As the BNS reported Lithuania has dropped five places, year-on-year, to rank 36th, on the 2008 global competitiveness scoreboard.

Lithuania has been included in the 55-country list compiled by Swiss-based International Institute for Management Development (IMD) for the second consecutive year.

On the list, Lithuania lags behind Estonia, which ranks 23rd this year, one place below its 2007 position. Yet Lithuania scores better than EU fellows Portugal (37th), Hungary (38th), Bulgaria (39th), Greece (42nd), Poland (44th), Romania (45th) or Italy (46th).

However, Lithuania ranks the second in terms of women executives number and mobile subscribers number per 1,000 population, the third in terms of corporate profit taxation level, the fourth in terms of real GDP growth and short-term interest rates announced by the central bank, and the fifth in terms of patents issued to residents.

On the other hand Mr Marcus Svedberg of the Eastern Capital gave an interview to the alfa.lt on the status of the Lithuanian economy.  Here are few points he made.

Lithuanian economy will not decline as much as that of Latvia’s and Estonia’s because the Lithuanian grew slower.

One of the most important factors for the rising inflation is the growth of the food prices.  The inflation will continue growing and will start going down in the third and the forth quarter.

The State couldn’t completely control the inflation but it could effect it by reducing the state expenditure, freezing growth of the wages, lowering the taxes.  But since Lithuania is entering the pre election period this is impossible.  The next government could do that, since those measures could be best implemented at the beginning of the new government’s term.

Forecasts of 6-7% GDP growth for next few years looks just about right.  However, it is impossible to predict how Ignalina’s closure will effect the economy.

We still invest in the commercial property as offices and wear houses in Lithuania.

The BNS reported that, as Lithuanian diplomats spoke up about attempts launched by some countries to revise agreements reached by four foreign ministers in Vilnius over the negotiations mandate on the European Union (EU) - Russia Strategic Partnership Agreement, Foreign Minister Vaitiekunas repeated that Lithuania is not going to back down on fundamental issues.

Lithuania blocked the commencement of talks with Russia, proposing to include four declarations in the negotiations mandate, i.e. the issue of cut-off oil supply via the Druzhba pipeline, the necessity to deal with frozen conflicts in Georgia and Moldova, cooperation in solving occurrences of Jan. 13th and the Medininkai massacre as well as support for exiled persons, who are returning to the Baltic States.

Foreign ministers of Lithuania, Sweden, Poland and current EU presidency holder Slovenia, decided in a meeting in Vilnius on May 11 to include issues brought up by Lithuania to be included in talks with Russia, however this agreement was not endorsed by ambassadors of EU member states in a meeting Tuesday. Ambassadors plan to continue discussions next week.

A Lithuanian diplomat announced this information to BNS May 14 that;”We eliminate such attempts. If they will continue, the mandate might not be approved by May 26 (GAERC)”.

Following a meeting with Lithuanian President Adamkus on 14 May, Vaitiekunas told the press of having informed the Head-of-State of receiving a few proposals by various countries with regards to the negotiations mandate, and they are currently being considered.

“A wide arsenal of different versions of what shape our answers might take is available, and they are currently being coordinated through diplomatic channels, however, when it comes to the main, primary, fundamental issues of Lithuania’s interests, we are not going to back down. (…) We are risking European solidarity”, the foreign minister asserted.

According to the BNS he also noted that the new proposals are most concerned with the issue of frozen conflicts and added that he can reveal neither who is making the proposals, nor what matter they concern.

“In general terms, I am telling you that yes, the main question under revision, is that of frozen conflicts, a declaration on frozen conflicts. Countries stand on different grounds when it comes to geographical and geopolitical positions. Take the United Kingdom, Spain, France - their interests are different and we are simply defending our interests by assuming this position here and now. The EU will have to go a long way in order to learn how to reflect interests unanimously and speak with one voice”, Vaitiekunas explained, noting that an acceptable compromise will be sought out on the issue.

The BNS writes that the minister also noted that he cannot yet reveal what form Lithuania’s demands should take on in the mandate, and in what phrasing should it appear. The minister said that this would mean having to reveal stances on the negotiations mandate and would therefore make them less efficient.

Source BNS

Lithuania was the sole of 27 EU member states, represented in the European Union’s (EU) General Affairs and External Relations Council’s (GAERC) session in Luxembourg last week to dissent to the proposal to begin talks with Russia over the new partnership agreement.

The countries decided that EU-presidency holder Slovenia’s Foreign Minister Dimitri Rupel arrived to Vilnius to further harmonize stances on the issue.  Amongst those who arrived to Vilnius were the Swedish and Polish Ministers of Foreign affairs.  However, another issue for the Lithuanians was of another importance, expression of support to Georgia.  The plan was that all ministers should visit Tbilisi on Monday and show their support to Georgia.

However, the Lithuanian diplomats had have heard a warning from Slovenian Foreign Minister Dimitri Rupel that he would accompany his Lithuanian, Polish and Swedish colleagues to Georgia only if Lithuania abandoned its proposals to the mandate of strategic talks between the European Union and Russia.  An anonymous Lithuanian diplomat expressed his disappointment by saying “How can one propose such exchange? It is incomprehensible whether the proposal from the European Union’s presiding country Slovenia indicates the entire EU’s stance on Georgia or is it a lame Slovenian proposal aimed at forcing Lithuania to give up its legitimate requirements in the discussion of the negotiating position of the EU-Russian strategic partnership agreement”.

However, after discussion in the Stikliai hotel the Lithuanians claimed that the EU had agreed with all Lithuanian propositions with some amendments.  The Lithuanian FM stated that the EU solidarity exists not only in declarations but also in reality.  Still he remained that the positions will have to be agreed with the other 23 Member States.  The Slovenian MF noted in the press conference that: ‘All Europeans States and the EU Members understand Lithuanian position.  And I can easy tell that I understand the Lithuanian concerns’.  So, what are those demands?

As Lietuvos Rytas daily wrote last week, Lithuania decided not to approve the mandate for the EU-Russia negotiations until this mandate reflects Lithuania’s interests. This was the first time Lithuania has dared to fight for its interests in the EU with such fervour.

Vilnius demands to add to the energy declaration Russia’s commitment to observe the requirements provided for in the Energy Charter Agreement.

Moreover, Lithuania wanted the EU negotiations mandate to include the point that Russia should cooperate more actively in the field of renewing delivery of crude oil via the Friendship (Druzhba) Pipeline. This pipeline was closed in 2006 for “political repairs.”

As the Lithuanian Minister of Foreign affairs noted “Druzhba was cut off without an explanation. (…) We are worried that Russia is creating a precedent. Energy security and creating a precedent are issues of interest to the EU. This is not a bipartite issue. And we believe that the question of a precedent, and of how far one can go in not cooperating with one EU state is important to the entire EU as well. We have an alternative for Druzhba, but not one for gas”.

Lithuania also noted that Russia’s attitude toward its neighbours is related to the security of Lithuania and the entire EU. This is why Lithuania proposes a declaration on Georgia and Moldova.

Moreover, Lithuania would like to have a declaration on legal cooperation, which should promote constructive cooperation in the investigations of the 13 January 1991 events in Vilnius and the 31 July 1991 massacre in Medininkai, as well as of the disappearance of EU citizens in Russia.  There is also an ongoing case of disappearance of Lithuanian businessmen Mr Jucys in Kaliningrad a year ago.

Lithuanian is also seeking to add an additional declaration to the negotiations mandate to compensate for the damages incurred by the persons deported from the occupied Baltic countries. Ensuring such support to the deported persons was one of the international commitments Russia undertook when it joined the Council of Europe.

Lithuania does not impose demands on Russia. It urges the EU to protect Lithuania’s interests, the same way it protects the interests of other EU members.  Lithuania is not trying to change Russia, it is impossible, it simply tries to change the EU attitude towards Russia, in sake of the EU.

The another point is that Lithuania is a Member State, the same as Germany, France, Italy, Cyprus, Greece, Poland or Ireland who are also defending their interests by blocking decision making.  However, Lithuania is standing not only for the ‘meet’ as the Poles did, but for the values of justice.

Lets see how it will go.

Following heated debates, the Lithuanian Seimas recognized Tuesday the independence of Serbia’s break-off nation of Kosovo.

As the BNS reported the opponents to recognition reminded that Lithuania is especially active in supporting Georgia’s quest to maintain control over the separatist Abkhazia and South Ossetia territories, however the country’s stance with regards to Kosovo is completely opposite. “Why don’t Lithuanians want to grant independence to Ossetians and Abkhazians, while they do so with the Kosovo Albanians?” one of the MPs noted.

As the BNS reported the supporters stressed that the Kosovo case is completely an exceptional one, as Serbia had undertaken repressions against its own citizens, which have to be protected by the international community. The others stated that given such animosity between the Serbians and Albanians, there is nothing left other than separating the two sides of the conflict with national borders.

This was a second attempt after a fiasco in April 1, when the Lithuanian Parliament failed to recognise Kosovo.  One of the main reasons behind the failure was that those MP’s who supported the recognition did not participate in the voting and chose to celebrate their colleague’s Sabatauskas birthday instead.

The Vilnius Special Forces units were on alert since 2 am tonight.  The two remaining Soviet statues in the centre of Vilnius were vandalised.  Read full story and see more images of this accident in alfa.lt

I found about it this incident this morning, just before the military parade in Moscow.  Watched all broadcast live on Russia Today.  The Russian commentators only confirmed that the Westerners have a wrong image of the President Medvedev: he will defend Russia’s interests as firmly as the former President Putin.  And by defending it means ‘expanding’ the ‘security’ zone around Russia.

Those who studied the Russian history a bit will understand that Russia suddenly feels a threat when it stops to expand.  At the moment this expansion takes a place not through its tanks but through its banks.  If the Kremlin wished to exhibit the real Russia’s mussel the tanks and the tactical missiles should have been replace by the Gazprom trucks carrying the pipes.  The workers from the oil fields should have replaced the officers and the red flags should have been changed to the blue Gazprom flags.  I am convinced that the new President would have felt much more comfortable observing his ex colleges saluting him.

The new Gazprom ambassadors to the EU such as Mr Schroder, the current Hungarian PM Gyurcsany, PM Berluscony, the ex PM Prodi, the Greek, Bulgarian and the Cyprus leaders should have stood next the President Medvedev.

The commentators kept explaining that this parade is designed for the internal public to foster Russia’s pride and to show that there is a capability to defend the country.  However, it was broadcasted live on the Satellite TV channel.  How local is that!  However, those who know Russia, especially in the Baltic States are not concerned about those tanks too much.  We are members of NATO after all.  We are mostly concerned about the undercover Russian Army, the army of Gazprom, and what its forces doing in the Brussels, and the other Western European capitals.

The incident in Vilnius is disgusting; the hooligans should be caught and punished!  Russia suffered a lot to the extent, which the Russians don’t realise themselves.  The question is from what Russia suffered more, from the WWII or from the Stalin’s regime?  Lithuania suffered much more from the Stalin’s regime, hence the end of the WWII symbolises to us the beginning of another and more bloody war.  The war, which is unknown and took place behind the Iron Curtain.  It should be taken into consideration that Lithuania has lost nearly a 1 million of its population between 1940 and 1953 that is from the beginning for the Soviet occupation until Stalin’s death.  That is one third of its population, the absolutely best third of it!  It is fear to say though that about 200.000 of those were the Jews who perished in Holocaust.

Perhaps we should keep those statues on the Green Bridge to remind us what had happened to our country.  Such reminders should not let us to relax too much in planning our future.  Or better, the Soviet solders’ uniforms on the statues should be upgraded and replaced by the Gazprom uniforms.  And I am very happy that the former President Putin brought back the old Soviet National Anthem and made it to the Russian Anthem.  Every Lithuanian who hears this music feels shivers, that also keeps us alert.  Hence, Welcome to the 21-Century!

As the BNS informed the Lithuanian press is seen as having one of the highest levels of free press among Eastern European and post-Soviet countries and is even ahead of counterparts in some of European Union’s (EU) old-timer countries.

According to the BNS this finding was revealed by the Global Press Freedom Survey 2008 announced by US-based NGO Freedom House, promoting global development of freedom.

BNS pointed out that as shown in the survey, Lithuania together with the Czech Republic share the second and third places ,both countries were rated 18, among Central and Eastern Europe as well as former Soviet Union countries according to freedom of press. Estonia is a leader when it comes to freedom of press in this group of countries, and received the rating of 16 in the report.

The aforementioned countries, together with slightly lower rated Hungary, Latvia, Slovakia, Slovenia and Poland, made it to the ranks of nations, which enjoy free press.

European Union’s will to ingratiate the rotating heads of the Kremlin lies behind EU’s pressure on Lithuania to refrain from vetoing talks with Russia over the new “Partnership and Cooperation Agreement”, a a high-ranking official of the Lithuanian Foreign Ministry said to the BNS agency on April 25.  ”The EU just wants to present the new president Dmitry Medvedev and outgoing Vladimir Putin with a gift, not worrying over who will keep the gift in hand. Russia’s Foreign Minister Sergey Lavrov will arrive to Luxembourg next week to claim the present”.

The BNS said that the diplomat again reminded of the principles of solidarity declared by Brussels and noted that Vilnius wants for EU’s interior policy on issues of energy to be stated in one voice, constructively and based on existing juridical norms. He added that Lithuania’s interest of solving “frozen conflicts” should also not be forgotten.

The Foreign Ministry’s representative mentioned a few issues unacceptable to Lithuania present in the purportedly compromising text declaring commencement of talks with Russia, prepared in a meeting of EU ambassadors in Brussels Thursday and sent to Lithuania.

The diplomat indicated to the BNS that there’s still time for pursuing a compromise over the negotiations mandate, i.e. two months, or until the end of June to be precise, when leaders of EU and Russia are to meet in Russia and hopefully begin talks over partnership. Lithuania would like to use this time for talks within the EU and polishing of rough edges.

He also noted that Vilnius is not satisfied with this stance taken by the EU with regards to “sensitive and complicated problems”.

“There’s still time, we would like to negotiate, however if this principle isn’t upheld, we will not back up a centimetre. We are a small nation, however one that is a part of the EU”, the Foreign Ministry official said.

Lithuania is also discontented about the tone of EU talks with Russia, which is aiming for “a new quality of relations”, as well as with other post-Soviet countries, especially those in South Caucasus.

“These are double standards, the so-called “Russia first” politics, completely disregarding observation of international commitments, i.e. how the Kremlin observes them”, the Lithuanian representative said.

As the Lietuvos Rytas daily mentioned in its editorial ‘Lithuania would like Medvedev’s term in office to become a turning point for Russia: It could become more European and more civilized. However, is this something we can expect?

Is it worth waiting and hoping for something? Or is it better to have a firm position from the start? This is what our diplomats - who have infuriated not only Moscow, but, it seems now also Brussels - demand.

Lithuania’s interests should be reflected in the mandate for the EU-Russia negotiations. In other words, Lithuania does not agree to launching the negotiations first, and only then seeking that the negotiations ensure Russia’s commitments important for Lithuania.

This means that Lithuania refuses to endorse Europe’s idea that the foundations for the new relations with the Kremlin should be built on the hope that once Medvedev becomes president, Russia can change, and that mutually beneficial agreements could be signed with this country, and that it will finally start playing in accordance with the game rules accepted by the international circles.

The idea that Medvedeved, called in the West a Kremlin liberal, can change Russia at least partially, has become one of the most important discussions in the international community, just as has another topic - whether Russia will be ruled by Medvedev or Prime Minister Putin.

Recent events show, in a way, that Putin is inclined to strengthen his political position as much as possible after he leaves the presidential post.’

The same editorial maintains that ‘Perhaps Russian experts or persons interested in Russia do find it interesting to forecast such things. However, those who create plans for relations with Moscow should realize that, at least in the near future, it is not worth expecting any changes.

A question arises then, what is the point of giving Medvedev any “diplomatic gifts?”

Is it yet another concession, hoping to warm the Kremlin’s heart? Have we not overdone it already? Have we not understood yet that such policy does not give any results? Or, perhaps, it is not worth starting any negotiations with Russia, until we have a firm negotiations mandate that reflects the interests of all the EU member states?

Experience of Lithuanian diplomacy shows that we achieved the greatest victories in negotiations with Russia when our country firmly held on to its positions and we could not allow ourselves to waver.

This is why such firmness is necessary also in the EU arena. And it does not matter how our country will be labelled by Moscow, or by its friends in Europe.’

The Prime Minister Kirkilas announce in his radio interview that Lithuania is not experiencing any economic crisis.

He said that opposition politicians who are talking about an economic crisis must be experiencing “a crisis in their heads”.

“Our economy is currently growing at a rather fast rate. We do not have final data for the first quarter yet, but we anticipate a similar growth rate to that we had last year. Inflation is a problem not only for Lithuania and the European Union, it is a global problem.”

As the BNS wrote “There will be no economic recession in Lithuania. Our industry and our businesses operate really efficiently. There are certain challenges, but I would not call that a crisis. The opposition always sees a crisis. Most probably, there is a crisis in their heads.”

“Our nations (the Baltic states) need a soft landing in order to prevent an overheating of their economies. This is what is taking place now. We have somewhat smaller growth rates, which is normal.”

Lets have a look what the other financial institutions think about the status of the Lithuanian economy.

The IMF warned Lithuanians that the dependence of Lithuania’s banking sector on foreign financing coupled with increasing macroeconomic imbalances render it vulnerable to regional and global disturbances.

·        Existing capital might not be sufficient to cope with extreme events and higher buffers would be advisable.

·        Given limitations of lender-of-last-resort operations under the currency board, contingency planning for emergency liquidity support under crisis conditions should be further discussed with banks, parent banks, and authorities of foreign banks.

·        The dominance of foreign-owned banks in the banking system constitutes both a source of strength and a risk. Although the foreign banks are highly rated, these ownership linkages increase regional and global contagion risks, especially against the backdrop of the recent global turmoil in financial markets.

·        The loan portfolios of Lithuanian banks are sensitive to the domestic economic cycle and euro interest rates, particularly given the significant concentration in real estate-related lending.

 
Recommendations from the IMF

·        IMF also Lithuania to strengthen supervision in the non-bank financial sector, given the rapid growth of assets and the increasing sophistication of financial institutions.

·        The regulatory and enforcement framework for insider trading should also be reformed.

Lithuanian Free Market Institute

·        Lithuania is already on the ‘soft landing’ stage.  The GDP will grow by 6,6% this year

·        Lithuania’s cushion against the global recession is its low competitiveness and productivity.  We can increase the productivity applying simple solutions, at least in the short term.

·        Money for the new technologies and innovation will increase due to the rising wages

·        The wage rise will slow down, this year should be about 12%, to 1,779 LTL by the end of the year

·        The Black Economy will be on the rise again, from 17,8% to 18,5%.  The tax burden will increase from 31,9% to 40,9% in 2008.

·        Imports will decline

·        Lithuania is not too connected too strongly with the markets which experiencing the decline or stagnation.

·        Lithuanians borrowed from the banks relatively small amounts of money

·        The immigrants still transferring huge sums of money into Lithuania

·        The election campaign started already, some populist decisions accepted in Seimas and are already affecting the economy

SEB

·        Inflation should be 8,5%

·        Some signs of the ‘hard landing’, which will be more evident in the last two quarters

Danske Bank

·        The GDP around 5%

·        Inflation about 10% since increased heating prices will hit the Lithuanians hard

·        More troubles ahead since the Baltic economies ‘engine’ the exports will decline

·        If a bank (especially a Scandinavian) would collapse the consequences for the  Lithuanian economy could be catastrophic.  But a collapse of a Scandinavian Bank is almost impossible.  

On the other hand the Standard & Poors published a table of the most volatile economies in the world which are very likely to feel the most negative effects of the world economical crises.

Lithuania is in the tenth place

               1.Iceland 

               3. Rumania

               4. Latvia

               7. Hungary

               8. Bulgaria

               9. Poland

               10. Lithuania

Amongst 40 mentioned Estonia is not in.  The Danske Bank analyst for the Baltic countries Mrs Klyviene is surprised because the Estonian economy in the private sector looks much more volatile that Lithuania’s.  Nevertheless, perhaps the S&P paid more attention to the more strict Estonian fiscal policy.

Hansabankas

Lithuanian economy could soften the effects of the world economy if it would redirect its exports to Russia and the other resources rich countries.

There are some since of looming crises, the construction industry which according to some estimates generates some 25% of all Lithuanian GDP, is slowing down.  The logistics companies also feeling a crunch.  The beauty salons complaining the less ladies making their hair.

Lets wait and see, but the slowing down mood is in the air.