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LITHUANIAN ECONOMY CHANGES OF THE EU COUNTRIES IN THE CONTEXT OF REVIEW 2010 June Summary The summary shall contain the world, the EU member states and the Lithuanian economy as their main analysis of the indicators. The euro-zone economic indicators, statistical analysis are based on Eurostat database. Lithuanian economic indicators further comment on corporate VAT returns available data. European Union's statistical office announced the euro zone economy in the first quarter of 2010 increased by 0.2 percent. Compared to the same period last year, the euro zone economy increased by 0.5 percent. The increase in the quarter, compared with the previous quarter, was also 0.2 percent. And the economy increases annually by 0.3 percent. The EU's economic decline has stabilized in 2009 in the third quarter, mainly due to the anti- crisis measures, which were taken in accordance with the European Recovery Plan, and also due to a number of other temporary measures. However, the resurgent optimism of the slight decrease comes down in the publication of general knowledge about business and consumer confidence index for the euro area economy after the unexpected decline in May. The Confidence Index, which calculates the European Commission, fell from 100.6 points in April to 98.4 points in May, although the analysts predicted that the index would remain unchanged during the month. According to the experts, the Greek debt crisis could slow economic recovery in the euro area. Because of the decline of the euro exchange rate, the exports price decreased by euro area but imports prices increased. On the other hand, weak euro is useful to the exports and beneficial to the producers doing great. Therefore the confidence of the consumer, retailer and service companies in the euro zone economy weakened in May, industrial sector confidence index grew from minus 7 to minus 6 points. The business activity in the euro area industrial sector grew in April - it is the biggest growth since June 2000.The activity in the euro area industrial sector index this month jumped from 55.9 points in March to 57.3 points in April. The index increase over 50 points in limit means that the industry is growing. The European Commission's quarterly report on the situation in the euro zone stated that the economic crisis had revealed major imbalances and increasing of the competitiveness between 16 euro area member states. The Commission also warned that the recovering economy was accompanied by risks, especially for the growing unemployment. It also was argued that the euro-area countries, in order to avoid imbalances in the future, had to strengthen economic cooperation and to undertake the reforms to reduce the Member States' competitiveness. It is obvious that if the European Union will not take immediate effective measures to restore the country's economy post-crisis period, the United States and Asian countries, where this process is accelerated , may push the EU into the background of the world economic policies. The European Commission and the IMF recommended to coordinate the economic policy at EU level. In assessing the current state government and the international supervision of staff activities in the fight against the global crisis, the IMF notes, that the collaborative work is inconsistent. The latter is confirmed by the lack of the cooperation and coordination in decision-making as well as slowing down the pace of the global economic recovery. However, the biggest problem of the world economy raises is the debt crisis. Weak public finances could undermine not only in Greece, but also in many other European countries. To create a new Pan- European management procedures, which would seek to prevent the growth of debt, and secure of the region's financial stability and economic recovery, the European Commission has prepared a package of measures. The European Commission proposes to revise the European Union Member States 'governments' budgets before submitting them to national Parliaments. The Commission also suggests that the euro-zone countries, which block the breach of the rules regarding the permissible deficit and debt level would be frozen EU subsidies and financing. Member States may also be forced to put up deposits, which are the subject to interest if it is decided that the progress towards the medium-term budgetary objective periods of growth is insufficient. Under the deposit system, the national governments will have to take care of the savings that could be used to improve their financial situation, if suddenly it will be disadvantaged. The recent Lithuanian labor market indicators reaffirmed that there is no improvement in the first quarter this year. Average monthly gross wages and salaries, compared with a fourth Q in 2009, decreased up to 4.1 percent and during the year fell up to 7.4 percent. The high and unabated unemployment remains persistently and leaves more room for wage adjustments. In the first quarter the private sector wages reduced 1.5 times more than the public sector. It creates the impression that Lithuanian real sector‘s reaction to economic change is much sharper and faster than in other Baltic countries, and recovery process is more slow. The domestic consumption is not recovering, but it is too falling. The corporate investment is still low. The majority of the companies are not going to increase the number of employees. The weak domestic demand restricts the economic recovery. At a time when European governments were encouraged to make every effort to stabilizing the financial sector and the measures were not be so fragile for economic recovery, Lithuania went the opposite way. Instead of a fiscal and effective economic stimulus consumption taxes were substantially increased, drastic social benefits were cropped, which dealt a further blow to the domestic consumption and further deepened sufficiently the weak economic downturn. To reduce the country's deficit over the next two years the government is planning to cut the public spending another 1.5 billion. They want to declare the year 2012 the country's fiscal deficit as much as 3 percent. GDP, the difference between income and expenditure should be reduced by slightly more than 4.5 billion lt. They also hope to get most of the money for deficit reduction from the introduction of the new taxes and cutting the social benefits. Meanwhile, the Lithuanian President Dalia Grybauskaite thinks that the government should first reduce the black economy, and only then think about the tax increases. It is obvious that without strong and efficient economic stimulus measures the Lithuanian recovery path is very long.