Linas Jegelevičius for BNN
An increasingly louder ringing of alarm bells was permeating the meeting of Lithuania’s president Gitanas Nausėda and seven mayors of the country’s Western municipalities, including those on the Baltic Sea, last Sunday, 11 September.
An array of topics was touched, but it was Šarūnas Vaitkus, the mayor of Palanga, a Baltic resort town, who voiced concerns the mayors have straight.
«The situation is exceptionally difficult,» he admitted. «The consequences of inflation and the increase in the price of energy resources for our region and resorts are just very painful and disastrous,» the mayor insisted.
The other mayors also admitted that the municipal coffers are on a much shallow end and the situation needs action.
How bad things are show this. A Palanga hotel located in central part of the town paid 3 000 euros for consumed electricity for July last year and one year later – a whopping 9 000 euros. Meanwhile its last bill, for August of the year, was mind-blowing – 22 000 euros.
The situation in Palanga’s water supply company «Palangos vandenys» is especially worrisome – the electricity bill in August was 200 000 euros.
The company paid a total of 300 thousand euros in July 2021, while last month’s bill was more than for the entire year in 2021.
«Based on the last electricity bills received, the company will need about 2 million euros for the year, which we do not have. We will have to increase the price of water service. It remains to be seen how much. We postponed some water and wastewater infrastructure improvement projects. Yet still we will need a credit from bank to maintain our working capital,» Virgilijus Beržanskis, director of the company, told BNN.
«Over one year, costs for electricity alone for most hotels increased by almost 800 percent. The same situation exists in absolutely all hotels in Palanga and, of course, in other Lithuanian hotels,» the mayor told BNN.
As a result, many catering, accommodation, spa treatment companies are on the brink of insolvency and/or bankruptcy.
«Many of them are in survival mode. Sanatoriums, hotels, restaurants and cafes are pushed into complete despair and absolute uncertainty by the unpredictably growing energy costs, which cannot be planned, controlled or amortised.
Therefore, it is impossible to plan a monthly or half-year budget of expenses and income, it is impossible to plan how many employees to hire and so on,» says Vaitkus. «If this uncertainty continues, a large wave of business activity suspensions awaits, and hotel and restaurant workers will join the ranks of the Employment Service in droves and will be supported by the state,» Vaitkus predicts.
The Palanga municipality says that expensive gas and electricity, coupled with high inflation, have hiked costs of vital services to a point where the continuity or the current volume of some of the services may be put in question.
For example, the expenses for the lighting of Palanga and Šventoji, a Baltic settlement some 20 kilometres away from Palanga, increased by 84.5 thousand euros, or by 165% for the first eight months of this year, expenses for managing the resort – by 176.4 thousand euros, also over the period.
«We have been intensively considering various saving measures for some time. We have already reduced the intensity of lighting in some places in the city, but it is impossible to completely darken the resort town, it is impossible to turn off the lighting in kindergarten groups or school classrooms in late autumn and winter,» says the mayor.
He believes that state must immediately react – create a mechanism to help businesses and people survive the next few months of the fierce energy war. Otherwise, it could be too late.
As reported by Bnn.lv, in the last six months, 1.7 times more Lithuanian companies started bankruptcy procedures than in the same period last year, according to the latest bankruptcy statistics published by the Lithuanian Department of Statistics.
The number of initiated bankruptcies has almost doubled in the economic entities providing and catering services. This year, in the first half of the year, the bankruptcy procedure was initiated for 61 companies, last year – for 33 companies during the same period.
«In the light of the energy crisis, a package of state aid and inflation management measures must also reach municipalities and their companies providing public services,» Vaitkus underlines.
In the meeting, president Nausėda said that the state must implement a proactive and wise economic policy.
«Without active involvement of municipalities, it is difficult to imagine the promotion of investment and productivity on a national scale. Municipalities today face serious challenges due to rising costs of projects, and the national government cannot always directly help them. The projects needed by the residents of the regions cannot be frozen – hey must be continuously implemented, giving the self-government more financial autonomy and incentives to act,» the president emphasised.
The amendment to the constitutional law regarding the possibility for municipalities to borrow more for investment projects, especially focused on more efficient energy, was submitted by the president to the Seimas in December last year.
The government approved the project last week, and a separate version is being prepared in parallel. In order for the amendment to the constitutional law to enter into force from the beginning of next year, the Seimas must adopt it within three months.Yet Nausėda emphasised that the budget deficit cannot jeopardise the state’s financial stability.
He said that, despite the adverse factors, the minimum monthly wage must continue to grow, the tax-free amount of income, the basic amounts of social benefits, and child money must continue to increase.
Among the other issued raised by the mayors in the meeting was municipal borrowing and, specifically, boosting the municipal coffers. Many municipalities want the legislature, the Seimas, to move forward with the much-discussed residents’ real estate tax, which is currently still being considered in the Seimas.
If passed, municipalities would be entailed to more resources. However, the ruling party, the Homeland Union -Lithuanian Christian Democrats, is said to be against such tax, arguing that the time for its introduction is not proper.
Meanwhile, Klaipėda mayor Vytautas Grubliauskas asked the president to make sure that the once cancelled teacher preparation programme is back in Klaipėda University.