Fiscal consolidation and structural reforms in Lithuania in the period 2008–2012: from grand ambitions to hectic firefighting

Abstract

This article analyses the inputs, decisions, outputs and outcomes of fiscal consolidation and structural reforms undertaken by the Lithuanian authorities in the period 2008–2012. Our research was based on desk research, which was supplemented by interviews with government decision-makers. The article found that Lithuania successfully pursued fiscal consolidation, which contributed to stabilising its economy and public finances. If economic factors largely explain the timing of fiscal consolidation decisions, political factors are more powerful in accounting for the expenditure-led nature of fiscal consolidation in Lithuania. However, despite bold and ambitious plans, Lithuania's structural reforms proved to be fragmented and incremental due to the absence of a stable base of political support, sustained political attention and persistent political leadership. Points for practitioners First, Lithuania's experience shows the importance of previous policies and the constraints that they impose throughout crises when the speed of decision-making is crucial. Second, it illustrates that an external shock and a reform programme are not sufficient conditions for successful implementation – coalition politics and institutional resistance can derail some initial plans. Third, it demonstrates that even countries that successfully executed a large-scale fiscal consolidation programme may fail to seize the ‘windows of opportunity’ offered by the financial crisis to implement long-term structural reforms.

The Influence of Government Priorities on Public-Administration Reforms in Europe1

“…For instance, despite the announcement of several bold and ambitious reform priorities, the Lithuanian authorities were only able to successfully execute the most salient programme of fi scal consolidation (Nakrošis et al 2015), whereas the implementation of other structural reforms was incremental and suff ered from the problems of an unstable base of legislative support and shift ing political attention in the executive during the crisis period of 2009 -2012. In terms of reform processes European governments put more eff orts into the formulation of priority initiatives by engaging diff erent stakeholders, communicating between ministries or building reform into a long-term strategy (EUPAN 2013, 12). Th is adds to the transparency and openness of public-policy processes and can increase reform ownership.…”

The politics of cutback management in thirteen European countries: statistical evidence on causes and effects

“…Figure 5 shows a paradox: both the country with a modest consolidation effort (Lithuania) and the one with the far highest effort (Ireland) achieved the highest reduction of budget deficit. However, the Lithuanian figure of fiscal consolidation effort is not derived from the OECD (2012) survey but from Nakrošis, Vilpišauskas, and Kuokštis (2015), and is therefore actually incomparable. Figure 6 shows that the correlation between budget deficit reduction and the share of spending cuts in fiscal consolidation is only slightly positive and insignificant (R 2 is 0.03).…”

The Quantitative and Qualitative Analysis of Public Administration Reforms in Post-Communist Countries

“…In response to the exigencies of EU policies and complex public administration problems, the EU-13, candidate countries, and potential candidates frequently designed comprehensive reform strategies that bundle various reform initiatives (Nakrošis, 2015). Examples of such strategies are the Strategy for Public Administration Reform in Serbia, Bosnia and Herzegovina, or Kosovo; the Public Governance Improvement Program in Lithuania; the Public Administration Development (Magyary) Program in Hungary; the Smart Administration Strategy in the Czech Republic; and the Effective, Reliable and Open Public Administration Program in Slovakia (EUPAN, 2013).…”

“…Lithuania's was among the worst hit economies in the world; due to the 2008 economic crisis, Lithuania's real output fell by almost fifteen per cent in 2009 (Nakrošis, Vilpišauskas and Kuokštis, 2015). The start of the financial crisis coincided with the country's parliamentary elections at the end of 2008, which brought into power a ruling coalition of four partiesthe Homeland Union-Lithuanian Christian Democrats, the Lithuanian Liberal Movement, the Liberal and Centre Union, and the National Revival Party.…”