Lithuania's President Dalia Grybauskaitė has asked the European Commission (EC) to apply a reserve clause for the country to be able to have a bigger deficit of public finance during implementation of a structural reform – the new social model.
Valdis Dombrovskis
© AFP / Scanpix

Grybauskaitė stated the position at a meeting in Vilnius on Friday with EC Vice-President Valdis Dombrovskis in charge of the euro, social dialogue, financial stability, financial services and capital market union.

During the meeting, the head of state also emphasized that the social model being implemented in Lithuania was an important structural reform, which should be subject to a reserve clause in the assessment of Lithuania's fiscal discipline, the President's Office said in a press release.

The compliance of the social model, as a structural reform of the social and labor market, to the Stability and Growth Pact will be assessed by the EC later this spring in the review of Lithuania's 2017 stability program. The pact envisages a reservation for EU countries implementing key structural reforms focused on boosting long-term financial sustainability – their costs are not included in the overview of compliance of the government sector balance and cost increase indexes to EU fiscal discipline rules.

The government sector deficit should stand at 0.7 percent of the gross domestic product (GDP) this year, 0.1 percentage points below the initial draft. The government sector's structural deficit in 2017 should be at about 1.2 percent of the GDP, also 0.1 points less than projected.

Total costs of the social model should be at 0.5 percent of the GDP in 2017. The structural government sector deficit, excluding the social model costs, should be lower than the 2016 deficit this year.

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