Lithuania as a European Union member state

From 2004 May 1^st Lithuania became the member of the European Union. During these all 12 years since integration indicators such as unemployment rate, interest rate, currency exchange rate and also currency, minimum salary, etc., have changed. From my point of view, European Union (EU) made a huge impact to improve these indicators, especially unemployment rate, which has the major influence in every Lithuanian’s cost of living and quality of life.

Firstly, becoming a part of the EU opened for Lithuania a huge amount of new consumers, which has led to bigger demand. Business had to raise supply, this allowing creating new workplaces. From 2004 until 2007, unemployment rate in Lithuania was decreasing from 11.3% to 4.3%, which was a record. Developing new workplaces in Lithuania received more than 36 billion Litas (previous Lithuania currency) as financial support from EU. Using this support efficiently, Lithuania improved its economic growth. Until 2004, Lithuania’s GDP was 46% of EU average. In 2014 it was 75% of EU average. It means that quality of living became better than it was before 2004. In October 2015, the unemployment rate was lower than EU average, which was 8.9% and 9.3%, respectively.

Secondly, integration in the European Union helped to receive more than 80% direct investments only from members of EU. Investments make a major impact in Lithuania’s unemployment rate. It created opportunities to develop business more easily, which led to decreasing the unemployment rate.

From 1^st of May 2004, Lituania joined Customs union and from 2007 the Schengen area. This created a possibility to export commodities more easily and allowed people travelling in 25 countries without any checking at muite borders. These two contracts made a major impact in bussiness. The lines near borders with Latvia and Poland disapeared. It became much more easy to transfer materials.

Moreover, the euro currency adaptation in Lithuania helped to reduce the black economy. The State Tax Inspectory Under the Ministry of Finance of the Republic of Lithuania started to observe every transaction more careful in order to catch people who did not pay taxes. To pay by cash become more and more difficult.

There is a remarkable correlation between taxes and unemployment rate. High percentage of jobless people increase the national Lithuania‘s budget deficit: collected less tax, more money has to be designated to pay for not working people unemployment insurance income, which leads to less money in country‘s budget. The significant reduction in black economy helped to decrease unemployment rate. Furthermore, after 2015 1st of January the minimu salary was raised, due to the euro. From the beginning of euro until nowadays, in Lithuania salary and prices where being slightly raised. Inflation also grown. According to Philips curve, inflation has a direct influence in the unemployment rate. Applying monetary and fiscal policy instruments, inflation has been raised in order to reduce unemployment.

In conclusion, the integration in European Union helped Lithuania to improve economic indicators which are essential to improve the economy. One of those indicators is the unemployment rate, which makes an impact into inflation, salary, tax system, budget, etc. To reduce the unemployment rate to a certain level is relevant for every country. European Union integration allowed us to travel around 25 countries without any control, and due to that the emigration level has been raising significantly. Most of the people emigrates because of the bad economy and cost of living conditions. For this reason Lithuania`s economists are trying to improve every indicator efficiently.

Diana Balsevičiūtė

References:

Ministry of Foreign affairs of the Republic of Lithuania.“Membership“. Last update: 13/01/2016. Interact: [https://www.urm.lt/default/lt/uzsienio-politika/uzsienio-politikos-prioritetai/lietuva-europos-sajungoje/lietuvos-naryste-es]

The World Bank. 2016. ” Inflation, consumer prices (annual %)“. Interact: [http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?end=2015&locations=LT&start=2012]

The World Bank. 2016. „Unemployment, total (% of total labor force) (modeled ILO estimate)“. Interact: [http://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?end=2014&locations=LT&start=2000]

[artigo de opinião produzido no âmbito da unidade curricular “Economia Portuguesa e Europeia” do 3º ano do curso de Economia (1º ciclo) da EEG/UMinho]