National agreement to combat economic downturn finally signed

After several months of negotiations, the Lithuanian government and the national peak social partner organisations finally signed a national agreement on 28 October 2009. The agreement concerns the application of fundamental measures of social and economic policies during the economic downturn, that is, until the end of 2010. However, several independent trade unions abstained from signing the agreement.

After several months of negotiations, the government of the Republic of Lithuania (Lietuvos Respublikos Vyriausybė, LRV) and the social partners – the national peak trade union and employer organisations – finally signed a national agreement providing for measures to combat the recession on 28 October 2009.

The agreement was signed by the government and, on the trade union side, by the Lithuanian Trade Union Confederation (Lietuvos profesinių sąjungų konfederacija, LPSK), the Lithuanian Labour Federation (Lietuvos darbo federacija, LDF), the Lithuanian Trade Union ‘Solidarumas’ (Lietuvos profesinė sąjunga ‘Solidarumas’, LPS ‘Solidarumas’), the Union of Lithuanian pensioners ‘Bociai’ (Lietuvos pensininkų sąjunga ‘Bočiai’) and the Lithuanian Political Prisoners and Deportees Union (Lietuvos politinių kalinių ir tremtinių sąjunga, LPKTS). On the employer side, the signatories comprised the Chamber of Agriculture of the Republic of Lithuania (Lietuvos Respublikos žemės ūkio rūmai, LRŽŪR), the Lithuanian Confederation of Industrialists (Lietuvos pramonininkų konfederacija, LPK), the Association of Lithuanian Chambers of Commerce, Industry and Crafts (Lietuvos prekybos, pramonės ir amatų rūmų asociacija, LPPARA), the Lithuanian Business Employers’ Confederation (Lietuvos verslo darbdavių konfederacija, LVDK), the Council of Small and Medium-sized Businesses (Smulkaus ir vidutinio verslo taryba), the Investors Forum (Investuotojų forumas, IF) and the Lithuanian Business Confederation – ICC Lithuania (Lietuvos verslo konfederacija, ICC Lietuva).

Economic and administrative commitments

The government commits to not adopting any new decisions concerning an increase in current tax rates, as well as not introducing any new taxes. The only exception in this regard is the increase in the state social insurance contribution rate which has been set in the national agreement, provided that fiscal consolidation measures laid down in the agreement are implemented.

The government also commits to making firm efforts in combating shadow economic activities by focusing on smuggling, tax avoidance and illicit trade.

The national agreement provides for measures aiming to control the government’s finances. This includes a commitment to reduce public administration expenses, recognition of the need for a slight temporary increase in taxes, including the rate of the social insurance contribution up to a maximum of 2%, and a further reduction in the number of civil servants by up to 10%. On the other hand, the national agreement contains an obligation not to reduce the basic amount of salaries for civil servants and budgetary employees.

Furthermore, the government commits to implementing a reform of public institutions, adopting decisions prohibiting the funding of these institutions from the budget with the exception of services such as schools and hospitals. It also plans to put public procurement in order; this includes establishing a centralised public procurement system and increasing transparency of such procedures.

Regarding economic stimulation measures, the government commits to reducing corporate income tax to 15% and for small enterprises to 7.5%. In addition, the government will take prompt measures to liberalise the regulation of territorial planning and civil works, granting soft loans of up to €25,000 from European Union funds to small and medium-sized enterprises (SMEs) and supporting employees of enterprises in a difficult situation by funding public works.

The government will also take additional measures with the aim of simplifying and shortening the procedures for awarding EU support.

With a view to protecting consumer interests in buying energy at lower prices, the government promises to ensure efficient control of energy monopolies. It also commits to creating favourable conditions for using renewable energy resources so that Lithuania would be less dependent on energy imports from foreign countries and would better utilise internal energy sources.

Social commitments

The national agreement stipulates that the government shall plan a reduction of wages and social benefits, taking into account the crucial requirements raised by the trade unions – namely, that any reduction should be made on a solidarity basis, where the most vulnerable groups of society should be affected the least.

Business organisations should undertake initiatives to enhance corporate social responsibility through specific projects in support of informal education and the training of children and young people.

Furthermore, the agreement provides for a differentiated reduction in all pensions and other social benefits based on the fundamental principle that such benefits would be paid on time and that all beneficiaries would share the burden of benefit reduction on a solidarity basis. Again, the impact on the most vulnerable groups of society should be cushioned.

All of these measures are of a temporary nature, covering a two-year period. The agreement also comprises a provision that legislation governing industrial relations shall not be amended without consent of the Tripartite Council of the Republic of Lithuania (Lietuvos Respublikos trišalė taryba, LRTT) during the period until 2011.

In addition, the government undertakes to develop reforms of the state social insurance, healthcare and education systems in 2010.

Commentary

The national agreement will remain in force until the end of 2010. The Prime Minister, Andrius Kubilius, expects to sign a new agreement at that time concerning economic and social policy measures in 2011 and possibly in 2012. The prime minister also mentions the possibility of negotiating a national plan covering the period up until 2020.

Although the national agreement was signed by all national peak employer and trade union organisations, some social partner organisations, mostly those representing independent trade unions, opposed the accord. According to them, it does not have any legal authority and constitutes mere efforts of the government to shift responsibility for decisions onto the shoulders of worker representatives. In addition, the non-signatory trade unions were critical of some specific provisions in the agreement, most notably the intention to reduce pensions and extend the retirement age to 65 years. They also criticised the lack of attention to the problem of unemployment growth.

Inga Blažienė, Institute of Labour and Social Research

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