How did the Commission assess Lithuania's first payment request?
The European Commission has today endorsed a positive preliminary assessment of part of the milestones linked to Lithuania's first payment request under the Recovery and Resilience Facility (RRF), the key instrument at the heart of NextGenerationEU.
On 30 November 2022, Lithuania submitted to the Commission a payment request based on the 33 milestones set out in the Council Implementing Decision for the first payment. After looking at the evidence provided by the Lithuanian authorities, the Commission considered 31 out of the 33 milestones to be satisfactorily fulfilled. The 31 milestones that have been satisfactorily fulfilled demonstrate significant progress in the implementation of Lithuania's recovery and resilience plan. They cover reforms in the areas of the green and digital transition, as well as reforms to the general and vocational education system, measures in support of innovation and science, on social protection and employment, as well as a digital data-storage for monitoring the implementation of the RRF, amongst others.
The Commission has found that two milestones related to taxation (M142 and M144) have not been satisfactorily fulfilled. The Commission acknowledges the first steps already taken by Lithuania to fulfil these outstanding milestones, though important work remains to be done. The Commission is therefore activating the ‘payment suspension' procedure, as foreseen by Article 24(6) of the RRF Regulation. In line with the RRF Regulation and as explained in the Communication published on 21 February, this procedure gives Member States additional time to fulfil outstanding milestones, while receiving a partial payment linked to the milestones that have been satisfactorily fulfilled.
How do the milestones fulfilled by Lithuania so far effectively support the green transition?
The green transition is supported by reforms linked to six milestones contributing to more sustainable electricity produced in Lithuania, and promotion of clean transport. This means adoption of legal acts to promote the production, transmission, and consumption of electricity from renewable sources, setting higher environmental standards for publicly procured cars, the creation of a Sustainable Mobility Fund to finance the development of infrastructure for clean vehicles, the adoption of an action plan to speed up the development of electric charging infrastructure, and two information systems: an interactive map of electric charging points operating in Lithuania, and a system keeping track of the quantities of renewable fuels supplied in Lithuania.
How do the milestones fulfilled by Lithuania so far effectively contribute to the digital transition?
Milestones related to the digital transition cover the completed auctions for spectrum allocation to facilitate the roll-out of 5G networks, measures facilitating the digitalisation of public services and the preparatory work for a project on innovative solutions in the field of transport. Specifically, Lithuania completed spectrum allocations for 5G. In addition, under the first payment request Lithuania set up a Competence Centre for Digital Transformation and Open Data to facilitate the process of digitalisation of public services. The last milestone concerns the designation of the responsible authority for the selection and implementation of innovative solutions in transport.
How do the milestones fulfilled by Lithuania so far contribute to improving Lithuania's economic and social situation, and its resilience?
The fulfilment of eight milestones in the area of education is expected to contribute to improving the quality and efficiency of the education system and vocational training. Key reforms under these milestones concern, in particular, the reorganisation of the school network, the approval of the modernisation programme for schools (Millennium School Programme) which will form the basis for investments into digitalisation, laboratories and other school infrastructure, as well as in forming teachers. The approved reform of the career guidance system aims at providing pupils and adults with quality advice on future career paths while the establishment of a scheme to support apprenticeships will foster future investments in this area.
Concerning social protection, Lithuania set up an accreditation scheme for the provision of social care and introduced additional benefits for people living alone who are elderly or have disabilities. In addition, employment support schemes have been set up to promote entrepreneurship and reskilling with a focus on the digital and green transitions. Lithuania is also pushing to digitalise the public Employment Service and more generally reform its public administration to improve tax compliance as well as the overall quality of public services. Lithuania also commissioned a study on the effectiveness of personal income taxation and social insurance contributions in reducing poverty and income inequality, which will inform future policy decisions.
Does the fulfilment of the first milestones contribute to an effective implementation of the Plan?
The fulfilled milestones constitute significant steps in the implementation of Lithuania's recovery and resilience plan, and of its broader reform agenda. They include important measures, such as reforms to support renewables and clean transport, steps for faster deployment of 5G and broadband infrastructure. The revision of the legal framework to promote the production, transmission, and consumption of electricity from renewable sources will speed up the uptake of renewables in Lithuania. Reforms in the transport sector will contribute to the transition towards green mobility in Lithuania. Once implemented, reforms in education, and notably the plans for the transformation of the network of schools and Millennium Schools Programme, will contribute to the quality and efficiency of education. The revision of the legal framework to support innovation and the establishment of the single Innovation Agency will speed up Lithuania's transition to a higher value-added economy. Reforms of the social protection system will contribute to greater social inclusion in Lithuania.
Why does the Commission consider that Lithuania has not fulfilled two milestones related to taxation?
The Commission has found that two milestones related to taxation (M142 and M144) have not been satisfactorily fulfilled. These milestones concern the submission to the Parliament of legislative proposals, including relevant impact assessments, on the removal of existing tax exemptions and special tax regimes, and on environmental taxes and taxes that are less detrimental to economic growth, respectively. The Commission's finding that these milestones are not satisfactorily fulfilled is based on the framework for assessing milestones and targets under the RRF Regulation (outlined in Annex I of the 21 February Communication).
The Council Implementing Decisions approving the recovery and resilience plans are the basis for evaluating the satisfactory fulfilment of milestones and targets. The Commission relies on the description of each milestone and target, its context and purpose to determine the requirements that Member States must fulfil. It then establishes, based on the due justifications provided by the Member States, whether a specific milestone or target has been satisfactorily fulfilled.
How will the Commission determine the amount to be suspended if it concludes that Lithuania has indeed not fulfilled two milestones?
If, following Lithuania's observations, the Commission were to confirm its assessment that the two outstanding milestones have not been satisfactorily fulfilled, it will determine the amount of the payment to be suspended by applying its methodology for payment suspension (outlined in Annex II of the 21 February Communication).
This methodology provides a clear and consistent approach to determine the relevant amounts to be suspended in case of a partial payment, while reflecting the fact that not all measures contribute equally to the realisation of the objectives of a national recovery and resilience plan.
The methodology is in line with the RRF Regulation, which caters for adverse and unexpected developments and allows partial or full suspensions of payments in case of implementation shortcomings. Member States might be confronted with delays in the implementation of measures, affecting the timely fulfilment of some milestones and targets. These situations should be exceptional and corrected as soon as possible. They should not, where justified, prevent payments from being made for milestones and targets that have been fulfilled. The RRF Regulation caters for such a situation where implementation issues for one or more of the milestones or targets of a payment request cannot be addressed in time before the submission of a payment request.
The payment suspension procedure therefore favours the continued implementation of the plan and provides time for Member States to fulfil the relevant milestone(s) or target(s) within a period of six months. If this is done, the Commission will then lift the suspension. However, if a milestone or target is not satisfactorily fulfilled at the end of the six months, the Commission will follow the process outlined in the RRF Regulation for decommitting the amount suspended
What are the next steps?
In line with Article 24(6) of the RRF Regulation, the positive preliminary assessment and the payment suspension are two distinct procedures that follow different steps.
-As regards the positive preliminary assessment: the Commission has now sent its preliminary assessment of the milestones that Lithuania has fulfilled to the Economic and Financial Committee (EFC), asking for its opinion. The EFC's opinion, to be delivered within a maximum of four weeks, should be taken into account in the Commission's final assessment. Following the EFC's opinion on the positive preliminary assessment and Lithuania's observations on the payment suspension, and taking both into account, the Commission will adopt the decision on the payment of the instalment, in accordance with the examination procedure, through a comitology committee. Following the adoption of the decision by the Commission, the payment to Lithuania can take place.
-As regards the payment suspension: the Commission has communicated to Lithuania the reasons why it considers that two milestones were not satisfactorily fulfilled. This communication starts an administrative procedure between the Commission and the Member State concerned. Lithuania now has a right to present to the Commission its observations within one month from the receipt of the communication. If, following Lithuania's observations, the Commission were to confirm its assessment that the two outstanding milestones have not been satisfactorily fulfilled, it will determine the amount of the payment to be suspended by applying its methodology for payment suspension (outlined in Annex II of the 21 February Communication). From that moment, Lithuania will have a period of six months to satisfactorily fulfil the outstanding milestones. During this period of six months, the Commission will engage in active dialogue with the Lithuanian authorities. If and when the milestones will have been fulfilled, the Commission will lift the suspension of the payment and send its assessment to the EFC, following the above outlined procedure on the positive preliminary assessment.
The Commission will assess further payment requests by Lithuania based on the fulfilment of the milestones and targets outlined in the Council Implementing Decision, reflecting progress on the implementation of the investments and reforms.
The amounts disbursed to the Member States are published in the Recovery and Resilience Scoreboard, which shows progress of the implementation of the national recovery and resilience plans.
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