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Lithuanian government expects to generate 1 billion litai ($410 million) in revenue from action against tax evasion, smuggling and other illegal activities. The size of the shadow economy accounts for 27 percent of national output, led by smuggling, tax evasion and illegal labor, according to estimates by the Free Market Institute, the Baltic Business News portal reports.

“The plan to boost revenue from eliminating the shadow economy is ambitious but realistic”, finance minister Ingrida Simonyte said at a press conference today in Vilnius. “This will require a consensus in the society to reduce tolerance for illegal activities.”

However, the plan has already been met with scepticism from various analysts. “It is not very realistic,” said Violeta Klyviene, the chief Baltic economist for Danske Bank. To cut the budget deficit by 2 percentage points by increasing revenue from shadow economy alone may be not enough, she said.

The Lithuanian government approved a 2011 budget draft that will cut the deficit to 5.8 percent of gross domestic product because of accelerating economic growth and a clampdown on the illegal shadow economy. The deficit compares with an expected shortfall of 8.1 percent this year, the government said. The bill will now go to parliament for debate, writes Bloomberg.

The nation will have to continue cuts through 2012 to achieve its target of adopting the euro in 2014. Economic growth will probably accelerate to 2.8 percent in 2010, the finance ministry said.

The European Commission said on Sept. 21 that Lithuania has taken effective action to reduce its budget shortfall and is “on track to bring the deficit to below 3 percent” by the agreed deadline of 2012.