  procedure  and  the  amended  Directive 
2011/85/EU  on  the  budgetary  frameworks  of  Member  States7.  The  objectives  of  the 
new  framework  are  public  debt  sustainability  and  sustainable  and  inclusive  growth 
through gradual  fiscal consolidation  as  well as reforms  and investments.  It  promotes 
national  ownership  and  has  a  greater  medium-term  focus,  combined  with  more 
effective and coherent enforcement. Each Member State should submit to the Council 
and  to  the  Commission  a  national  medium-term  fiscal-structural  plan.  National 
medium-term  fiscal-structural  plans  contain  the  fiscal,  reform  and  investment 

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COM(2023) 168 final.  
COM(2024) 77 final. 
COM(2023) 901 final. 
Council  Regulation  (EU)  2024/1264  of  29  April  2024  amending  Regulation  (EC)  No  1467/97  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L,  2024/1264, 
30.4.2024,  ELI: http://data.europa.eu/eli/reg/2024/1264/oj)  and  Council  Directive  (EU)  2024/1265  of 
29  April  2024  amending  Directive  2011/85/EU  on  requirements  for  budgetary  frameworks  of  the 
Member States (OJ L, 2024/1265, 30.4.2024, ELI: http://data.europa.eu/eli/dir/2024/1265/oj). 

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commitments  of  a  Member  State,  covering  a  planning  horizon  of  4  years  or  5  years 
depending on the regular length of the national legislature. The net expenditure8 path 
in  the  national  medium-term  fiscal-structural  plans  should  comply  with  the 
requirements of Regulation (EU) No 2024/1263, including the requirements to put or 
keep  general  government  debt  on  a  plausibly  downward  path  by  the  end  of  the 
adjustment period at the latest, or for it to remain at prudent levels below 60% of GDP, 
and to bring and/or maintain the government deficit below the 3% of GDP reference 
value  over  the  medium  term.  Where  a  Member  State  commits  to  a  relevant  set  of 
reforms and investments in accordance with the criteria set out in Regulation (EU) No 
2024/1263, the adjustment period may be extended by 3 years at most. For the purpose 
of supporting the preparation of those plans, on [21 June] 2024, the Commission is set 
to  provide  Member  States  with  guidance  on  the  content  of  the  plans  and  the 
subsequent  annual  progress  reports  that  they  will  need  to  submit  and,  in  accordance 
with  Article  5  of  Regulation  (EU)  No  2024/1263,  will  transmit  to  them  technical 
guidance  on  the  fiscal  adjustments  (reference  trajectories  and  technical  information, 
where  applicable).  Member  States  should  submit  their  medium-term  fiscal-structural 
plans by 20 September 2024, unless the Member State and the Commission agree to 
extend the deadline by a reasonable period of time. Member States should ensure the 
involvement  of  their  national  parliaments,  and  the  consultation  of  independent  fiscal 
institutions, of social partners and other national stakeholders, as appropriate. 

In 2024, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  The  full 
implementation  of  the  recovery  and  resilience  plans  remains  essential  for  delivering 
the policy priorities under the European Semester, as the plans help effectively address 
all  or  a  significant  subset  of  challenges  identified  in  the  relevant  country-specific 
recommendations  issued  in  recent  years.  The  2019,  2020,  2022  and  2023  country-
specific  recommendations  remain  equally  relevant  also  for  recovery  and  resilience 
plans  revised,  updated  or  amended  in  accordance  with  Articles  14,  18  and  21  of 
Regulation (EU) 2021/241.  

On 14 May 2021, Lithuania submitted its national recovery and resilience plan to the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the  relevance, 
effectiveness,  efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in 
accordance with the assessment guidelines of Annex V to that Regulation. On 28 July 
2021,  the  Council  adopted  its  Decision  on  the  approval  of  the  assessment  of  the 
recovery and resilience plan for Lithuania9, which was amended on 9 November 2023 
following Article 18(2) of Regulation (EU) 2021/241 to update the maximum financial 
contribution for non-repayable financial support, as well as to include the REPowerEU 
chapter10. The release of instalments is conditional on a decision by the Commission, 

Net expenditure as defined in Article 2 of Council Regulation (EU) 2024/1263 of 29 April 2024 (OJ L 
2024/1263,  30.4.2024,  ELI: http://data.europa.eu/eli/reg/2024/1263/oj).  Net  expenditure  means 
government  expenditure  net  of  (i)  interest  expenditure,  (ii)  discretionary  revenue  measures,  (iii) 
expenditure  on  programmes  of  the  Union  fully  matched  by  Union  funds  revenue,  (iv)  national 
expenditure  on  co-financing  of  programmes  funded  by  the  Union,  (v)  cyclical  elements  of 
unemployment benefit expenditure, and (vi) one-offs and other temporary measures. 
Council Implementing Decision of 28 July 2021 on the approval of the assessment of the recovery and 
resilience plan for Lithuania (10477/2021). 
Council Implementing Decision of 23 November 2023 amending the Implementing Decision of 28 July 
2021 on the approval of the assessment of the recovery and resilience plan for Lithuania (14637/2023). 

(6) 

(7) 

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(8) 

(9) 

the 

taken  in  accordance  with  Article  24(5)  of  Regulation  (EU)  2021/241,  that  Lithuania 
has  satisfactorily  fulfilled  the  relevant  milestones  and  targets  set  out  in  the  Council 
Implementing  Decision.  Satisfactory  fulfilment  presupposes  that  the  achievement  of 
preceding milestones and targets has not been reversed. 
The Commission published the 2024 country report for Lithuania11 on 19 June 2024. It 
assessed  Lithuania’s  progress 
relevant  country-specific 
in  addressing 
recommendations  adopted by the Council  between 2019  and  2023 and  took stock of 
Lithuania’s implementation of the recovery and resilience plan. Based on this analysis, 
the  country  report  identified  gaps  with  respect  to  those  challenges  that  are  not 
addressed  or  only  partially  addressed  by  the  recovery  and  resilience  plan,  as  well  as 
new and emerging challenges. It also assessed  Lithuania’s progress on implementing 
the  European  Pillar  of  Social  Rights  and  on  achieving  the  EU  headline  targets  on 
employment, skills and poverty reduction, as well as progress in  achieving the UN’s 
Sustainable Development Goals.  
Based  on  data  validated  by  Eurostat12,  Lithuania’s  general  government  deficit 
increased from 0.6% of GDP in 2022 to 0.8% in 2023, while the general government 
debt rose from 38.1% of GDP at the end of 2022 to 38.3% at the end of 2023.  
(10)  On 12 July 2022, the Council recommended13 that Lithuania take action to ensure in 
2023 that the growth of nationally financed primary current expenditure is in line with 
an  overall  neutral  policy  stance14,  taking  into  account  continued  temporary  and 
targeted support to households and firms most vulnerable to energy price hikes and to 
people fleeing Ukraine. Lithuania was recommended to stand ready to adjust current 
spending to the evolving situation. Lithuania was also recommended to expand public 
investment  for  the  green  and  digital  transitions,  and  for  energy  security  taking  into 
account  the  REPowerEU  initiative,  including  by  making  use  of  the  Recovery  and 
Resilience  Facility  and  other  Union  funds.  In  2023,  according  to  the  Commission 
estimates, the fiscal stance15 was expansionary, by 0.6% of GDP, in a context of high 
inflation.  The  growth  in  nationally  financed  primary  current  expenditure  (net  of 
discretionary revenue measures) in 2023 provided a broadly neutral contribution to the 
fiscal stance of -0.2% of GDP. This includes higher costs to offer temporary protection 
to  displaced  persons  from  Ukraine  (by  0.1%  of  GDP).  The  growth  of  nationally 
financed  primary  current  expenditure  in  2023  was  in  line  with  the  Council 
recommendation.  The  broadly  neutral  contribution  of  nationally  financed  primary 
current expenditure was due to the reduced costs of the support measures (targeted and 
untargeted)  to  households  and  firms  in  response  to  energy  price  hikes  (by  0.9 
percentage  points  of  GDP).  Public  sector  wages,  social  benefits  and  pensions  were 

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SWD(2024) 615 final. 
Eurostat-Euro Indicators, 22.4.2024. 
Council Recommendation of 12 July 2022 on the 2022 National Reform Programme of Lithuania and 
delivering a Council opinion on the 2022 Stability Programme of Lithuania, OJ C 334, 1.9.2022, p. 120. 
Based on the Commission Spring 2024 Forecast, the medium-term potential output growth of Lithuania 
in 2023, which is used to measure the fiscal stance, is estimated at  10.5% in nominal terms, based on 
the 10-year average real potential growth rate and the 2023 GDP deflator. 
The fiscal stance is defined as a measure of the annual change in the underlying budgetary position of 
the  general  government.  It  aims  to  assess  the  economic  impulse  stemming  from  fiscal  policies,  both 
those  that  are  nationally  financed  and  those  that  are  financed  by  the  EU  budget.  The  fiscal  stance  is 
measured as the difference between (i) the medium-term potential growth and (ii) the change in primary 
expenditure  net  of  discretionary  revenue  measures  (and  excluding  temporary  emergency  measures 
related to the COVID-19 crisis) and including expenditure financed by non-repayable support (grants) 
from the Recovery and Resilience Facility and other Union funds. 

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among the main drivers of growth in nationally financed primary current expenditure 
(net  of  discretionary  revenue  measures).  Expenditure  financed  by  Recovery  and 
Resilience  Facility  grants  and  other  EU  funds  amounted  to  1.2%  of  GDP  in  2023. 
Nationally  financed  investment  amounted  to  3.5%  of  GDP  in  2023,  representing  an 
increase of 0.9 percentage points as compared to 2022. Lithuania financed additional 
investment  through  the  Recovery  and  Resilience  Facility  and  other  EU  funds. 
Lithuania  financed  public  investment  for  the  green  and  digital  transitions,  and  for 
energy security, such as the installation of four energy storage facilities to ensure the 
security and stability of the Lithuanian electricity system, which are partly funded by 
the Recovery and Resilience Facility and other EU funds. 

(11)  The  Commission  Spring  2024  Forecast  projects  real  GDP  to  grow  by  2.0%  in  2024 
and 2.9% in 2025, and HICP inflation to stand at 1.9% in 2024 and 1.8% in 2025. 

(12)  The Commission Spring 2024 Forecast projects a government deficit of 1.8% of GDP 
in  2024, while the general-government-debt-to-GDP  ratio is set  to increase to  38.9% 
by the end of 2024. The increase of the deficit in 2024 reflects increases in spending 
that are not fully matched by increasing revenues. Spending is rising due to indexation 
of pensions and social benefits, increasing public wages, current transfers paid by the 
government  and  interest  expenditure.    Public  wages  are  projected  to  increase  at  a 
similarly  high  pace  as  private  sector  wages  to  preserve  the  competitiveness  of  the 
public sector as an employer. Based on the Commission’s estimates, the fiscal stance 
is projected to be expansionary at -1.6% of GDP in 2024. 

(13)  Expenditure amounting to 0.8% of GDP is expected to be financed by non-repayable 
support  (“grants”)  from  the  Recovery  and  Resilience  Facility  in  2024,  compared  to 
0.3%  of  GDP  in  2023,  according  to  the  Commission  Spring  2024  Forecast. 
Expenditure  financed  by  Recovery  and  Resilience  Facility  grants  will  enable  high-
quality investment and productivity-enhancing reforms without a direct impact on the 
general government balance and debt of Lithuania. Expenditure amounting to 0.5% of 
GDP is expected to be backed by loans from the Recovery and Resilience Facility in 
2024, compared to 0.0% of GDP in 2023, according to the Commission Spring 2024 
Forecast. 

(14)  On 14 July  2023, the Council recommended16 that Lithuania  maintain a sound fiscal 
position  in  2024.  When  executing  their  2023  budgets  and  preparing  their  Draft 
Budgetary  Plans  for  2024,  Member  States  were  invited  to  take  into  account  that  the 
Commission  would  propose  to  the  Council  the  opening  of  deficit-based  excessive 
deficit  procedures based on the outturn data for 2023. According to  the Commission 
Spring 2024 Forecast, Lithuania’s structural balance is projected at -0.8% of GDP in 
2024,  from  0.1%  in  2023,  thereby  remaining  close  to  the  country’s  medium-term 
budgetary  objective  (MTO)  of  a  structural  balance  of  -1.0%  of  GDP.  This  is  in  line 
with what was recommended by the Council. 

(15)  Moreover,  the  Council  recommended  that  Lithuania  take  action  to  wind  down  the 
emergency  energy  support  measures  in  force  as  soon  as  possible  in  2023  and  2024. 
The Council further specified that, should renewed energy price increases necessitate 
new or continued support measures, Lithuania should ensure that these were targeted 
at  protecting  vulnerable  households  and  firms,  fiscally  affordable,  and  preserve 
incentives for energy savings. According to the Commission Spring 2024 Forecast, the 

16 

Council Recommendation of 14 July 2023 on the 2023 National Reform Programme of Lithuania  and 
delivering a Council opinion on the 2023 Stability Programme of Lithuania, OJ C 312, 1.9.2023, p. 135. 

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(16) 

net  budgetary  cost17  of  emergency  energy  support  measures  is  estimated  at  0.3%  of 
GDP in 2023 and projected at less than 0.1% in 2024 and 0.0% in 2025. In particular, 
the  compensation  of  VAT  calculated  on  heat  energy  and  hot  water  for  household 
consumers will remain in force in 2024. The emergency energy support measures are 
projected to be wound down as soon as possible in 2023 and 2024. This is in line with 
what was recommended by the Council. 

In addition, the Council also recommended that Lithuania preserve nationally financed 
public  investment  and  ensure  the  effective  absorption  of  Recovery  and  Resilience 
Facility  grants  and  other  EU  funds,  in  particular  to  foster  the  green  and  digital 
transitions.  According  to  the  Commission  Spring  2024  Forecast,  nationally  financed 
public investment is projected to decrease to 3.3% of GDP in 2024 from 3.5% of GDP 
in  2023.  This  is  due  to  exceptionally  high  investment  in  2023  for  infrastructure, 
including  for  defence  and  security.  In  comparison,  nationally  financed  public 
investment  was  2.8%  of  GDP  on  average  over  the  2019-2022  period.  Taking  into 
account  these  additional  factors,  public  investment  in  2024  is  assessed  as  respecting 
the Council recommendation. In turn, public expenditure financed from revenues from 
EU funds, including Recovery and Resilience Facility grants, is expected to increase to 
1.8% of GDP in 2024 (from 1.2% of GDP in 2023). 

(17)  Based on policy measures known at the cut-off date of the forecast and on a no-policy-
change  assumption,  the  Commission  Spring  2024  Forecast  projects  a  government 
deficit  of  2.2%  of  GDP  in  2025.  The  increase  of  the  deficit  in  2025  mainly  reflects 
increasing social spending due to the indexation of pensions and social benefits, while 
revenues are projected to remain stable as a percentage of GDP: the projected increase 
in  revenues  from  social  contributions  and  indirect  taxes  will  be  counter-balanced  by 
decreasing  revenues  from  corporate  income  taxes  due  to  the  phasing-out  of  the 
“temporary solidarity contribution” currently levied on banks, as well as the projected 
decrease in interest income as the government plans to reduce its cash deposits at the 
central bank. The general government debt-to-GDP ratio is set to increase to 41.6% by 
the end of 2025, being pushed up by the increasing deficit. 

(18)  Lithuania’s tax revenue as a share of GDP increased in 2023 but is significantly below 
the EU’s average. This limits the funding available for public spending on healthcare, 
social protection and general  public services.  In  2022, revenues from property taxes, 
which  are  among  the  taxes  least  detrimental  to  growth,  amounted  to  only  0.3%  of 
GDP, around seven times lower than the EU average. Lithuania collected less than half 
of  the  EU  average  from  capital  taxes  (as  a  share  of  GDP),  has  some  of  the  lowest 
transport taxes in the EU and is one of the few Member States without an annual car 
tax.  Public  spending  on  social  protection  increased  in  2023,  but  is  still  significantly 
below the EU average. This translates into relatively low levels of social benefits and 
limited  coverage,  with  old-age  pensions  among  the  lowest  in  the  EU  relative  to 
employment  incomes.  Spending  on  general  public  services  is  particularly  low, 
receiving  less  than  half  the  funding  (as  a  percentage  of  GDP)  of  the  EU  average. 
Inadequate financial resources for healthcare result  in high levels of unmet needs for 
patients  and  in  particular  for  low-income  groups,  a  strong  reliance  on  out-of-pocket 
payments  and  the  inability  to  offer  competitive  salaries  and  conditions  to  healthcare 
professionals.  

17 

The figure represents the level of the annual budgetary cost of those measures, including revenue and 
expenditure and, where applicable, net of the revenue from taxes on windfall profits of energy suppliers. 

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(19) 

In accordance with Article 19(3), point (b), and Annex V, criterion 2.2 of Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. These are expected 
to  help  effectively  address  all  or  a  significant  subset  of  challenges  identified  in  the 
relevant  country-specific  recommendations.  Within  this  tight  timeframe,  proceeding 
swiftly  with  the  effective  implementation  of  the  plan,  including  the  REPowerEU 
chapter, is essential to boost Lithuania’s long-term competitiveness through the green 
and digital transition, while ensuring social fairness. To deliver on the commitments of 
the plan by August 2026, it is essential for Lithuania to continue the implementation of 
reforms  and  investments  by  addressing  emerging  delays,  including  most  notably  the 
tax  reform.  The  systematic  involvement  of  local  and  regional  authorities,  social 
partners, civil society and other relevant stakeholders remains essential to ensure broad 
ownership for the successful implementation of the recovery and resilience plan.  

(20)  As  part  of  the  mid-term  review  of  the  cohesion  policy  funds,  in  accordance  with 
Article 18 of Regulation 2021/1060, Lithuania is required to review each programme 
by March 2025, taking into account,  among other things, the challenges identified in 
the 2024 country-specific recommendations, as well as its national energy and climate 
plan.  This  review  forms  the  basis  for  the  definitive  allocation  of  the  EU  funding 
included  in  each  programme.  While  Lithuania  has  made  progress  in  implementing 
cohesion  policy  and  the  European  Pillar  of  Social  Rights,  challenges  remain,  and 
significant  regional  disparities  persist  between  the  capital  region  and  the  rest  of 
Lithuania 
indicators. 
Accelerating  the  implementation  of  the  cohesion  policy  programmes  is  crucial.  The 
priorities  agreed  in  the  programmes  remain  relevant.  It  is  important  to  continue  to 
address  regional  disparities  while  focusing  on  counties  that  are  lagging  behind. 
Improving  the  quality  and  access  to  education  (including  by  implementing  the 
European  Child  Guarantee),  social  and  health  services,  remains  relevant.  Lithuania 
could  also  make  use  of  the  Strategic  Technologies  for  Europe  Platform  initiative  to 
support the transformation of industry through the development and manufacturing of 
high  value-added  digital  and  deep-tech  innovation  as  well  as  clean  and  resource-
efficient technologies  and biotechnologies, including  in  the area of defence  and dual 
use. 

terms  of  economic  activity, 

investments  and  social 

in 

(21)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan  and  other  EU  funds,  Lithuania  faces  several  additional  challenges  related  to 
health and pension systems, competitiveness, public services, as well as environment 
and resource management.  

(22)  The range of preventive, early diagnostic and primary level care services is limited in 
Lithuania, and there is a lack of appropriate competencies within primary care teams. 
As  a  result,  the  level  of  preventable  and  treatable  mortality  remains  high.  This  is 
influenced  by  weaknesses  in  prevention  interventions,  healthcare  screening  and 
treatment delivery, but also behavioural risk factors. Health spending continues to be 
among the lowest in the EU (only 68.6% of it was publicly funded in 2021). Lithuania 
is  beginning  to  take  legislative  action  and  deploy  investments  to  strengthen  primary 
and preventive care, but the results have not yet materialised.  

(23)  Even though the social benefits and old-age pensions have been increasing on average 
in recent years, the capability of the tax-benefit system to alleviate poverty (20.9% vs 
EU  16.5%)  and  income  inequality  (S80/S20  ratio  6.39  vs  EU  4.74)  in  Lithuania 
remains  insufficient.  Old-age  pension  adequacy  in  relation  to  pre-retirement  income 
has  deteriorated  and  remains  critically  low.  In  2022  (the  latest  available  data),  the 

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median disposable income of older people (65 years or older) constituted 65% of the 
pre-retirement  median18,  15  percentage  points  lower  than  the  EU  average.  The  latter 
gap  between  the  pre-retirement  and  post-retirement  income  has  been  widening  since 
2014. The aggregate replacement rate for old-age pensions19, which measures the size 
of pensions as a share of pre-retirement salaries before taxes, was the lowest in the EU 
in  2022. Although  the average pension paid  from  the state social insurance fund has 
increased significantly (from EUR 277 in 2017 to EUR 539 in 2023), it still remains 
below the poverty threshold (EUR 564 in 2023). The low overall adequacy of pensions 
is driving up old-age poverty. In 2022, the at-risk-of-poverty rate of older people was 
one  of  the  highest  in  the  EU  (Lithuania  39.5%  vs  EU  17.3%).  Despite  progress  in 
recent years, energy poverty remains among the highest in the EU. Addressing these 
challenges  would  also  contribute  to  supporting  upward  social  convergence,  in  line 
with the Commission services’ second-stage country analysis based on the features of 
the Social Convergence Framework20. 

(24)  Regional  disparities  persist  in  Lithuania,  exacerbated  by  negative  demographic 
developments. Lithuania is experiencing a significantly larger urban-rural gap for the 
risk  of  poverty  or  social  exclusion  compared  to  the  EU  average  (10.7  percentage 
points vs 0.4 percentage points in 2022, computed as the difference in the share of the 
population). For smaller and more remote municipalities, it is becoming increasingly 
difficult  to  provide  access  to  quality  healthcare,  education,  social  services,  transport, 
energy, water supplies and other public services in an efficient manner, and to speed 
up economic development. The municipalities lack cooperation to pool expertise and 
investments  in  order  to  scale  up  and  improve  efficiency  and  effectiveness  in  the 
provision  of  public  services.  A  fragmented  and  unevenly  developed  public  transport 
system,  the  lack  of  internal  connectivity  and  intermodality21,  trip  planning  and  other 
basic passenger services hinder access to jobs and public services, especially in remote 
and rural areas, contributing to regional disparities. Lithuania has the least developed 
and least used public transport network in the EU, with only 5.3% of passenger travel 
being  carried  out  on  public  transport,  including  0.9%  by  train.  Lithuania  has 
significant  scope  to  improve  the  coordination  of  its  public  transport  system  both  at 
regional and central level. 

(25)  Lithuania  has  been  experiencing  limited  productivity  growth  partly  due  to  skills 
mismatches. Although the country has one of the highest tertiary attainment rates, the 
scarcity  of  skilled  staff  is  a  major  obstacle  to  long-term  investment  for  72%  of 
Lithuanian firms, while only 47% of college graduates find jobs that match their level 
of education. The involvement of social partners in developing study programmes and 
the quality control of higher education study programmes remain weak. The network 
of  higher  education  institutions  has  not  been  adapted  to  the  dwindling  number  of 
students  and will face further pressures once a new student admission system  comes 
into  force  this  year.  While  Lithuania  has  planned  several  college  reorganisation 
projects,  further  efforts  are  needed  to  increase  the  efficiency  of  the  higher  education 
network and consolidate the fragmented research system. 

18 
19 

20 
21 

Disposable median income of the 55-64 age category. 
The indicator is defined as the ratio of the median individual gross pension of the 65-74 age category 
relative  to  the  median  individual  gross  earnings  of  the  50-59  age  category,  excluding  other  social 
benefits. 
SWD(2024)132 final. 
A  characteristic  of  a  transport  system  whereby  at  least  two  different  modes  are  used  in  an  integrated 
manner in order to complete a door-to-door transport sequence. 

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(26)  Lithuania  lags  behind  the  EU  average  on  different  innovation  indicators  such  as 
research  and  innovation  (R&I)  intensity,  public-private  partnerships  and  private 
investment  in R&I.  Public R&I expenditure  amounted to 0.53% of GDP in  2022, its 
lowest  level  since 2007.  Complex rules  limit  access  to  public R&I support measures 
for  academia  and  business.  Private  investment  in  R&I  has  stagnated  in  recent  years 
and is three times lower than the EU average. This is aggravated by restricted access to 
finance  hindering  the  growth  of  innovative  firms,  in  particular  small  and  medium-
sized enterprises, which face limited availability of alternative funding sources.  

(27)  Lithuania’s  economy,  and  particularly  its  industry,  is  considerably  less  efficient  at 
using  materials  to  produce  wealth  than  the  EU  average.  Resource  productivity  has 
remained consistently below the EU average since 2018, marked by a higher material 
footprint. Lithuania’s circular material use rate was three times below the EU average 
in  2022  (4.1%  compared  to  11.5%)  and  has  shown  no  signs  of  improvement  since 
2018. This means that approximately 96% of all materials are not reused in Lithuania, 
indicating considerable scope to improve the fragmented waste sorting and recycling 
system  and  promote  the  use  of  secondary  materials  for  value  creation.  Moreover, 
three-quarters of the surface area of Lithuania’s building stock was built before 1992, 
resulting  in  poor  energy  efficiency  and  higher  energy  consumption  (and  energy 
poverty).  Improving  resource  productivity  can  reduce  dependency  on  volatile  raw 
material markets, lower production costs and therefore boost competitiveness through 
efficiency  gains,  while  also  helping  to  minimise  the  negative  impacts  on  the 
environment.  At  the  same  time,  two-thirds  of  the  habitats  protected  under  EU 
legislation  are  in  an  unfavourable  conservation  status,  while  only  half  of  all  surface 
water  bodies  achieve  good  ecological  status.  Lithuania  has  experienced  a  significant 
loss  of  biodiversity  in  agricultural  landscapes.  This  is  exemplified  by  a  decline  by 
almost  half  of  the  farmland  bird  population  over  2000-2020.  Moreover,  the 
agricultural sector is the second largest emitter of greenhouse gases in  Lithuania and 
has  seen  its  emissions  grow  since  2005.  Overall,  the  environmental  investment  gap 
was  estimated  at  2.2%  of  GDP  in  Lithuania  over  2014-2020,  well  above  the  EU 
average of 0.8%. As such, there is still scope to further align agricultural practices with 
environmental objectives. 

(28) 

In view of the close interlinkages between the economies of euro area Member States 
and of their collective contribution to the functioning of the Economic and Monetary 
Union,  in  2024  the  Council  recommended  that  the  euro  area  Member  States  take 
action,  including  through  their  recovery  and  resilience  plans,  to  implement  the 
recommendation  on 
the  euro  area.  For  Lithuania, 
recommendations  (1),  (2),  (3)  and  (4)  help  implement  the  first,  second,  third  and 
fourth euro area recommendations. 

the  economic  policy  of 

HEREBY RECOMMENDS that Lithuania take action in 2024 and 2025 to:  

1. 

22 

Submit  the  medium-term  fiscal-structural  plan  in  a  timely  manner.  In  line  with  the 
requirements  of  the  reformed  Stability  and  Growth  Pact,  limit  the  growth  in  net 
expenditure22  in  2025 to  a rate  consistent  with  maintaining  the general  government 
deficit  below  the  3%  of  GDP  Treaty  reference  value  and  keeping  the  general 

According  to  Article  2(2)  of  Regulation  (EU)  2024/1263,  ‘net  expenditure’  means  government 
expenditure net of interest expenditure, discretionary revenue measures, expenditure on programmes of 
the  Union  fully  matched  by  revenue  from  Union  funds,  national  expenditure  on  co-financing  of 
programmes funded by the Union, cyclical elements of unemployment benefit expenditure, and one-offs 
and other temporary measures. 

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2. 

3. 

4. 

government  debt  at  a  prudent  level  over  the  medium  term.  Provide  adequate 
financing for healthcare, social protection and general public services.  

Address emerging delays to allow for continued swift and effective implementation 
of  the  recovery  and  resilience  plan,  including  the  REPowerEU  chapter,  ensuring 
the 
completion  of  reforms  and 
implementation  of  cohesion  policy  programmes.  In  the  context  of  their  mid-term 
review continue focusing on the agreed priorities, while considering the opportunities 
provided  by  the  Strategic  Technologies  for  Europe  Platform  initiative  to  improve 
competitiveness.  

investments  by  August  2026.  Accelerate 

Improve  health  outcomes  and  the  resilience  of  the  health  system  by  strengthening 
primary  care  and  expanding  preventive  care.  Increase  the  adequacy  of  old-age 
pensions,  while  maintaining  the  sustainability  of  the  pension  system.  Address 
regional  disparities  by  promoting  cooperation  among  municipalities  in  improving 
access to public services, including public transport. 

Address  skills  mismatches  by  improving  the  labour  market  relevance  of  higher 
education. Facilitate private investment in research and innovation. Step up resource 
productivity to progress towards a circular economy.  

Done at Brussels, 

For the Council 
The President 

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