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Lithuanian President Approves Incomplete Butkevicius Cabinet

December 07, 2012

Lithuanian President Dalia Grybauskaite approved 12 of the 14 Cabinet members proposed by Premier-designate Algirdas Butkevicius, saying the country needed a new government to take office without further delay.

“Important work and decisions are waiting,” Grybauskaite said today in a statement e-mailed by her office in Vilnius, the capital. “That’s why I signed the decree to approve the government whose composition is incomplete.”

The decision ends a six-week post-election stalemate between the president and a coalition of four parties with a majority in parliament, led by Butkevicius’s Social Democrats. Grybauskaite rejected two of the Labor Party’s four candidates for Cabinet posts, leaving the education and social security portfolios empty.

Butkevicius plans to present the government and its policy program to parliament on Dec. 11, expecting to win lawmakers’ approval and take office two days later, according to his spokeswoman, Evelina Butkute. The 141-member legislature, in which three seats are unoccupied, authorized him to form a government on Nov. 22 by a vote of 90 to 40 with 4 abstentions.

“The government can work perfectly well without two ministers” until Labor proposes new candidates, Butkute said by telephone today.

Market Reaction

Lithuania’s dollar bond due 2022 rose today, pushing the yield down to a record 3.093 percent at 2:30 p.m. in Vilnius from 3.290 yesterday.

“Investor concerns eased following both the appointment of Prime Minister Butkevicius and today’s approval of the new Cabinet,” Mohammed Kazmi, an emerging markets strategist at Royal Bank of Scotland in London, said by e-mail today. “The focus will turn to the 2013 budget bill, which will be a key indicator of the extent to which the government intends to loosen fiscal policy to boost growth.”

Butkevicius, 54, served as finance minister in 2004-2005 and as transportation minister in 2006-2008. Speaking in parliament last month, he quoted U.S. President Abraham Lincoln, saying his government would seek to be “for the people” by focusing less on fiscal discipline and more on economic stimulus.

As per a coalition agreement, the Social Democrats delegated seven ministers, in addition to Butkevicius, to head the departments of finance, economy, foreign affairs, defense, transportation, health care and justice.

‘Key Negative’

The Ministry of Finance will go to Rimantas Sadzius, 52, who held the same post in a previous government from May 2007 to December 2008.

The draft 2013 budget sent to parliament by the outgoing government reduces the fiscal deficit to 2.5 percent of gross domestic product from this year’s planned 3 percent. Butkevicius has pledged to revise the draft budget to allow for an increase in the minimum wage without increasing the deficit. “Abandoning fiscal consolidation efforts would be a key negative for the credit,” said Kazmi at RBS. “It would alter the country’s image of tightly managed public finances that enabled Lithuania to maintain access to international markets throughout the global financial crisis.”

Labor Dispute

Grybauskaite initially opposed allowing any members of the Labor Party to serve in the Cabinet as the party and its leaders are suspected of fraud and election violations.

She today approved Labor delegates to be the ministers of agriculture and culture, and said new Labor candidates to lead the education and social security ministries would be judged based on their record and competence.

The General Prosecutor’s Office has asked parliament to remove the immunity from prosecution of three Labor members in the chamber: party and faction head Viktor Uspaskich, first deputy speaker Vytautas Gapsys, and Vitalija Vonzutaite of the Budget and Finance Committee.

Lawmakers’ approval is needed to continue a trial in a Vilnius court where they are charged with accounting fraud on behalf of the party. The three deny any wrongdoing and are fighting the charges. A special parliamentary commission is due to issue recommendations on the matter next week.

Among other coalition partners, impeached ex-President Rolandas Paksas’s Order & Justice party delegated ministers of environment and internal affairs, and Lithuanian Polish Election Action, which represents the country’s Polish minority, proposed the new energy minister.

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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