There is a feeling of crisis: we are approaching the anti-record

Crisis moods

– You have stated in Seimas that if all the measures of the planned aid package are applied, a budget revision is possible. How should it go

– The consequences of both economic changes must be evaluated. I think we will know the result of the very important second quarter gross domestic product (GDP) in the near future. And it will reflect the so-called coronavirus period, the most critical period. And we will be able to assess the possible consequences or extrapolations before how that VAB can change in the remaining quarters and what impact it may have on budget revenues.

– Obviously, the influence is already there: budget revenues are not collected. This is absolutely obvious, and if those measures are applied in the package, there will be a hole of at least half a trillion euros.

– Definitely yes, but I think we have survived the classic situation in which countercyclical measures are needed that allow us to have a much larger budget deficit than we planned. Most importantly, there are no longer any obstacles to this on the part of the institutions of the European Union. I can mention that the packages from Germany and many other EU countries. (…) We are all aware that we have that crucial moment now that we are doing something or not doing it and allowing the economy to develop on its own. I’m afraid the second path will be quite painful. And it can remind us of 2008-2009.

– But you are still saying that the budget review has yet to be done. In what direction, what costs should be reduced?

– You treat budget revision differently. This should be on both the income and spending side. In this case, we are talking about a possible decrease in income and an increase in expenses. (…) You see how interesting Lithuania is: theoretically we have been able to follow an anti-cyclical policy in the last 30 years. But due to certain peculiarities of political cycles, we did not manage to carry it out in any way, because we spend money quite freely all the time. Whether the economy is rising or falling. And only for the last three years, since 2016, in a pretty good economic period, we’ve had a budget surplus, that’s something we don’t know. And now, with some reservations, we have entered another period of economic development and we have to behave completely differently here.

– Do you say that the budget review will be carried out by reducing the income plan, but increasing the spending plan? Why then does the government not want to review it?

– Ask the government. I will not be held accountable by the government now. (…) We have quite significant measures that have a significant scope, only that they are not implemented, it is not clear and in what way they will be implemented. When we have them, we can say that this is the point, it is time to review the budget.

– What will be the budget deficit then?

– I’m not really going to guess. Those measures are presented as proposals, but regardless of what the Seimas leave behind and how they will be implemented, no one can know today.

– It has presented a package of proposals for almost half a billion euros. These include a reduction in personal income tax (PIT) for half a year, an increase in the amount of tax-free income (NPD), and benefits for all children. The Seimas approves the latter, and from the government side it seems that it does not want to support everything. How do you evaluate the attitude of the Seimas?

– I think we are moving in the right direction. In fact, I will frankly say that when we have discussed both the group’s leader and the Prime Minister on these issues, we will not come to a full agreement. So my decision was this: this issue is so important both ideologically and economically that we leave it to the Seimas to decide. This means that I submit a proposal to the Seimas in this way, despite objections, and the Seimas and the different factions will be able to decide.

This is what we did. That is why today we have a controversy over the GPM rate, but we have no controversy over the NPD. (…) From the point of view of social exclusion, there are attempts to make a decision that is supposedly very valuable for the wealthy. Well, first of all, I don’t know if people who earn 3 or 4 average wages (VMU) are classified as wealthy. Second, as a percentage, people with lower incomes would earn and benefit more from this tax reform than people with higher incomes.

Could you give other analogues: if we promote business, the big owners, then in this case, we also seem to encourage the richest people, right? When we encourage micro-businesses and link them to support, how much did they pay last year? (…) According to our proposal, people in all categories would have much more money in their pockets.

– Why do you not agree with the decision on this proposal?

– On the same topic, which is called ‘benefits for higher-income workers’. You want to focus only on the lowest income groups. But I don’t know, it seems to me that the best way is to combine both motives. Social exclusion is very important and we are addressing this problem through lump sums, through increasing NPD. Meanwhile, the GPM tax rate would affect broader sectors of the population. And it would have a more tangible impact on domestic demand, so we would get a higher amount of consumption tax.

– Perhaps there is not a dramatic decrease in consumption?

– According to consumer expectations and what we are seeing now, it is halfway to the lowest consumer confidence point in 2010. And it is found that there is a fairly elastic correlation between consumption and consumption expectation. If we get to the middle of 2010, it means there is cause for concern.

– What do you mean “halfway”?

– The decline in consumer expectations is now almost half that of mid-2010. (…) But in reality, consumer expectations have not plummeted in recent months, which should concern us.

– The lowest point, is this the most depressing point?

– Yes, rightly so, the anti-registration was in 2010, now we are in a better situation. But the trajectory goes to the bottom.

– And we are approaching the anti-record? Because in the real economy, doesn’t it look like it will move to the real economy?

– Approaching, yes. The only question is, perhaps somehow, can we delay this approach? And here, perhaps, is the big difference between the crisis of 2009-2010 and now: then we increased taxes, we reduced costs. Yes, there was a reason for that at the time, there was much less access to the resources of the European Union (EU) itself. This year, we have many more opportunities, and let’s take advantage of them.

– But okay, the proposal to reduce the GPM for half a year is like a sweet: you eat, you want more, but it deprives you of something. Will it have an effect?

– This is precisely very specific (proposal, aut. P.), with a specific date in the law – December 31. And it is aimed precisely at the period which, in our deep conviction, is critical to the Lithuanian economy: this is the second half of this year.

Test for political parties

– The governors offered benefits of € 200 for the unemployed, pensioners and other vulnerable social groups. It seems you have explained why: to help the socially sensitive. But there are those who believe that this is a desire to convince voters before the election. What do you think of this offer?

– For me, I don’t want to convince myself before the elections, because my election ended last year. Yes, one could reason that in this way the president is on a team with the ruling.
Or you want to look even better by making suggestions. But are we talking about the political treatment of this decision or the economic significance?

– About both.

– First of all, let’s talk about the economic meaning: up to 200 euros becomes considerable sums, let’s add the child’s money, which is an important inflow of money into the economy. How different groups in society will handle this money, we cannot unequivocally affirm it. But that its impact on consumption will be direct, no one will deny it. (…) This will unequivocally increase consumption, even when it is most needed.

– As he said, he does not agree with the authorities in his proposal to reduce the personal income tax (PIT) by 5 points, in the hope that other groups, perhaps the opposition, will support this proposal. What hope did you make for that?

– I will be very interested to see the voting results on how the different groups will vote. It will be very interesting to compare this with your upcoming electoral programs. If you say that the objective of this proposal was to know even better the real and declarative objectives of our parties, which are already waiting for the Seimas elections. Yes, perhaps both for us and for society in general we will have the opportunity to make sure that they are truly social democrats, liberals or that they live up to the names they have.

– Do you expect them to support your proposal?

– I really can’t influence your proposals. As I know, some parties are in favor, others are less in favor. Others link this proposal to a budget review, specifically the National Union. I think that if some kind of forced voting mechanism is not activated in the ruling coalition, but individual members are allowed to vote according to their imaginations, there can also be quite mixed results there. To this day, I cannot guarantee that the result will be positive or negative.

– If only an increase in NPD is approved, will you sign the law?

You see, we would find ourselves in a strange situation here: if the President proposes certain amendments and the law passes, but deviates from his amendment and this vein, tries to restore the amendments, I think it would be a kind of violation of Seimas, not what it would take.

Narkevičius’s fate is in the hands of Tomaševskis

– Your relations with the Seimas are quite tense, you have made it quite clear that you cannot reach an agreement with the rulers to find compromises. (…) So how would you evaluate your relationships with the Seimas?

– Those relationships are quite dynamic, at one point they improve, at another they get worse. But it should be. I would say that (now, aut. P.) There is completely normal and constructive communication. We periodically discuss positions, we meet periodically with the Prime Minister, we discuss all issues very openly. And I would probably say that those relationships are not bad at all.

– Just today you spoke about Mr. Narkevičius again. Possible corruption with a former family friend is suspected. You said today, and I quote, “He cannot participate in your direct activities.” What do you have in mind?

– Look, in terms of time, how much has Mr Narkevičius talked about the affairs of the Ministry of Transport and Communications in the last two weeks and how much about his affairs? I think the percentage will be ruthless: many times he spoke about the affairs of the house, his decisions, the ones he made and raised very serious doubts, ways, everything else. Meanwhile, other ministers … do not need to talk about their personal problems: they can focus on their work and make the decisions that are hired as ministers.

Apparently, there are so many unknowns in Mr. Narkevičius’s activities that he simply cannot work normally anymore, without problems and is constantly attacked, forced to speak on issues that are not directly related to the decisions of the Ministry of Transport.

– But does that mean you have to resign?

– Here I say what I said before: the ball is not on our side. And it should probably be that both the representatives of the ruling Seimas coalition and the head of government finally decide whether the minister’s activities are satisfactory or whether they satisfy all the moral aspects of his activities and make a final decision. Because I don’t think that such a situation is very attractive in terms of elections either.

– And what did the Prime Minister tell you about Minister Narkevičius? What arguments does he make, has he discussed this issue with him?

– Yes, frankly, the key is not even with the Prime Minister, nor with Mr. Karbauskis.

– With what?

– Try to guess.

– Mr. Tomaszewski?

– Try to do an elemental analysis, you will easily determine it. It would be completely difficult to replace this person with another and continue to work calmly, the composition of the coalition would remain the same, relations with the Presidency would be completely different from now. Everything would be fine. But there is a provision, either this minister or no minister. When the question is posed this way, it is simply stagnant and impossible to solve.

– This is the prime minister, how would you agree that the minister cannot work?

– That the Prime Minister himself comment on his position.

– What are you going to do? Will the minister stay that way until the elections?

– Can be. (…) You know it creates a very bad thing. We are beginning to blur the distinction between political and criminal responsibility. Because if everything remains reduced only until it comes out after breaking your arms, then you will no longer be able to carry out your tasks, and everything else will be in order. (…) This is very bad from a democratic point of view, and we have taken a big step backwards, I am forced to say this.

– You have just said that our Government is the hostage of Mr Tomaszewski.

– Call it whatever you want. It is an evaluation of my situation, I expressed it.

– Can’t you see solutions then? Perhaps, how could the president initiate change then?

– And why would the opposition not want to organize such changes? They have that opportunity: the interpellation instrument has not been used, I don’t know why. At first, only after the problems were cleared up was the gathering of opposition signatures. And to my great surprise, I collected 7 or 8 signatures and that’s it. Or maybe that just makes sense? Perhaps it would be an opportunity to ask the minister and analyze his activities in various aspects.

– Why does Mr Tomaszewski think that only this minister can work?

– I really do not want to delve into this situation, I think that Mr. Tomaszewski could be very clear about why he believes that this minister is the most suitable for the position.

I would like to see Vaičiūnas in another post

– There is another pending issue in the government: the issue of the Minister of Economy and Innovation. You said today that you need an Innovation Director. Perhaps it would be enough to appoint a minister in this case?

– We have passed the impasse on this issue, we are talking about two possible options, both related to certain aspects that have not yet been decided. But compared to what was said before, when it was said “or Mr. Savick or none”, we have made progress. Other candidates emerged. There was a reason to speak.

– Are both candidates acceptable to you and the Prime Minister?

– Let’s say yes, one of the candidates would probably be acceptable to both parties, but there is a more complex option.

– Maybe we’ll pick it up.

– Yes, this is an option that would be perfectly acceptable to me. But then you must find a minister in another ministry.

– Are you talking about Mr. Vaičiūnas?

– I am talking about Mr. Vaičiūnas.

– Would you like Mr. Vaičiūnas to be the Minister of Economy and Innovation?

– I would like Mr Vaičiūnas to be the Minister for the Economy and Innovation, a few months before the end of his term.

– And does the Prime Minister agree?

– Let’s say yes. At the moment, probably a lot depends, probably in all cases, on Mr. Vaičiūnas’ self-determination. I encourage you to take this publication.

– Already received an offer?

– No one formally makes an offer until there is human consent, we must respect the person himself.

– Are you still considering it?

– We are in the process of moving from the point of death. But we still can’t talk about what happened as a fact. This young man, with his experience, really established himself as an excellent energy minister. I think he could direct the Ministry of Economy and Innovation, especially since everything is in order in the energy sector.

He is considered an active president.

– During the quarantine part of society you missed, you have probably received questions and criticism, understand, you would like more active participation. How would you behave if there was a second quarantine wave? Would your behavior be the same?

– Look, because of that activity, I don’t know what you’re measuring it for. In my opinion, the best result is achieved when we say that we have successfully treated the coronavirus. We have succeeded, I think so. Activity: As we provide bills, various proposals, perhaps some presidents have not presented as much in three years. (…) Activity should not be measured by how many epithets I run towards a minister or how abruptly I hit the table. But with that job, which is the real job of a politician, legislative initiatives, so to speak, and vetoes. (…)

As a result, I don’t know what I should discuss here. Because I consider myself an active president both in national politics and abroad. The last package, which came from the EU, also shows that we have managed to do a lot in the negotiation process, convincing ourselves that we need an ambitious project. And today we have it.

Errors and gains

– A year has passed since you were elected president, what jobs would you name as the most important? And how you value your work, how you have achieved it. And what mistakes do you see?

– First of all, I would like to see some positive developments in foreign policy. Our relations with Poland are really very well established. We are really active in the EU format, we carry that flag of the Eastern Association, although it has not been easy to carry it lately. As the focus on the Eastern Partnership has decreased, we are trying to increase that focus. It was a very significant and significant NATO meeting in December, when we managed to clearly declare not only the need for NATO for the countries of our region, but also our strong commitment to 2 percent or more of GDP for the financing of the defending.

In domestic politics, yes, I still can’t get out of my skin as an economist. Therefore, we offer a series of economic projects. (…) We veto very important laws for our democracy regarding the electoral cartel. (…) And now, lately, we are seeing an active role for us when making economic and social proposals. And I have to hear from the Seimas that such an active president has been in domestic politics for a long time.

I will not deny it, we also make mistakes. He would admit that J. Narkevičius’s question, if he had deduced from his forehead that such problems would arise in the next six months, would certainly have been much easier. At that time, many of the stories that had recently been released were not known to me by either the Prime Minister or other political actors. The situation was as I have already described: the key was in a person and that person categorically occupied his position, so the alternative was to avoid the formation of the Government. Although it would be legally difficult to do so. Recall that in July last year there was a return of power, not the formation of a new government. That is why the president’s options have been limited.

When it comes to building a governing coalition in the fall, it will be completely different. I can only say one thing: this man will certainly not be a minister for the next four years.