Executive Summary

Flaws in substantive democracy
Formal democracy is well developed in Lithuania. Participation rights, electoral competition and the rule of law are generally respected by the Lithuanian authorities. Lithuania has also actively supported the pro-democracy movement in Belarus. Substantive democracy, in contrast, suffers from several weaknesses. Despite recent improvements, party financing is insufficiently monitored and audited, while campaign-finance laws could still be better enforced. Voting participation rates are relatively low, especially in municipal elections (though a switch to the popular election of mayors seems to have increased voter interest). In addition, discrimination against certain societal groups continues. Most importantly, while anti-corruption legislation is well developed and being improved, the public sector continues to offer opportunities for abuses of power as the enforcement of anti-corruption laws remains insufficient.
Social policies lag
economic outcomes;
crises hampering
structural reform;
stable democracy
despite rising
Lithuanian policymakers have sought to establish and maintain social, economic and environmental conditions that promote citizens’ well-being. Nonetheless, the country’s policy performance remains mixed, with social policy outcomes lagging behind those of economic and environmental policies. Some observers attribute this to EU transition and integration processes, which have focused primarily on political, economic and administrative issues. Structural reforms in education, healthcare and the broader public sector are lagging behind technological developments, although the EU conditions related to the use of the Recovery and Resilience Fund (2021 –2026) might increase incentives for such reforms and ensure their continuity after the next parliamentary elections in 2024. The country’s formal governance arrangements are well designed, yet these arrangements sometimes do not function to their full potential. There are significant gaps with regard to policy implementation and the proper use of impact assessments and stakeholder-consultation processes for important policy decisions. The current coalition government is well aware of those gaps, as indicated by provisions in its program intended to deal with them. However, it is far from clear whether it will be able to transform the practice of public administration and implement structural reforms, especially as it continues to face several crises at the same time. In addition, many governance practices are better developed on the central level than on the municipal level, or alternately can be found in the executive rather than in parliamentary legislative processes. Overall, for most sustainable-governance criteria, little changed during the review period; this was in large part due to the ongoing crises related to the pandemic as well as illegal migrant flows from Belarus, which distracted political attention away from structural reforms. On an optimistic note, the country’s governance arrangements and democracy remained robust despite significant crises.
coalition government
The coalition government led by the conservatives (Homeland Union, which won 50 out of 141 seats during the 2020 parliamentary elections) has been in power since the end of 2020. Besides the conservatives, the coalition includes two liberal parties – the Liberal Movement (13 seats in parliament) and the Freedom Party (11 seats). During the 2020 election campaign, Ingrida Šimonytė led the party and subsequently became the new prime minister even though she had not formally joined the party (following the example of the previous Prime Minister Skvernelis).
President focused on welfare expansion
Gitanas Nausėda, a bank economist and an independent candidate, won Lithuania’s presidential elections in 2019. He received 66% of the votes cast during the second voting round. His electoral platform, entitled “Welfare State,” focused on reducing economic inequality by increasing government expenditure as a share of the country’s GDP, although his focus in the first two years in the office was mostly on increasing old-age pensions, with some initiatives focused on reducing the tax burden on low-income earners, helping people with disabilities and improving the country’s environmental record.
Economy resilient
despite shocks
Lithuania has achieved remarkable progress in terms of broad macroeconomic development. The economy has also been very resilient in the face of multiple shocks, such as the global financial crisis, Russian sanctions and the pandemic. In contrast to previous crises, the government enacted substantial fiscal stimulus to counter the effects of the pandemic. Rapidly increasing inflation rates, including spikes in heating prices, have emerged as a key short-term economic challenge. The World Bank ranked Lithuania 11th out of 190 countries overall in its 2020 Doing Business index, indicating that the country has become one of the most attractive locations in Europe (after Denmark, the United Kingdom, Norway and Sweden) in terms of the regulatory framework facing the private sector.
High death rates
during pandemic
While significant progress has been made in reducing absolute poverty (mainly as a result of robust growth), the share of the population at risk of poverty or social exclusion remains high. There are also growing regional disparities. In addition, the country continues to perform relatively poorly in terms of life expectancy. The pandemic exposed deficiencies in the healthcare system, as the country registered one of the highest relative death rates in the world. Up until recently, Lithuania has experienced significant emigration, and although the situation has stabilized, profound demographic challenges remain. Over time, these are likely to have negative effects on economic growth and the pension system, while increasing pressure to restructure the education, healthcare and public administration systems.
Centralized power with little consultation
In 2018, Lithuania joined the OECD, a process which motivated reforms to state-owned enterprises as well as to a variety of regulatory and anti-corruption policies. In addition, the OECD has provided useful advice, for instance with its report on improving evidence-based policymaking presented in late 2021. However, power and authority remain centralized and are often affected by coalition party politics. Citizens and other external stakeholders rarely take part in government processes, and are not systematically consulted. Despite numerous electoral pledges to improve impact assessments, most major reforms are not accompanied by substantive assessments or stakeholder consultations. In particular, initiatives by members of parliament continue to be poorly prepared and lack proper impact assessments.
Rising tensions making reform difficult
The current government has far-reaching structural reform plans, but to date has been largely preoccupied dealing with significant challenges related to the pandemic, the migrant crisis, and geopolitical tensions not only with Russia and Belarus, but also China following Lithuania’s recent favorable stance toward Taiwan. The lack of cooperation between the government and the president, very low approval ratings, increasing societal tensions and polarization, and rising disagreements within the ruling coalition significantly reduce the probability of achieving the ambitious reform goals.
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