Lithuania to boost defence spending despite c.bank warning on budget

VILNIUS, July 10 Thu Jul 10, 2014 10:00am EDT

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VILNIUS, July 10 (Reuters) - Lithuania's parliament voted on Thursday to boost defence spending to buy weapons and pay for an increased NATO presence despite warnings that doing so could breach fiscal discipline laws enacted with an eye to joining the euro.

The Baltic states of Lithuania, Latvia and Estonia, ruled by Moscow in Soviet times but now all NATO members, are seeking to improve regional security after Russia annexed Crimea.

Lithuania's parliament voted unanimously to increase the defence budget in 2014 by about 130 million litas (38 million euros), which along with the 57.5 mln litas rise in the original 2014 budget approved in December represents a 20 percent hike over 2013.

"The changing geopolitical and security situation in Europe after Russia's aggression in Ukraine" made it essential to increase spending, the defence ministry told parliament.

The increase will bring Lithuania's defence spending to 0.9 percent of gross domestic product in 2014, in line with the level in neighbouring Latvia.

Both countries plan to boost defence spending to the NATO target of two percent by 2020. Estonia, the smallest of the Baltic states, already meets the target.

Lithuania's central bank has warned that the government will need to cut elsewhere if it wants to increase defence spending and still balance its budget. But Defence Minister Juozas Olekas said security comes first.

"There will be nothing to be prudent about if there is no security and no free and democratic Lithuania," he told Reuters on Thursday.

Both Lithuania and Latvia cut defence spending during the recession caused by the global financial crisis in 2008.

Laws to limit spending to keep budget deficits in control were adopted later as both countries sought to adopt the euro currency.

Latvia joined the euro zone on Jan. 1, 2014, and Lithuania is expected to adopt the single currency from the start of 2015.

Lithuania's defence ministry said the additional money will be used to buy more anti-aircraft and anti-tank weapons. The country does not have tanks or fighter jets itself, and would rely on help from NATO allies in case of an attack.

NATO members states have already agreed to deploy more fighter jets to patrol the Baltic skies on a rotating basis. The United States has sent 600 troops to Poland and the three Baltic states for month-long infantry exercises. (Reporting by Andrius Sytas; Editing by Nerijus Adomaitis and Sonya Hepinstall)

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