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The government approved the proposed budget for next year. I don’t have to call it anything other than a “painful hangover budget.” The elections ended half a year of uncontrolled and often irrational money squandering, the “party during the plague” ended and the most expensive election campaign (for state money) in Lithuania’s history. Monday has arrived and a painful hangover begins.
Of course, such a hangover will not hurt Saul Skvernelis, but the new head of government. It is the manager. However, the figures compiled by the Ministry of Finance are indisputable: hangovers are such that they cannot be avoided and their consequences cannot be changed; no matter how hard you try, how many pills you don’t drink, your head will still hurt.
This text is not just to criticize the actions of those in power during a pandemic. During the pandemic, the government boldly borrowed and recklessly squandered borrowed funds in all directions, where it was needed to help companies resist the quarantine, where it was a pure election campaign, as it came out with pre-election lump sums.
We can all be glad that our economy weathered the first wave of the pandemic well. However, it is unclear whether this was due more to the viability of our own economy or the fact that the government has recklessly squandered borrowed funds that someone will one day still have to pay back. The crucial question that we still don’t have an answer to is whether it really took so much to spend, so much to borrow, and so much to increase the deficit this year, because I think our economy itself has shown greater viability than anyone could. have predicted. This is an important topic, but should be left for future expert analysis. Not for parliamentary research, but for the analysis of real experts, because every crisis and its management (even the poor ones) is a good lesson for the future.
Is it possible to plan a different future with such a legacy? Unfortunately, it must be said that this is practically impossible. Hangovers are still painful.
You will not change what happened anymore. Therefore, I dedicate this text not to what this government did wrong, but to a better understanding of the consequences. The key question is, how painful will these hangovers be?
In the first place, it is worth highlighting some figures that the government has finally revealed when approving the 2021 budget. Until now, the Government, although it has unilaterally and unconstitutionally increased several expenses, has avoided including it in this year’s budget, so some of this year’s figures that we could only speculate about have been clarified so far. And those figures speak volumes: we finally learned that public debt has risen from around 35% of GDP this year (2019) to 45.6%, and in 2021 to 50.3%. And this is already an inevitable process, as the budget deficit has risen to 8.8% this year and the Government plans to reduce it to 5% next year. A deficit is a matter where expenses exceed income received and that difference must be financed with borrowed funds. Therefore, when the government forecasts a deficit of 5% next year, it is necessary to anticipate the growth of the debt.
Is it possible to plan a different future with such a legacy? Unfortunately, it must be said that this is practically impossible. Hangovers are still painful. It should be noted that the government’s planned reduction of the deficit from almost 9% to 5% in 2021 means a rather brutal “belt tightening”. From my personal memories I can say that during the 2008-2012 crisis, our efforts to reduce the deficit by an average of 3% per year were very painful for both the people and the politicians themselves. Therefore, the budget planned by this government is not just a budget for a “painful hangover”, but also a budget that this government has planned for future governments knowing that it will no longer have to implement such a budget after a lost election.
Is it possible to reduce the deficit without pain? It is possible, but only if budget income miraculously increases and the gap between income and expenses suddenly narrows. But as you know, miracles only happen in fairy tales. It is also possible in another way: suddenly miraculously and radically reducing public spending after the generous increases of the previous government. From experience, I can say that these miracles also happen very hard in real life.
It should be noted that the government’s planned reduction of the deficit from almost 9% to 5% in 2021 means a rather brutal “belt tightening”.
It can be speculated that next year’s deficit is also due to the fact that this year the government has very generously allowed much of the economy to use the expensive system of “artificial respiration” or “pulmonary ventilation.” Only because of this did this business survive. This is good.
However, the question arises whether the government’s planned deficit reduction of almost 4% also means that such a business will already be disconnected from the “artificial respiration” system. And then the natural question arises: is all that business ready to turn off “artificial respiration”? Will it not be the case that someone who is supported by “artificial respiration” seemed quite viable will die faster after disconnecting external support than he will be able to find other support for himself? Similarly, the natural question arises: whether it is possible to continue the same “lung ventilation” procedure for an even longer period, that is, whether the necessary “oxygen” stores still accumulate or whether everything has already been borrowed. during this semester. For a long time and without much prudence. What if the second wave of the pandemic is so painful that you have to go back into quarantine? From such questions, for which there are no clear and comforting answers, the hangover becomes even more painful.
Even worse than a painful hangover is the fact that the past government seems to have been able to “mature” the long-term future of all of us. A different future: with an innovative, digitized and modernized economy.
Even worse than a painful hangover is the fact that the past government seems to have been able to “mature” the long-term future of all of us. A different future: with an innovative, digitized and modernized economy. Because, as required by the European Union, together with the draft budget for next year, the Government must present to the European Commission not only the draft budget for next year, but also a draft plan on how the Recovery Fund will be used created by the EU in Lithuania. It should be remembered that Lithuania expects to receive up to 6,300 million from this fund. of which up to 2,400 million. will be received as non-refundable grants.
The European Union expects these funds to be used prudently and responsibly in all countries; Unfortunately, since the Government prepared such a plan, one can only speculate, because there was no public debate in Lithuania on the use of these unique opportunities. The government answers all questions about future investments by referring to the so-called “DNA Plan for the Future of the Economy”, in which the only thing of value is the modern-sounding name. But the content is completely out of date and not strategic.
The government anticipates that up to 811.1 million of this fund will be received and used next year. euros. This is equivalent to one third of the funds provided to Lithuania by the EU Recovery Fund in the form of non-reimbursable grants. Therefore, in these matters, the plan drawn up by the Government is of special strategic importance: either we will finally use those funds that suddenly arrived in Lithuania with prudence and consideration, or it will be as always: “we wanted better, but we left as usual”.
I am convinced that this will be the main concern of the new Government in budgetary matters: how urgently to develop, for the broad debate next year, a truly strategic investment plan for these billions of the Recovery Fund, so that Lithuania can take advantage this unique opportunity to make real progress. At least in some areas.
All other budget issues will be difficult to change and very painful.
I would like the new government and the whole of Lithuania to survive this hangover left by the former in the least painful way.
And not be tempted to treat a painful hangover at the same time that we are now suffering the painful consequences of spending. Therefore, I would like the future Government to change the budget rules immediately, so that even in the case of the second wave of the pandemic, there would be no temptation to divide millions and billions without the approval of the Seimas and the budget change. Even in the case of an ongoing emergency.
And I would like to keep in mind to the peasants that it is your government that has planned such a drastic budget to tighten its belt. And at the end of this year, he will still have to vote for it, although the peasants, deservedly, are left alone in the opposition.
Andrius Kubilius is a member of the European Parliament, representative of TS-LKD. This text has been published on the Facebook account of A. Kubilius
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