Governors who have protected pensions from politicians’ wishes renounce their law before elections Business

The discussions between politicians emerged a few days ago because it may not be possible to increase pensions next year as the coronavirus pandemic plummets in the Lithuanian economy.

The current pension indexation mechanism does not allow pension increases if Lithuania’s gross domestic product (GDP) or wage bill falls.

In June, the Finance Ministry forecast that Lithuania’s GDP would shrink 7 percent this year.

In mid-September, he promises to update the forecast. It should be much more optimistic, as the Lithuanian economy contracted much less in the heat of the pandemic than previously thought.

However, it is not clear what we will see in the forecast, and even the slightest contraction in GDP would prevent an increase in pensions.

In response, the Seimas rulers announced that in the event of a negative forecast for GDP, they would propose to amend the law, thus allowing an increase in pensions even in the event of an economic recession.

“It may be necessary to make some changes to that law for indexing to take place,” 15 minutes Ramūnas Karbauskis, leader of the Union of Greens and Peasants of Lithuania, spoke.

Prime Minister Saulius Skvernelis also announced that pension increase funds are already included in next year’s budget, and said he expected pensions to grow 7 percent. President Gitanas Nausėda called for an 8 percent increase in pensions.

To increase pensions: at least 200 million. euros

Negotiations with the Ministry of Finance on the possibility of increasing pensions take place over several months.

“That political decision to keep indexing is an important victory that we have been chasing all summer.” 15 minutes said the Minister of Social Security and Labor, Linas Kukuraitis.

Blindly following the formula would cause material harm to people, most of whom are at risk of poverty.

According to him, more than 200 million will be allocated for the increase of pensions next year. euros. Currently, the average old-age pension is almost € 380.

The Minister explains that as wages in Lithuania continue to rise during the COVID-19 pandemic, leaving the current level of pensions would further increase the gap between older people.

Meanwhile, the government aims for the average pension to reach half the average salary in the country.

According to L. Kukuraitis, the current situation is special, because there are sufficient funds to increase pensions in the Sodra budget, wage growth does not stop, but no one knows the GDP forecasts yet, so it is planned to change the current mechanism of pension indexation.

“I believe that the principle of indexation and the indexation formula in general is a great achievement and we see that with indexation pensions have grown significantly this period,” said the minister.

On the other hand, I fully understand that if we maintain the current indexing formula and do not look for ways to solve the situation, then the freezing of pensions for one year would affect the social group, which is one of the most excluded in Lithuania. In that case, indexing would not make sense, “he added.

According to L. Kukuraitis, there is also a risk that the Ministry of Finance will forecast a decline in GDP in the fall, but the economy will really grow. It would only be seen next year.

“In that case, it would mean that by blindly following the formula, we would do material harm to people, most of whom are at risk of poverty,” the politician said.

Game rules

Pensions in Lithuania have been indexed since 2018, when the mechanism provided for by law came into force, but this would be the second time in a year and a half that it has been modified.

President G. Nausėda, who began his term last year, presented a number of proposals for this year’s budget, including increasing the indexation ratio for the basic pension. This proposal was accepted.

Naturally, a politician cannot fail to politicize and a nightingale cannot fail.

Financial analyst Marius Dubnikov points out that the indexation of pensions as a mechanism was designed to make pensions grow not based on political populism, but on economic indicators.

“Through the indexing mechanism, we seek to depoliticize the issue of a particularly sensitive part of society. It should have provided for an automatic increase or suspension of pensions depending on the state of the economy. ” 15 minutes said the expert.

“Now, as the elections approach, once again we are seeing a fight for the votes, but it seems natural that a politician cannot stop politicizing and a nightmare cannot fail,” he added.

M. Dubnikov raises the question whether in such a case it would not be necessary to simply abandon the rules of indexation of pensions and determine their amounts annually through political decisions, as was the case before.

“I don’t understand what the heck is indexing if we change it Belekur and Belekaip. This is how we just discredit the idea itself, “said the analyst.

Boguslav Gruževskis, a professor of social policy at Vilnius University, also said that raising pensions during the crisis was wrong.

“Whether in companies or in the public sector, salaries or benefits must be aligned with the capabilities of the system. The current mechanism, where pension increases are linked to economic growth, is justified “, 15 minutes said the expert.

According to him, in the face of the crisis, it is much more important to ensure the stability of Sodra.

“A fund that guarantees people an income in old age is in itself a national value,” Gruzevsky said.

“There are hundreds of ways to guarantee the standard of living of the average Lithuanian pensioner, and unreasonable indexing is simply populism,” he added.

They oppose the verdict of the neskuba

The Seimas opposition is in no rush to answer whether it would support the rulers’ proposal to increase pensions even in the event of an economic recession.

The leaders of the two largest opposition parties say they would like to first see the draft state budget for 2021 to assess the real economic situation in the country.

“The current secrecy of the rulers and the desire to maximize the time before the elections without showing the real situation encourages anxiety and mistrust in both the president and the opposition.” 15 minutes Conservative leader Gabriel Landsberg said.

“We will be able to express our position on the specific wording of the laws when we see a bill of this type,” he added.

Viktorija Čmilytė-Nielsen, leader of the Liberal Movement, also said that he could assess the real possibilities of increasing pensions after evaluating the state budget project, but it is not yet available.

However, the policy assured that he does not like proposals to change the rules of the game in the middle of the party.

“All politicians would always like to give more money to everyone, but that is the essence of such irrational optimism or populism (…). The rulers of this mandate were characterized especially by the tendency to change the rules of the game, regulation very often according to the invention of one or more people ”. 15 minutes the parliamentarian spoke.