Lithuania

VII - Six-Pack

The ‘Six-Pack’ is a package of six legislative measures (five regulations and one directive) improving the Economic governance in the EU. The Commission made the original proposals in September 2010. After negotiations between the Council and the European Parliament, the package was adopted in November 2011 and entered into force on December 13, 2011. Part of the ‘Six-Pack’ measures applies only to the Eurozone member states (see the individual titles below).        
The ‘Six-Pack’ measures reinforce the Stability and Growth Pact (SGP), among others by introducing a new Macroeconomic Imbalances Procedure, new sanctions (for Eurozone member states) and reversed qualified majority voting. Also, there is more attention for the debt-criterion.
(
http://ec.europa.eu/economy_finance/economic_governance/index_en.htm)

Negotiation
VII.1
What positions did Lithuania adopt in the negotiation of the ‘Six-Pack’, in particular in relation to the implications of the ‘Six-Pack’ for (budgetary) sovereignty, constitutional law
, socio-economic fundamental rights, and the budgetary process?

As the information on Lithuania’s negotiating position is not publicly available, the answer to this question is based on the reply of the Ministry of Finance to my request to provide information on the issues under the Law on the Right to Obtain Information from State and Municipal Institutions. The Ministry replied via email on 7 September 2015.[1] The Ministry only provided a summary of its positions, which did not touch on the issues identified above. On this basis it is assumed that during the negotiations Lithuania did not raise any concerns with respect to the issue of the implications of the ‘Six-Pack’ for budgetary sovereignty, constitutional law, socio-economic fundamental rights or the budgetary process. Lithuania supported the proposal to impose financial sanctions on the eurozone Member States which fail to ensure budgetary discipline as prescribed by the SGP.

Directive 2011/85/EU       
Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States

Implementation
VII.2
What measures are being taken to implement Directive 2011/85/EU on requirements for budgetary frameworks (required before 31 December 2013, article 15 Directive 2011/85/EU)?

The main measure implementing Directive 2011/85 was an amendment of the Law on Budget Structure, which is described in more detail under Question II.[2] The amending Law was adopted on 16 October 2012. In order to implement the directive, a number of other amendments were also made to the Law on Fiscal Discipline,[3] the Law on Budget Structure of the Social Security Fund[4] and three regulatory instruments adopted by the Ministry of Finance.[5]

The Law on the Budget Structure was supplemented with a new section VI governing the mechanism of surveillance. The competences concerning economic development scenario were given to the Ministry of Finance, whereas the Bank of Lithuania was allocated the task of reporting on the impact of the macrofiscal measures on consumer confidence, price and fiscal stability. 

Implementation difficulties 
VII.3
What political/legal difficulties
did Lithuania encounter in the implementation process, in particular in relation to implications of the directive for (budgetary) sovereignty, constitutional law and the budgetary process?

No difficulties were encountered. Only one member of parliament, Julius Veselka, a member of the Order and Justice Party, raised his concern that it is not correct to assume that EU bureaucrats know better how to decide a fiscal situation, and it is also incorrect to hand in the right to decide on these issues to the accountants of the Ministry of Finance assuming that they know better. He cited Gerhard Schröder on the point that it is wrong to exclude the means which may enhance economic growth, and invited ‘true lithuanians’ to vote against the proposal. The Law on Budget Structure was adopted with 62 votes in favour, 2 against and 21 abstentions. The support came mostly from the ruling coalition (41 votes) and 11 socialdemocrats. 6 abstentions and both objections came from the Order and Justice Party. Apart from the quoted opinion of one of its members, the Party did not make any statement explaining its position. A further 6 abstentions came from the Social Democratic party, 5 from the group of the independent members and 4 from the Labour Party.

Macroeconomic and budgetary forecasts        
VII.4
What institution will be responsible for producing macroeconomic and budgetary forecasts (article 4(5) Directive 2011/85/EU)? What institution will conduct an unbiased and comprehensive evaluation of these forecasts (article 4(6) Directive 2011/85/EU)?

The institution responsible for submitting the macroeconomic and budgetary forecasts is the Ministry of Finance (Art. 8(5) of the Law on Budget Structure). Specifically, the function of producing macroeconomic and budgetary forecasts is performed by the Ministry’s Department of fiscal policy.[6]  

Art. 4(1) of the Directive is implemented by an amendment of Art. 17 (2) of the Law on Budget Structure.[7] It lists the documents that the Ministry of Finance needs to take into consideration when drafting the Law on Fiscal Indicators of the State and the Municipal Budgets. The documents include the Government Programme, the Convergence/Stability programme of Lithuania, the State Progress Strategy,[8] National Reform Programme and other documents of strategic planning, the Law on the Budget Structure, the Law on Fiscal Discipline, the medium term economic development scenario, strategic documents of EU financial support, strategic plans of the appropriations managers, preliminary fiscal indicators of the state and municipal budgets, approved by the Government.

Art. 4(5) of the Directive was implemented by amending arts. 8 and 11 of the Law on Budget Structure. Art. 8 specifies that the methodology of drafting the budget and its implementation is managed by the Ministry of Finance. Under Art. 11 of the Law, the information about the drafting, adoption and execution as well as assessment and surveillance of the budget is public, except for the information which constitutes state secrets. Art. 11 (2) specifies that this information is published at the internet site of the Ministry of Finance.[9]

The table of implementation of the Directive also refers to Art. 17 of the Law of Budget Structure, which provides that the Law on the Fiscal Indicators of the State and Municipal Budgets is drafted by the Ministry of Finance.[10] In addition, point 7 of the Government’s regulation governing the functions of the Department of Fiscal policy was supplemented with a part 4, which specifies that the Department is under a duty to prepare the central medium term scenario, which is necessary for drafting the Law on the Fiscal Indicators of the State and Municipal Budget and other documents.

With respect to the requirement to conduct an unbiased and independent evaluation under Art. 4(6) of the Directive, the Law on Budget Structure was supplemented with Art. 37 (5), specifying that the final evaluation of the macroeconomic and budgetary planning would also be done by the Ministry of Finance. It provides for an obligation of the Ministry of Finance to take measures in order to avoid excessive inaccuracies. Under this provision excessive inaccuracies are established if they are observed at least for the duration of four consecutive years, given that these inaccuracies have an impact on the economic development scenario and their causes are not related to changes of circumstances or methodology of planning. If such inaccuracies are established, the Law imposes a requirement on the Ministry of Finance to take steps to remove the bias and inform the public of the bias. The provision requires making public the results of this evaluation. These results are to be taken into consideration when drafting other scenarios of economic development and the plans of budgetary revenue.

Fiscal Council   
VII.5
Does Lithuania have in place an independent Fiscal Council (article 6(1) Directive 2011/85/EU: ‘independent bodies or bodies endowed with functional autonomy vis-à-vis the fiscal authorities of the Member States’)? What are its main characteristics? Does Lithuania have to create (or adapt) a Fiscal Council in order to implement Directive 2011/85/EU?

The functions of monitoring the compliance with the eurocrisis law are conducted by the National State Audit Office. Its functional autonomy derives from the Constitution (1992) and the Law on National State Audit Office (No. I-907, 30 May 1995).

The table of the implementation of the Directive,[11] which demonstrates the level of implementation of the directive, identified the National Audit Office as an independent Fiscal Council within the meaning of Art. 6(1) of the Directive 2011/85. However, the implementing measures were taken only subsequent to the ratification of the Fiscal Compact. The major implementing legislation was the Constitutional Law on the Implementation of the Fiscal Treaty, accompanied with the amendments of the Law on National Audit Office, made on 6 November 2014. Both entered into force on 1 January 2015.[12]

In general, the powers of the National Audit Office to control the execution of the budget are constitutional (Art. 134 Constitution). The Constitution defines that the term of office of an Auditor General is 5 years and that he/she is appointed by the Seimas upon the recommendation of the President of the Republic. The Constitution also requires the Auditor General to present a report to the Seimas on the annual execution of the State budget. Under Art. 173 of the Statute of the Seimas the Auditor General also presents a report on the draft Budget.

The specific role of the National Audit Office in the fiscal surveillance was implemented only by the Constitutional Law on the Implementation of the Fiscal Treaty of 2014. Art. 9 of this Law addresses the independence of the Fiscal Council and provides for its right to receive data. Art. 9(1) specifies that the officials of the monitoring authority must not accept instructions from any other institution and person and that state institutions and other persons must respect the independence of the [monitoring authority]. Under Art. 9(2) the Bank of Lithuania is under a duty to present its macroeconomic forecasts each time they are updated, but not less frequently than twice per calendar year.

Under Art. 9(3) the monitoring authority has a right to hire independent Lithuanian and foreign experts.

Art. 9(6) of the Law on the National Audit Office provides for the following deadlines to present the Office’s reports:

  1. within 30 working days the report on achievement of the structural impetus target, in case of failure to achieve it – the report on the validity of reasons and adequacy of measures to achieve it;
  2. within 20 working days on the government’s proposal to amend the Law on Fiscal Indicators of the State and Municipal Budgets, a report on implementation of the structural impetus target, and the need of additional measures to achieve it.
  3. within 7 work days after a public presentation by the Government of an economic development scenario a report affirming it.
  4. within 7 working days after the public presentation of the economic development scenario by the Government a report on the presence of exceptional circumstances within the meaning of Council Regulation No. 1466/97.
  5. within 15 working days after the Government’s proposal of the guidelines on the structural impetus target and measures to achieve it a report to the Seimas on compliance with the Fiscal Compact.

Regulation No 1176/2011 on the prevention and correction of macroeconomic imbalances 
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32011R1176:EN:NOT)

MEIP difficulties       
VII.6
What political/legal difficulties
did Lithuania encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process?

The answer of the Ministry of Finance to this particular question shows that there were no difficulties on this issue. During the negotiations Lithuania was in favour of the provisions of the regulation. However, it considered it important that the indicators of imbalance were analyzed in more detail, therefore it insisted on presentation of an economic analysis with the scoreboard. Lithuania considered that a detailed analysis of the indicators might ensure that the Commission initiated any procedure only after a careful analysis of the deviations, and in view of eg specific circumstances of the states that are catching up.[13]

Regulation No 1175/2011 on strengthening budgetary surveillance positions    
(http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1997R1466:20111213:EN:PDF)

MTO procedure
VII.7
What changes to the rules on the budgetary process are made to accommodate the amended Medium-term Budgetary Objective (MTO) Procedure?

Under the amended Art. 19 (1) (5) of Law on Budget Structure if there is a deviation from the three-year planning indicators approved by the Seimas, the government must present its explanation on how new priorities of economic policy are reflected in the change.

Under Art. 19 (2) (1) within 10 working days after submitting the draft Law on Fiscal Indicators of State and Municipal Budgets to the Seimas the Government is under a duty to present to it:

  1. the newest opinion of the EU Council on the Stability program, and, if Lithuania is in the excessive deficit procedure, the recommendations of the EU Council addressed to Lithuania on corrective measures.
  2. The Minister of Finance must present the Government’s conclusions with respect to the necessity to implement the recommendations and (or) opinion of the EU Council.
  3. The Government’s list of suggested measures in order to implement the recommendations and (or) opinions of the EU Council.
  4. Medium term public sector balance indicators which implement Lithuania’s obligations to the EU or seek to attain public sector surplus.

Under Art. 20 (6) of the Law on Budget Structure, Seimas is under a duty to ‘assess’ [Lith. įvertina] the latest valid recommendations and opinion of the EU Council on Lithuania’s stability (convergence) program.

European semester  
VII.8
What changes have to be made to the rules and practices on the national budgetary timeline to implement the new rules on a European Semester for economic policy coordination (section 1-A, article 2-a consolidated Regulation 1466/97)?

The new rules for economic policy coordination did not have an effect on the national budgetary timeline.

MTO difficulties        
VII.9
What political/legal difficulties
did Lithuania encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

No difficulties were encountered. All amendments were generally perceived as concerning Lithuania only indirectly, as the Lithuanian institutions viewed themselved doing well in balancing the budget. It was also assumed that these provisions would not affect Lithuania, as the rules were there only to ensure that the state budget does not become a means of gaining political influence by unjustifiably increasing budgetary expenditure. [Also see question IX.2]

Respect MTO       
VII.10
How is respect of the Medium-term Budgetary Objective included in the national budgetary framework (section 1A, article 2a consolidated Regulation 1466/97)?

The Constitutional Law on the Implementation of the Fiscal Treaty of 2014 provides that the medium term objective must be established by 15 March by the act of the Seimas, for a period which should not exceed three years (Art.5 Constitutional Law on the Implementation of the Fiscal Treaty). The Law further requires that the MTO should either be a surplus budget or should not exceed 0.5 percent of the structural public sector deficit. If the ratio of the public sector debt and GDP is less than 60 percent and the risk of longterm sustainability of finance is low, the MTO should be either a surplus budget or a deficit not exceeding 1 percent GDP at current prices.

So far the Government has not yet adopted the necessary legislation implementing the procedure of adoption of the MTO by the Seimas. The MTO so far has been set by the Government without a formal regulation of the procedure for its adoption. Also, there is no legislation providing for an automatic correction mechanism in the Lithuanian system of fiscal discipline (see also question IX.1).[14]

Current MTO      
VII.11
What is Lithuania’s current Medium-term Budgetary Objective (section 1A, article 2a consolidated Regulation 1466/97)? When will it be revised?

The Constitutional Law on the Implementation of the Fiscal Treaty, which entered into force on 1 January 2015, defines that Lithuania’s medium-term objective is not higher than 1 % of GDP in structural deficit, or the one that is very close to this value at the time when the results are assessed.

However, so far there is no legislation implementing this provision. On 22 January 2015 the Ministry of Finance submitted its proposal on a Resolution of the Seimas setting the Medium-term budgetary objective of 0.5 percent of GDP in structural deficit for 2015-2017.[15] The draft was registered but was not considered by the Seimas. On 21 September 2015 the Ministry of Finance again submitted a draft proposal for a resolution of the Seimas which essentially repeats the provision of the Constitutional Law on the Implementation of the Fiscal Treaty, ie it provides that Lithuania’s MTO is no higher than 1 per cent of GDP in structural deficit for 2016-2018.[16] Adoption is still pending.

The last time that the Government revised the MTO was on 28 October 2014, when it postponed the objective to attain a budget surplus to 2017.[17] It did so in its regulation presenting its report on compliance of the draft Law on the Fiscal Indicators of the State and Municipal Budgets with the recommendation of the Council of the EU. The Government set the following MTOs: 1,2 percent GDP structural deficit in 2015, 0,5 percent GDP structural balance in 2016, and 0,2 percent GDP surplus in 2017.

Adoption MTO   
VII.12
By what institution and through what procedure is Lithuania’s Medium-term Budgetary Objective adopted and incorporated in the stability programme (Eurozone, article 3(2)(a) consolidated Regulation 1466/97)?

With respect to the procedure of establishing the MTO the Constitutional Law on the Implementation of the Fiscal Treaty merely provides that the MTO must be established by 15 March of the current year by a legal act of the Seimas, but for a maximum period of three years. However, so far implementing legislation has not been adopted, and the procedure is not regulated. As discussed above under VII.11, the last time the MTO was approved in the Government’s report on compliance of the draft Law on the Fiscal Indicators of the State and Municipal Budgets with the recommendation of the Council of the EU, ie a document which formally would not be expected to be used for this purpose. 

Regulation No 1177/2011 on the excessive deficit procedure
(http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1997R1467:20111213:EN:PDF)

EDP difficulties           
VII.13
What political/legal difficulties
did Lithuania encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

The discussion documents are not generally available to the public, however, the official documents implementing this legislation do not show any discussions demonstrating any difficulties with this issue.

Regulation No 1173/2011 on effective enforcement of budgetary surveillance
(http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32011R1173:EN:NOT)

Sanctions
VII.14
What political/legal difficulties
did Lithuania encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

No difficulties.                                                                                                                                  

General changes        
VII.15
What further changes have to be made to the rules on the budgetary process in order to comply with the Six-Pack rules?

No further changes.

Miscellaneous
VII.16
What other information is relevant with regard to Lithuania and the Six-Pack?

No further information.

 

 

 

 

 

[1] A. Jonušas, „Fw: Dėl informacijos pateikimo“ Message to Loreta Šaltinytė“, 7 September 2015. Email in Lithuanian. Translated by Loreta Šaltinytė.

[2] LR Biudžeto sandaros įstatymo 1,2, 3, 8, 10, 14, 17, 18, 19, 20, 21, 24, 30, 31, 32, 33, 35, 37  straipsnių, penktojo skirsnio pavadinimo pakeitimo, įstatymo papildymo šeštuoju skirsniu ir priedu bei 16 straipsnio pripažinimo netekusiu galios įstatymas, 2012-10-16 Nr. XI-2274, entered into force on 31 October 2012, published  at VŽ, 2012-10-31 No. 126-6323. [Amendment of Arts. 1,2, 3, 8, 10, 14, 17, 18, 19, 20, 21, 24, 30, 31, 32, 33, 35, 37 of the Law on the Budget Structure, amendment of the title of its 5th section, its supplementation with 6th section and invalidity of Art. 16, Law No. XI-2274.]

[3] Lietuvos Respublikos Fiskalinės drausmės įstatymo 3 ir 4 straipsnių pakeitimo įstatymo projektas [Draft Law amending Arts. 3 and 4 of the Law on Fiscal Discipline] Nr. 12-1040-01, 2012-03-29.

[4] Lietuvos Respublikos valstybinio socialinio draudimo fondo biudžeto sandaros įstatymo 2, 4, 6 ir 9 straipsnių pakeitimo įstatymo projektas [Draft Law on amendment of Arts. 2, 4, 6 and 9 of the Law on the Budget of the State Social Security Fund] Nr. 12-1029-01, 2012-03-29.

[5] Lietuvos Respublikos finansų ministro 2004 m. birželio 9 d. įsakymas Nr. 1K-219 ‘dėl Finansų ministerijos rengiamų fiskalinio sektoriaus rodiklių, apibrėžtų Tarptautinio valiutos fondo duomenų platinimo specialiuose standartuose, teikimo nacionaliniam suvestinių duomenų puslapiui „Lietuvos ekonomikos ir finansų duomenys“, Įsakymas Nr. 1K-219, Žin., 2004, Nr. 95-3515; Lietuvos Respublikos finansų ministro 2004 m. gegužės 14 d. įsakymas Nr. 1K-189 “Dėl Valstybės skolos apskaičiavimo taisyklių patvirtinimo“, Įsakymas Nr. 1K-189, Žin., 2004, Nr. 82-2972; 2006, Nr. 72-2722; Lietuvos Respublikos finansų ministro 2011 m. gruodžio 12 d. įsakymas Nr. 1K-407 „Dėl Fiskalinės politikos departamento nuostatų patvirtinimo“.

[6] LR finansų ministro 2011 m. gruodžio 12 d. įsakymas Nr. 1K-407 „Dėl Fiskalinės politikos departamento nuostatų patvirtinimo“ [an order of the Minister of Finance of 12 December 2011 on the rules governing the functions of the department of Fiscal policy].

[7] 2011 m. lapkričio 8 d. Tarybos Direktyvos 2011/85/ES “Dėl reikalavimų valstybių narių biudžeto sistemoms“ ir  Lietuvos Respublikos Biudžeto sandaros įstatymo 1, 2, 3, 8, 10, 14, 17, 18, 19, 20, 21, 24, 30, 31, 32, 33, 35, 37 straipsnių, penktojo skirsnio pavadinimo pakeitimo, įstatymo papildymo šeštuoju skirsniu ir priedu bei 16 straipsnio pripažinimo netekusiu galios įstatymo projekto atitikties lentelė, XIP-4582 2012-06-21 [The table of implementation of the Directive 2011/85/EU  and the Law on Amendment of the [number of articles] of the Law on the Budget Structure].

[8] Currently this is a Lithuania’s progress strategy 2030, approved by Seimas’ decision on 15 May 2012: Seimo nutarimas Dėl valstybės pažangos strategijos „Lietuvos pažangos strategija „Lietuva 2030” patvirtinimo Nr. XI-2015. It is presented as a future vision of Lithuania. The document compiles the ideas of the civil society, active citizens, NGOs on the successful future of Lithuania. Its legal status is not clearly defined.

[9] Amendment of Art. 11 of the Law on Budget Structure of 6 November 2012 No. XI-2318, entered into force on 1 January 2014. Prior to this provision the law required to publish this information at Valstybės žinios (Official Journal). Currently the information relating to the budget is available at http://finmin.lrv.lt/lt/veiklos-sritys/biudzetas . Also, the information on the execution of the budget is published at https://lrvk.lrv.lt/lt/administracine-informacija/biudzeto-vykdymo-ataskaitu-rinkiniai

[10] 2011 m. lapkričio 8 d. Tarybos Direktyvos 2011/85/ES “Dėl reikalavimų valstybių narių biudžeto sistemoms“ ir  Lietuvos Respublikos Biudžeto sandaros įstatymo 1, 2, 3, 8, 10, 14, 17, 18, 19, 20, 21, 24, 30, 31, 32, 33, 35, 37 straipsnių, penktojo skirsnio pavadinimo pakeitimo, įstatymo papildymo šeštuoju skirsniu ir priedu bei 16 straipsnio pripažinimo netekusiu galios įstatymo projekto atitikties lentelė, XIP-4582 2012-06-21 [The table of implementation of the Directive 2011/85/EU  and the law on amendment of the [number of articles] of the Law on the Budget Structure].

[11] 2011 m. lapkričio 8 d. Tarybos Direktyvos 2011/85/ES “Dėl reikalavimų valstybių narių biudžeto sistemoms“ ir  Lietuvos Respublikos Biudžeto sandaros įstatymo 1, 2, 3, 8, 10, 14, 17, 18, 19, 20, 21, 24, 30, 31, 32, 33, 35, 37 straipsnių, penktojo skirsnio pavadinimo pakeitimo, įstatymo papildymo šeštuoju skirsniu ir priedu bei 16 straipsnio pripažinimo netekusiu galios įstatymo projekto atitikties lentelė, XIP-4582 2012-06-21 [The table of implementation of the Directive 2011/85/EU  and the law on amendment of the [named articles] of the Law on the Budget Structure].

[12] Lietuvos Respublikos valstybės kontrolės įstatymo Nr. I-907 2, 4, 6, 9 ir 23 straipsnių pakeitimo įstatymas [Law on the Amendmet of the Law on National Audit Office]  Nr. XII-1291, 2014-11-06, TAR, 2014-11-13, Nr. 2014-16779.

[13] A. Jonušas, „Fw: Dėl informacijos pateikimo“ Message to Loreta Šaltinytė“, 7 September 2015. Email in Lithuanian. Translated by Loreta Šaltinytė.

[14] Išvada dėl Lietuvos Respublikos 2015 metų valstybės biudžeto ir savivaldybių biudžetų finansinių rodiklių patvirtinimo įstatymo projekto, 2014-11-14 Nr. Y-4. [Report of the National Audit Office on the draft Law on Fiscal Indicators of State Budget and Municipal Budgets of 2015], p. 13.

[15] Seimo nutarimo projektas Dėl vidutinio laikotarpio tikslo nustatymo [Draft Seimas’ decision on Medium Term Objective] Nr. 15-508, 2015-01-22.

[16] Seimo nutarimo projektas Dėl vidutinio laikotarpio tikslo nustatymo [Draft  decision of Seimas on Medium Term Objective] nr. 15-10302, 2015-09-21.

[17] Lietuvos Respublikos Vyriausybės 2014-10-28 nutarimas Nr. 1178 “Dėl išvados dėl Lietuvos Respublikos 2015 metų valstybės biudžeto ir savivaldybių biudžetų finansinių rodiklių patvirtinimo įstatymo projekto atitikties Europos Sąjungos Tarybos rekomendacijai“, [Decision of the Government of the Republic of Lithuania No. 1178 on compliance of the draft Law on Fiscal Indicators of State and Municipal Budgets with the recommendation of the Council of the EU], p. 4.