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Finance Ministers of Baltic States: Fiscal Discipline is the Basis of Economic Development

Date

2008 09 05

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Trakai (Vilnius), September 5, 2008. Ministers of finance of the Baltic States are convinced that compliance with fiscal discipline highly impacts development prospects of national economies. All three Baltic States have low debt levels and pursue low fiscal deficit or a balanced budget and have followed conservative expenditure policies – all this and further compliance with fiscal discipline will help maintain the prospects of sustainable long-term economic growth.

Held today in Trakai, the annual meeting of Estonian, Latvian and Lithuanian ministers of finance touched upon relevant economic and financial issues of the Baltic States. In the opinion of the Ministers of Finance, accession to the euro area would be an important achievement for ensuring macroeconomic stability of the Baltic States; however, in the near future the countries will encounter challenges meeting the Maastricht criteria. Due to both internal and external factors such as high energy and food prices the level of inflation has been high, but an easing of the inflationary pressures is expected. The targets of the general government sector finances are also becoming increasingly ambitious. Baltic states’ finance ministers expressed common opinion, that joining the euro zone strategic goal for all Baltic states.

Ministers discussed the excise duties related issues at the meeting. Estonia, Latvia and Lithuania as well as certain other Member States, have been granted transitional periods to achieve minimum excise duty rates on petrol, gas oil and kerosene minimum rates. Estonia has already reached the minimum levels, while Latvia and Lithuania are in the process of reaching them. However, in 2007 the European Commission proposed until 2014 to increase the minimum excise duty rate on petrol – from 359 EUR to 380 EUR, and the minimum rate on gas oil – from 330 EUR to 380 EUR per 1000 litres of the product (to achieve these minimum rates, the granting of a new transitional period was proposed to Estonia, Latvia and Lithuania until 2017). This proposal has been several times discussed by the working groups of the European Union, and majority of the Member States in these discussions agreed to the proposal to increase the excise duty rates. The discussions on possible increases of the minimum rates at the EU level will continue this autumn, when the European Commission tables the proposal on the energy taxation.

Furthermore, the meeting addressed proposals put forward this summer by the European Commission (EC) to make several substantial changes in connection with taxation of cigarettes and other types of processed tobacco. EC submitted those proposals taking into consideration the objectives of the internal market and health protection. The Baltic States have considerably increased excise duty rates on cigarettes in the past few years and Estonia reached the minimum levels with the excise applied from July 2008.

Baltic Ministers of Finance have expressed opinion that at the moment common decisions on excise duties increase at EU level are not expedient. As each and every member state pursues its own priorities and goals, each member state is to have competence to decide on further action in this area.

Ministers of finance of the Baltic States focused also on EU budget review issues. The review provides a possibility to analyse the long-term challenges for the EU budget; to explore how the EU budget could be improved in order to reflect and implement the policies pursued by the European Union to the best possible extent; to search for a renewed consensus on how to organise the EU spending and how to finance it.

The positions of Lithuania, Latvia and Estonia on the common position in view of expiry of the major EU financing priorities, which certainly generates high value added at EU level was taken to ensure that the fundamental Treaty based goal of cohesion policy – to decrease regional development disparities in the Union – should remain the cornerstone of the policy and therefore the priority should be given to the least developed EU regions. Other important provisions are as follows: exceptional importance of financing research and development, the need on maintain agricultural policy as the common EU policy. The reform of the policy has to continue including strengthening of the second pillar of the agricultural policy. All the three Baltic States, having a part of external EU border, devote great attention to shaping effective migration policy and external border protection, also to the implementation of the European neighbourhood policy. Development of trans-European networks is another significant issue for the Baltic States.

Energy security is extremely important for Estonia, Latvia and Lithuania, and it could be guaranteed only by a fully-integrated energy market and implementation of strategic energy projects. Considering the objectives of combating the effects of climate change, due attention should be given to development of low-polluting energy technologies. Ministers of finance of the three Baltic States agreed to co-ordinate actions in addressing EU key budget issues also in the future.

The following meeting of finance ministers of the Baltic States is planned to take place next year in Estonia.


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