LONDON (Reuters) – In their battle to bolster state finances and avoid sovereign defaults, euro zone policymakers may do well to examine the efforts of tiny neighbour Lithuania to reform state-owned enterprises.

The Baltic economy’s drive to squeeze higher returns from state assets ranging from office blocks to forestry firms, offer beleaguered European countries a reminder of what UBS has dubbed “the forgotten side of the government balance sheet”.

As privatisation plans in Europe falter, some say governments should focus on generating greater profits from these assets rather than selling them for paltry returns in debt-cutting fire sales.

Lithuania eyes sixfold increase in returns from state-owned enterprise ambitions: “The Pavlovian reaction of politicians is to sell these assets but you can do much more than that. You can rationalise these assets, make them more profitable through better management,” said Stephane Deo, chief European economist at UBS.

Deo estimates that euro area governments hold some 2.35 trillion euros (2.06 trillion pounds) of financial assets and roughly 4 trillion in fixed assets such as buildings and roads.

Governments could do more to “sweat” these assets, he said.

Italy, Portugal and Greece, for instance, raised under 5 percent of total 2009 state revenues from fixed assets though such holdings are worth the equivalent of 30 percent of their individual GDP.

BUDAPEST/LONDON, Nov 10 (Reuters) – Hungary will find meeting its 2012 economic growth target of 1.5 percent a major challenge in the current global climate, but it thinks the European Commission’s forecast of 0.5 percent is too low, prime minister said on Thursday.

Viktor Orban also said eagerly awaited assessments from rating agencies on the country’s sovereign rating would likely come at the end of this month, adding that the likes of Moody’s and Standard & Poor’s did not always approve of his government’s unorthodox policies.

“The EC…said growth levels in Hungary (next year) will be 0.5 percent (and) the budget deficit will be 2.8 percent (of GDP). I don’t agree. We think growth will be higher and the deficit will be 2.5 percent,” he told an audience at the London School of Economics.

But the government’s growth target would be “extremely difficult” to meet, and the challenge for Hungarian policymakers was to come up with a plan to generate at least 1 percent more growth than expected by the Commission.

According to the fresh forecasts released by the Commission on Thursday, Hungary’s economy — the most vulnerable in central Europe due to its high debt and huge stock of foreign currency mortgages — is expected to grow by 1.4 percent this year, up from last year’s 1.3 percent.

Next year is expected to bring a marked slowdown as the country’s export markets — mostly Germany — will be affected by the impact of the debt crisis, and domestic demand in Hungary will stay depressed.

The Commission sees the budget deficit gap widening to 3.7 percent in 2013.