Izgorodin: France is the best example of what to do with energy prices

“Countries like France have decided to freeze energy prices. That decision will be valid until the end of this year. It can be extended next year. I would say France is the best example. She took simple but very effective measures.

The result is inflation France has one of the smallest in the EU. July. the annual inflation in France reached 6.8 percent, and in Lithuania – 20.8 percent,” says the economist in an interview with “Delfi”.

In his words, the current situation in the financial markets allows Lithuania to borrow inexpensively – unlike during the global financial crisis, when the Government borrowed at ten percent or more interest.

“In other words, we should act a little more aggressively and, let’s say, freeze energy prices at the level of the end of last year until the spring of next year. Then see how it goes and temporarily increase budget spending to solve these problems,” suggests Izgorodin.

The “Delfi” interlocutor says that he does not rule out such an option, that the Lithuanian economy will withstand both energy difficulties and inflation very well, and the coming crisis, if it really happens, should not cause such consequences as the global financial crisis. Moreover, Izgorodin says that he does not see signs of a crisis yet:

“Looking at the latest export indicators of Lithuanian goods and the dynamics of the number of employees in the transport sector, I don’t really see a crisis in Lithuania yet. Merchandise export growth remains in double digits, and the number of workers in the transport sector reached an all-time high in the second quarter – despite all the challenges of geopolitics and the impending recession.

<…> Despite the high prices, there are no signs yet that Lithuanian residents are tightening their belts. Household deposits in banks continue to exceed the level that existed before the start of the coronavirus pandemic. This means that people have money, <…> advance limiting their consumption in certain areas, not because they don’t have money, but because they want to save that money.

Lithuania’s GDP, in turn, exceeds the pre-pandemic level by a tenth. This is a really strong result.”

And the energy crisis plaguing Europe, in Izgorodin’s opinion, may even benefit Lithuanian industry:

“The current inflation crisis in Europe and even the current energy crisis can be very useful for our main economic sectors, industry, because due to rising prices, Western European producers will definitely look for options to make their final consumption cheaper.

Consequently, they will look for contract manufacturing partners in other European countries that have a sufficiently strong industry and where it would be cheaper to produce certain components. Lithuania has a golden opportunity here.”

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