BAKU, Azerbaijan, July 9. At the Economic and Financial Affairs Council (ECOFIN) meeting held today in Brussels, the European Union (EU) finance ministers gave a thumbs up to Lithuania’s fiscal structural plan and the accompanying recommendations, including a crucial exemption that paves the way for increased defense spending, Trend reports.
Fifteen EU member states, including Lithuania, have received encouraging recommendations from the European Commission concerning the national defense exemption—an instrument that allows for temporary overspending beyond EU fiscal limits when focused solely on defense needs.
Lithuania was counseled to comply with the stipulated cap on net
expenditure escalation while concurrently leveraging the national
exemption to enhance defense financing. The Council further
advocated for the nation to secure sufficient fiscal resources for
healthcare infrastructure, social safety nets, and critical public
service provisions. Subsequent advisories encompassed enhancing
fiscal adherence and expanding the tax spectrum by pivoting towards
revenue streams conducive to economic expansion.
“The determinations regarding expenditure thresholds and the
sanctioned defense exemption are crucial as we architect
Lithuania’s fiscal strategy for the forthcoming years,” articulated
Minister of Finance Rimantas Šadžius.
He underscored that the administration's objective is to uphold
fiscal sustainability while constructing a budgetary framework that
underpins enduring economic expansion.
“The defense exemption, combined with additional budget revenues from recently adopted tax legislation and funding from international institutions, offers a balanced mix of tools to meet the need for increased defense investments,” Šadžius added.
According to Lithuania’s newly approved fiscal structural plan, average annual net expenditure growth should not exceed 5.2 percent from 2025 through 2028, with a projected 6.1 percent increase in 2025 alone. During negotiations with the European Commission, the Ministry of Finance successfully secured a higher spending threshold than initially proposed by the Commission.
Among regional peers, Lithuania’s approved net expenditure growth rates are the highest. By comparison, Latvia’s average growth rate for the same period is set at 4.1 percent, Estonia’s at 4.8 percent, and Poland’s at 4.6 percent.
The national defense exemption facilitates Lithuania's capacity
to temporarily surpass the sanctioned expenditure threshold by a
margin of 1.5 percent of GDP during the fiscal years 2025 to 2028,
contingent upon the stipulation that the supplementary financial
resources are earmarked solely for defense-related allocations.
Upon the conclusion of the exemption phase, member states are
mandated to adhere to the EU's fundamental fiscal prudence
regulation, which imposes a ceiling on budgetary deficits at 3
percent of GDP.
Within the EU's revised economic governance paradigm, net
expenditure serves as the principal metric for assessing adherence
to fiscal regulations. Concurrently, member states are obligated to
consistently adhere to the Maastricht convergence criteria
regarding fiscal deficits on a yearly basis.
Through the strategic orchestration and implementation of fiscal
allocations within these broadened parameters, Lithuania endeavors
to secure enduring financial viability extending to 2038—while
simultaneously factoring in prospective demographic dynamics and
escalating expenditures associated with an aging populace.
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