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But whose pocket? The urban middle classes are doing just fine, while country people see their share of the pie dwindling fast.by Ky Krauthamer 10 May 2019
One in eight Lithuanian households doesn’t have an indoor toilet for its sole use. This statistic, third worst in the European Union, helps explain why the strongest candidates in Sunday’s presidential election pledge to spend heavily on social benefits.
“Citizens are thirsty for social justice and seek a candidate who can bridge existing social polarization,” Donatas Puslys, an analyst at the Vilnius Policy Analysis Institute, told AFP.
The president is in charge of foreign policy but has no direct influence on domestic affairs. Candidates can only promise to apply moral suasion on lawmakers, Bloomberg writes.
Former Finance Minister Ingrida Simonyte and economist Gitanas Nauseda are leading the polls, with Prime Minister Saulius Skvernelis not far behind.
Squeezed in the Middle
Skvernelis, who led the upstart Peasants and Greens Union to victory in the 2016 parliamentary elections, pledges to raid the state budget for the benefit of the needy.
If “raising pensions, introducing child benefits and strengthening young families is populism, then I agree to be a populist,” Bloomberg quotes him as saying.
In a country with the largest proportion of rural dwellers in the EU, Skvernelis’s promises resonate with the rural poor. Simonyte’s support base lies among educated urban voters, while Nauseda “is offering a catch-all option across the rich-poor divide,” according to AFP.
Almost three in five Lithuanians identify themselves as middle class, an indication of rising incomes and more optimistic financial expectations, Swedbank’s Jurate Cvilikiene told the Baltic Times. However, most in this group are not satisfied with their current income and would like to earn at least 60 percent more in the future, a survey commissioned by the bank found.
A robust middle class may be the bedrock of a healthy democratic economy, but Eurostat data suggest Lithuanian society is becoming more unequal at a worrying rate.
Lithuania, along with Bulgaria, experienced the union’s highest levels of income inequality in 2017. Eurostat calculated their GINI coefficients at 37.6 and 40.2 percent respectively, similar to those in poorer non-EU countries Serbia and Turkey.
Who’s to Blame?
Still, many Lithuanians are much better off than when the country became an EU member 15 years ago.
Wages have leaped upward by around 10 percent annually in recent years, bringing the average gross monthly paycheck to 970 euros ($1,100), AFP says.
However, Lithuania’s economy contracted more during the 2008 slump than that of almost any other EU state, so this recent growth does not necessarily mean people are earning more in real terms than a decade ago.
Skvernelis blames the policies of financial insiders like his two main challengers, along with the central bank, for missteps during the 2008 financial crisis, Bloomberg says, while according to AFP, poverty and inequality are largely due to “weak progressive taxation.”
The European Commission concurs with the French news agency. Its 2019 country report chides the country for a taxation and benefit system – low tax-to-GDP ratio and weak redistribution through taxes and social transfers – that is hardly able to correct income inequality.
In the likely event that no candidate wins an outright majority on Sunday, a runoff will be held on 26 May, coinciding with European Parliament elections and a national referendum on extending dual citizenship for the large number of Lithuanians living abroad.
That diaspora is one of the largest in the world in relative terms. Lithuania, along with Latvia, experienced massive population loss starting in the 1990s, with much of the exodus occurring once their citizens were able to work freely in richer EU nations.
The “shrinking population, notably of people of working age, remains a major bottleneck to growth,” the EC report states. “The working-age population decreased from 1.8 million to 1.7 million between 2014 and 2017, reducing the potential supply of labor at a time of economic growth.”
“Employment opportunities are also very unequal in Lithuania: in 2017 the employment rate gap between people living in cities and those living in rural areas was one of the highest in the EU,” the report says.
Simonyte, the former finance minister, claims she can reduce the rural-urban divide through economic growth, AFP says.
“We can’t isolate Vilnius from the rest of Lithuania,” she told a campaign rally this week.
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