Bloomberg News

Lithuanians Vote in Runoffs as Opposition Vies for Dominance

October 28, 2012

Lithuanians are voting in a second round of elections as opposition parties vie to lead a new coalition replacing Prime Minister Andrius Kubilius’s austerity- focused government.

The Labor Party won the most seats in the first round while Kubilius’s Homeland Union-Christan Democrats placed third. Polling stations opened at 7 a.m. local time and balloting ends at 8 p.m. Initial results are expected at about 10 p.m.

The opposition lured voters with spending pledges after austerity measures devised by Homeland Union intensified the Baltic nation’s deepest recession in 2009 and 2010. While support for Labor, the Social Democrats and Order & Justice, which plan to form a coalition, should propel them into power, Labor may struggle to retain its initial lead, according to Oxford University’s Ainius Lasas.

The Social Democrats “are the most likely to head the government,” Lasas, a senior research fellow focusing on media and democracy in central and eastern Europe, said Oct. 24 by phone. Their positions are “quite strong” and they will probably end up with more seats, he said.

While a “center-left” coalition of the Social Democrats, Labor and Order & Justice seems most appropriate for Lithuania’s current policy needs, agreement between the three parties is still preliminary, Social Democrat leader Algirdas Butkevicius said after voting today in the capital, Vilnius. “Every party has the right to decide they’d prefer to work with someone else and notify the other partners,” Butkevicius told reporters.

Labor Leads

The yield on Lithuania’s dollar bond due 2022 was 3.578 percent late on Oct. 26 in Vilnius, near the lowest since its January sale. The cost of insuring government debt against non- payment for five years using credit-default swaps was 144 basis points, compared with 845 points in February 2009, data compiled by Bloomberg show.

Labor won 18 of parliament’s 141 seats in first-round voting and is competing for 35 more through runoffs in the single-mandate districts that make up half of the legislature. The Social Democrats, which have 16 seats, will run in 28, while Order & Justice has six seats and will challenge for seven more. Homeland Union got 13 seats in the first round Oct. 14.

‘Artificial Provocations’

Election officials have ordered a rerun in one district, saying a Labor candidate made illegal payments to voters and altered the outcome. The Constitutional Court upheld the decision in a ruling published Oct. 26 on its website, saying parliament needs to amend laws and give the election commission more powers to prevent or punish such offenses.

Police are now investigating 22 incidents during this year’s election, the police department said Oct.26 on its website, without identifying the parties involved. Nine cases involved Labor, four Order & Justice, two Homeland Union and one the Social Democrats, the Baltic News Service reported Oct. 24, without saying where it got the information.

The accusations have hurt voter support for Labor, according to party head Viktor Uspaskich, who called them “artificial provocations” by rivals. Other parties haven’t commented publicly about investigations of their members.

“It’s not so important to be in first or second place,” he said Oct. 24 by phone. “In any case we’ll have to work in a coalition government, so I don’t see much difference.”

Living Conditions

Kubilius’s government, the first to serve a full term since Lithuania regained independence from the Soviet Union 22 years ago, has been trying to avoid the fate of European leaders who lost power in a wave of anti-austerity protests. The policies, designed to shield nations from the euro area’s debt crisis, instead contributed to recessions in economies from Romania to Spain.

The Cabinet cut wages and raised taxes equivalent to 12 percent of gross domestic product in 2009 and 2010 as output plunged by almost a quarter. Plans to narrow this year’s budget deficit to the European Union cap of 3 percent of GDP from 9.4 percent in 2009 have helped push borrowing costs to record lows.

While Lithuania’s GDP will advance 2.5 percent this year and 3 percent in 2013, according to the Finance Ministry, the recession fueled joblessness and sparked an exodus of workers.

Russian-born entrepreneur Uspaskich’s Labor Party, former Finance Minister Algirdas Butkevicius’s Social Democrats and impeached ex-President Rolandas Paksas’s Order & Justice are negotiating the formation of a new coalition to “improve living conditions for the people of Lithuania as quickly as possible,” the parties said in a joint statement Oct. 16.

‘No Revolutions’

The Labor Party says it will raise the minimum wage to 1,509 litai ($565) a month from 850 litai and reduce the value- added tax on basic food stuffs. The Social Democrats, who have advocated euro adoption a year later than Kubilius’s 2014 goal, have pledged to create jobs and adjust income-tax rates to benefit those who earn least.

President Dalia Grybauskaite, a former EU budget commissioner who must name Lithuania’s new premier after the elections, has criticized spending pledges by some parties. The Social Democrats’ Butkevicius has said “there will be no revolutions in the budget.”

While Kubilius’s Homeland Union may improve on its first- round showing and could end up with more votes than any other party, it won’t be able to form a coalition because its natural partners lack sufficient support, according to Tomas Janeliunas, who lectures at Vilnius University’s Institute of International Affairs and Political Science.

With the voter-fraud scandal damaging Labor’s runoff prospects, that puts the Social Democrats in pole position, he said Oct. 24 by phone.

There will probably be “some shifting of weight” within the planned coalition, Janeliunas said. “It seems logical the Social Democrats will take the role of the leader and most likely hold the premiership.”

To contact the reporter on this story: Bryan Bradley in Vilnius at bbradley13@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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