For more than a century, Lithuania has been a small Baltic enclave of the Russian empire. Its modest population has struggled through political turmoil and the ravages of war. The island nation went independent from Moscow in 1918, but its central government — now the Lietuvos Rytas i Kokklaas — was abolished in 1918-19 and its capital, Vilnius, was nearly destroyed in World War II.
In recent years, however, Estonia and Latvia have been struggling to tackle their economies. Both have political instability, while many Lithuanians would like to see better opportunities available for the country’s youth, particularly its children. Concern about immigration from abroad has fueled nationalist sentiment in the Baltic region. Today’s turmoil in Russia — and fear of a hardening stance from the Kremlin — could help bolster Lithuanian interest in protecting the Baltic states.
Historically speaking, Russia has been easier to manage in a small Baltic state like Lithuania than Estonia or Latvia. Lithuania became the third Baltic state in the early days of the Soviet Union. In the 1950s, however, the Soviet Union began to realize that the Baltic states were a threat to its Eastern European colonies. As one of the first states to break away, Lithuania faced a range of measures from Moscow aimed at quelling protests and promising amnesty to the Baltic states for nonviolent political disobedience. But the Soviet Union did not always realize the importance of Vilnius, a historic and still densely populated hub of power in the country. While the Soviet invasion made the country a Soviet principality, it did not completely take it over. More importantly, Soviet troops lacked that necessary cohesion for an invasion. Even Soviet President Mikhail Gorbachev, who spearheaded a number of international moves to “integrate” the Baltic states into the Russian empire, realized the problems of a massive occupation force in its way.
In 1989, Lithuania gained independence. The Soviet regime was dismantled and a new polity took shape. Lietuvos Rytas i Kokklaas was largely dismantled and lost its status as a central government with its capital. Today, the central government is the National Union of People of Lithuania. The government, alongside nine other regional and municipal councils, holds power in five vice-governor portfolios. Each region runs its own internal affairs; the state has no control over any university or major social-services programs. Its foreign policy committee includes nearly 150 representatives from the World Bank and other financial institutions. The government provides money to improve schools, health care, and infrastructure. And it oversees a network of bilateral diplomatic relationships with nearly 70 countries around the world.
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In a central government scheme to foster job growth, the Lithuanian government provides 100 million euros annually to individual villages to run a variety of services including roads, sewage, and transportation.
The Lithuanian government has made multiple promises for the citizens of the Baltic states over the past few years. Since 2017, it has implemented a number of broad reforms, such as reducing the corporate tax to 13 percent, by law doubling the tax free allowance for any permanent individual or work permit holder, reducing the administrative burden of the corporate and personal tax system, and introducing a universal personal income-tax freeze.
Still, Lithuania has the problem of a heavy labor-force imbalance. In 2017, for every Lithuanian citizen, 1.28 people were abroad, with 48 percent of these remittances going to Russia. While much of the remittances come to the country from Germany, Latvia, and the United States, there is a growing emigration of Lithuanians to Israel and other countries as well.
The jobs gap is even more acute for younger Lithuanians. One-third of young Lithuanians live in large cities and 15 percent of citizens do not have any employment. The occupation-dependency ratio of young adults is 6.5, well above the 3.7 European average. Many young Lithuanians would like to find a job, but that is an uphill battle.
To address the problem, the Lithuanian government is introducing a universal tax subsidy for young Lithuanians that will cover up to 13 percent of their professional salaries. In many ways, the changes will level the playing field for young people. But in another way, they will also raise taxes for the country’s middle class and provide a convenient rationale for the majority of people to give up some of their earning power. This is the challenge that will likely bring about the change that the Lithuanian government has sought in recent years.