Lithuania Labor Party Leads Parliament Vote, Exit Poll Shows

Lithuania’s Labor Party is leading parliamentary elections after a first round of voting, making it most likely to lead a new coalition, an exit poll showed.

The party, led by Russian-born entrepreneur Viktor Uspaskich, won 19.8 percent of votes, according to a poll of 3,786 people by the RAIT agency for the Baltic News Service. Former Finance Minister Algirdas Butkevicius’s Social Democrats garnered 17.8 percent, while Prime Minister Andrius Kubilius’s Homeland Union-Christian Democrats placed third with 16.7 percent support, the poll showed.

Opposition parties lured voters with pledges to boost wages and trim sales levies to oust Kubilius, whose austerity measures intensified the Baltic nation’s deepest recession in 2009 and 2010. A new Cabinet will be formed after Oct. 28, when a second round of balloting will take place in the single-mandate districts that comprise 71 of the 141-seat parliament in the capital, Vilnius.

“The preliminary results show the Labor Party will play the key role in deciding whether the new ruling coalition leans more to the right or to the left,” Tomas Janeliunas, who lectures at Vilnius University’s Institute of International Affairs and Political Science, said by phone after the exit poll. “Homeland Union will in any case remain a strong party.”

Turnout Threshold

Turnout was 50.1 percent one hour before polling closed, above the 50 percent minimum threshold for the election to be valid, the central election commission said on its website. Results are due to be released from 10 p.m. in Vilnius as is the outcome of a referendum on whether Lithuania should build a new nuclear power plant, which was also held today.

There will probably be three parties in the new coalition as there is no clear leader at present, BNS cited Uspaskich as saying after the exit-poll results were released.

“I project that most likely it will be the Social Democrats, the Labor Party and Order & Justice.” BNS quoted him as saying. Teaming up with Homeland Union “won’t really work, since they say they won’t stimulate the economy and may increase taxes. That will be a dying economy.”

Austerity Backlash

Impeached ex-President Rolandas Paksas’s Order & Justice was one of three other parties poised to exceed the 5 percent barrier to parliamentary representation, getting 8.4 percent support, according to the poll, which had a margin of error of 1.2 percentage points. The Liberal Movement, part of the current coalition, and Way of Courage each had 8.5 percent, the results showed.

Kubilius has been trying to avoid the fate of European leaders who lost power in a wave of protests against austerity measures that contributed to recessions in economies from Romania to Spain instead of tackling the euro area’s debt crisis as envisaged.

His government cut wages and raised taxes equivalent to 12 percent of economic output in 2009 and 2010 as gross domestic product plunged by almost a quarter.

Kubilius is seeking to narrow this year’s budget deficit to close to the European Union’s cap of 3 percent of gross domestic product from 9.4 percent in 2009, plans that have helped push borrowing costs to record lows.

Bonds, Swaps

The yield on Lithuania’s dollar bond due 2022 was 3.552 percent Oct. 12, near the lowest since it was sold in January. The cost of insuring state debt against non-payment for five years using credit-default swaps was 152 basis points, compared with 845 points in February 2009, according to data compiled by Bloomberg.

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.

After falling from a peak of 18.3 percent in the second quarter of 2010, unemployment remains above 13 percent, driving emigration to countries such as Norway and the U.K.

Lithuania’s population dropped below 3 million for the first time in April, compared with 3.7 million in 1990. About 53,900 Lithuanians left the country in 2011, while 15,700 returned, the statistics office said in March.

“As a result of the huge emigration, we even face labor shortages,” the Social Democrats’ Butkevicius said today. “If we head the new government, one of our priorities will be initiatives that we hope will bring people back to Lithuania.”

Poverty Risk

Spending cuts and tax increases since 2008 have also pushed inequality to the highest level in the EU, with the proportion of people at risk of poverty surging to the biggest among the bloc’s 27 members, according to Eurostat.

The Labor Party says it will raise the minimum wage to 1,509 litai ($563) a month from 800 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.

These plans contradict promises by both parties to maintain control of fiscal affairs, Kubilius has said. President Dalia Grybauskaite, a former EU Budget Commissioner who must name Lithuania’s new premier after the elections, has criticized some parties’ spending pledges, urging fiscal responsibility.

“I hope they’ll think about Lithuania and not just about themselves,” Grybauskaite told reporters after voting today in Vilnius, asked about her expectations for the next government.

The state of public finances and the breadth of the new coalition will block deviation from Kubilius’s fiscal discipline, according to Oxford University’s Ainius Lasas.

“The left-of-center parties won’t go through with their rather populist promises, for objective reasons and because they won’t have enough power to make it happen,” Lasas, a senior research fellow focusing on media and democracy in central and eastern Europe, said Oct. 10 by phone. “It will all be blamed on the coalition.”

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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