Lithuania pleas for EU funds as it bears brunt of Russia’s war

Lithuania needs EU financial support as it faces up to the economic consequences of a war on its border, its deputy finance minister told Euronews on a visit to Brussels.  

Mindaugas Liutvinskas said he was open to seizing hundreds of billions in Russian assets in order to rebuild Ukraine – and that persuading Germany to accept eurobonds is a “matter of time.”

“Cohesion policy has to maintain focus,” Liutvinskas said, referring to the bloc’s main instrument for helping poorer regions catch up.

“Over decades, it has shown its efficiency and the value added it brings,” he said, of the funding streams which allocated €7.8 billion to the Baltic nation over the last seven-year spending period, out of a total EU envelope of around €1.2 trillion.

The plea comes as the European Commission plans its next budget framework to take effect as of 2028 – which President Ursula von der Leyen has said will be more flexible, impactful and targeted on priorities.

Squeezed between Russia and the EU, Lithuania has seen growth crumble and foreign investment dented since the 2022 invasion of Ukraine, Liutvinskas said – and he argues EU investment in interconnections and innovation is needed to rebuild supply chains and boost resilience.

But EU regional funds have also proven controversial, and could feel the squeeze as member states with stretched public finances wrangle over pricey new priorities such as rebuilding competitiveness, and fending off the threat of Russian invasion.

On Thursday, the European Court of Auditors found that the error rates for cohesion spending are among the highest in the EU budget, rising to 9.3% as part of a trend the spending watchdog badged as “concerning”.

Liutvinskas leaps to the defence of what he calls the “most effective long-term investment instrument the European Union has” — adding that the programme will need to stay flexible and adaptable.

“Even when the war ends, at some point we will still be living close to Russia and Belarus; that’s basically the aggressor country,” Liutvinskas said, “We need some European instruments, primarily cohesion policy, to actually deal with it, to try to mitigate these effects, to help promote investment.”

“The best strategy to reassure, especially foreign, investors is to treat our own security in a very serious manner, which we do: to increase our defence spending … because then you have a safe environment in which the investors can come,” he added. 

But he said he was “open” to exploring innovative financing means, such as joint borrowing at the EU level – in spite of opposition to eurobonds from the likes of Germany.

“I think it’s a matter of dialogue and a bit of a matter of time for them [Germany] to understand,” he said, adding: “If there is a place where countries could and should shift red lines, that is defence, because that’s a common thing for all of us.”

He’s also hopeful that Hungary will, “in the upcoming weeks”, lift its veto on a plan to offer long-term support to Ukraine using frozen Russian central bank assets as collateral.

“I hope that we will manage to reach some sort of an agreement with the Hungarian presidency on how we can enhance the sanction regime,” he said, adding: “The financing gap for Ukraine is increasing for next year and Europe has a responsibility to help.”

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 “At some point in time we will inevitably have to have a tougher discussion, potentially as part of reparations to Ukraine, to actually seize the assets that are now frozen within the EU,” he said, adding: “That’s probably a question for the future.”

Shortly after Euronews’ Wednesday interview, it emerged that EU countries had cleared an unprecedented plan to issue a €35 billion loan to support Ukraine’s war-battered economy using the immobilised assets of Russia’s Central Bank as collateral.

But Budapest has said it won’t yet agree to extend underpinning sanctions from the current six months, a US request intended to offer long-term certainty.  

On Wednesday, Hungary’s pro-Russian stance prompted angry clashes between Prime Minister Viktor Orbán and European Commission President Ursula von der Leyen during a European Parliament debate.  

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Lithuania is also facing upcoming parliamentary elections starting this weekend, which could see a left-wing coalition take over the current centre-right coalition – but the view from Brussels should stay the same, Liutvinskas reckons.  

“Pretty soon now we’ll see what the results are, but my take is that on the key strategic and fundamental issues, be it security or foreign policy or outlook towards the EU, we should not have dramatic changes,” he said.