Lithuanian Premier’s Party Set to Lose Power After Election

  • Prime minister unlikely to keep job on wage, emigration gripes
  • Peasants Party, Homeland Union tipped to form next cabinet

Lithuanian Prime Minister Algirdas Butkevicius’s Social Democrats were pushed into third place in parliamentary elections as voters voiced disquiet over pay and opportunities in the tiny Baltic nation that seven years ago became a trailblazer for European Union austerity.

Sunday’s national vote left the Peasants & Green Union and the Homeland Union-Christian Democrats neck and neck on 21.6 percent with almost all ballots counted. The Social Democrats had 14.4 percent, with support for the ruling coalition they lead sinking on persistent emigration, sluggish salary growth and a procurement scandal that worsened already frosty ties with President Dalia Grybauskaite.

“The dominant scenario is that the Peasants and Homeland will form the basis of a new center-right coalition,” Ramunas Vilpisauskas, director of the Institute for International Relations and Political Science at Vilnius University, said Monday by e-mail. With a second round of voting in single-mandate constituencies to come on Oct. 23, the “big intrigue” is which party will have a better bargaining position to nominate the next premier, he said.

Dalia Grybauskaite during a pre-vote for parliamentary elections in Vilnius on Oct. 5.

Photographer: Petras Malukas/AFP via Getty Images

Lithuania, a euro-area and NATO member that borders Russia and Poland, won plaudits for its response to one of the continent’s worst recessions after the 2008 crisis. But the recovery hasn’t stemmed an exodus of workers or triggered the kind of wage growth seen elsewhere in the region. Campaigning, rocked by graft scandals at parties including the Social Democrats, has focused on pledges of future prosperity, though tight fiscal policy is set to stay.

Three other parties surpassed parliament’s 5 percent entry barrier, including Order & Justice, a junior coalition partner, and the Liberal Party, which may join the new government. Nevertheless, Order & Justice Chairman Rolandas Paksas said he’d step down, as did Valentinas Mazuronis, leader of the Labor Party, which missed the threshold to enter the legislature.

The national vote, where turnout was 50.5 percent, decides 70 of parliament’s 141 seats, with individual constituencies accounting for the rest. Only three single-mandate races were decided Sunday, leaving a large number of seats up for grabs in the runoffs in two weeks.

“People voted for change and against the scandal-ridden coalition,” Grybauskaite, who has no official party affiliation, said Monday, according to the BNS news service. “But the election isn’t over yet.”

Butkevicius, 57, said he wouldn’t make any announcements about his future until after the next round of voting. Homeland Union leader Gabrielius Landsbergis said the Social Democrats had been handed a defeat and that it’s hard to see them joining the next coalition. He said he’d be prepared to take over as prime minister in an alliance with the Peasants and the Liberals. Peasants leader Ramunas Karbauskis said he doesn’t plan coalition talks until all voting has been completed.

For more on the trials and tribulations of Baltic workers, please click here

Butkevicius campaigned on further increasing the minimum wage to help lift average monthly salaries to 1,100 euros ($1,230) by 2020 from 772 euros now. Homeland Union, popular among urban voters, pledged to boost average pay to 1,250 euros. Having secured investment from the likes of Barclays Plc when last in power, it promised 147,000 new jobs, a higher cutoff for untaxed earnings and the return of 80,000 emigrants to the nation of 3 million. The Peasants advocate less red tape and a more technocratic government.

Whatever the final outcome, a budget stance that’s reined the deficit back within EU limits is unlikely to change with the big parties shunning major additional expenditure beyond meeting NATO-mandated defense outlays by 2020 in the wake of Russia’s Crimea annexation. Economic growth, while curbed by EU sanctions against Russia that Grybauskaite strongly backs, is set to top 3 percent in 2017 and 2018. Government bond yields are near all-time lows.

Fitch Ratings said last month in a report that it’s “not expecting a new government to diverge from the current economic, fiscal and social-policy agenda, regardless of the outcome of upcoming parliamentary elections.”

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