Lithuania Opposition Parties Grab Lead Over Kubilius in Vote

Lithuania’s opposition Labor Party and Social Democrats lead Prime Minister Andrius Kubilius’s party after a first round of voting in parliamentary elections.

The Labor Party, led by Russian-born entrepreneur Viktor Uspaskich, won 20 percent, or 17 seats in the new parliament, based on counting from 1,985 of 2,017 districts, the election commission said today on its website. Former Finance Minister Algirdas Butkevicius’s Social Democrats garnered 18.5 percent of the vote, or 16 seats, while Kubilius’s Homeland Union-Christian Democrats placed third with 14.9 percent, or 12 seats. Four other parties also qualified for parliament.

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. Yield on Lithuania’s dollar bond due 2022 fell to 3.4263 percent today, the lowest since its January debut.

“Voters have called for a different kind of government than the one we’ve had,” Uspaskich told a news conference today in Vilnius.

Nuclear Referendum

A Cabinet will be formed after Oct. 28, when a second round of balloting will take place in 68 of the single-mandate districts that comprise 71 of the 141-seat parliament. Three seats were decided in the first round as candidates there won more than 50 percent of the votes.

Turnout was about 52 percent, according to the election commission. In a non-binding referendum also held yesterday, 62.7 percent of voters rejected a plan to build a nuclear power plant with Japan’s Hitachi Ltd. (6501) compared with 34.1 percent in favor, results from 95 percent of districts showed. The number of ballots cast on the issue appeared to be sufficient to validate the referendum, commission head Zenonas Vaigauskas said on national television today.

Kubilius’s government, the first to serve a full term since independence was regained 22 years ago, has been trying to avoid the fate of others in Europe, which 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.

The Cabinet 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.

Deficit Target

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.

The cost of insuring state debt against non-payment for five years using credit-default swaps was 149 basis points today, compared with 845 points in February 2009, according to data compiled by Bloomberg.

The new coalition will probably consist of three parties as there is no clear leader at present, Uspaskich said, though Kubilius predicted the current ruling parties would gain the upper hand in the next round of voting.

“I’m convinced that after the second round, our tried and tested coalition of the Liberal Movement and Homeland Union will have every possibility to become the core of a new ruling coalition,” he told reporters today. The Homeland Union has 36 candidates advancing to run-offs in the single-mandate districts, the most of any party, with 19 of those ahead of their opponents.

Negotiations

Social Democrat leader Butkevicius said that he also expects his party’s position to be stronger after the second round. The Social Democrats have started negotiations with other current opposition parties to form a majority coalition if policy positions can be harmonized, he said.

“We have to stimulate Lithuania’s economy, create jobs and output, but not by spending borrowed money.” he told reporters today. “We need to boost revenues where possible, and focus on the areas of the economy where wages are especially low. There won’t be any sudden tax reforms.”

The Liberal Movement, part of the current coalition, was one of four other parties that exceeded the 5 percent barrier to parliamentary representation, getting 8.4 percent support, or 7 seats. The Way of Courage, founded in March, had 7.9 percent, or 7 seats, impeached ex-President Rolandas Paksas’s Order & Justice got 7.4 percent for 6 seats, and the Lithuanian Polish Election Action won 5.9 percent of votes, or 5 seats, according to the latest results.

Joblessness, Exodus

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.

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.

Wage Increases

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

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 spending pledges by some parties.

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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