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You're reading: Lithuania to reject austerity, quick euro entry in vote

VILNIUS - Austerity-weary Lithuanians are set to eject the country's ruling centre-right coalition in an election this month, a move likely to delay the moment the small European Union member state joins the euro and to ease ties with Russia.

However, the new government, which opinion polls show is
likely to be a broad coalition led by the centre-left Social
Democrats, is expected to largely stick to austerity as the
Baltic state cannot afford to be frozen out of debt markets.

“The situation is unbearable, half of Lithuania has
emigrated,” said Svetlana Orlovskaya, 65, as she headed to work
as a factory cleaner in a suburb of the capital city Vilnius.

She said Prime Minister Andrius Kubilius, head of a
four-party coalition since 2008, had not done “anything good”.

The election is likely to influence when Lithuania seeks to
join the single currency. Kubilius has said 2014 would be a
realistic date, but Social Democratic leader Algirdas
Butkevicius told Reuters he is aiming for 2015.

Along with Latvia and Estonia, Lithuania has been held up to
euro zone states as an example of how to successfully implement
tough austerity measures. It cut spending and raised taxes
following the 2008 global crisis.

The flip side, however, was falling wages and living
standards and a 15 percent drop in output in 2009. Some growth
has returned, but thousands have emigrated, the jobless rate is
13 percent and the country remains one of the poorest in the EU.

Kubilius, 56, a veteran politician, has defended his record,
which included keeping the litas currency pegged to the euro.

“Back in 2009 the budget deficit would have been 15 percent
(of GDP), but it ended at 9 percent. This year it will be about
3 percent,” he said in his office.

But political scientist Kestutis Girnius of the Institute of
International Relations and Political Science said people were
fed up with austerity, and with Kubilius, who has a dour image.

“As one of his advisers has said, he seems like a surgeon
who would say ‘Let me cut off the leg, but you won’t get any
anaesthesia’,” said Girnius.

Lithuania has two voting rounds: on October 14 half the
seats will be decided on a proportional representation basis,
with the rest decided two weeks later in runoffs in districts.

Lithuanians will also vote in a referendum on Sunday on
whether to back a new nuclear power plant. Polls show most
people will reject it, but political parties might ignore the
result as the referendum is advisory rather than binding.

CENTRE-LEFT COALITION

Social Democratic leader Algirdas Butkevicius, whose first
choice of coalition is with the Labour Party, led by a
Russian-born businessman, and with a party led by an impeached
former president, Rolandas Paksas, backs rises in the minimum
wage and a progressive income tax which would be fairer to lower
earners.

“It has to be recognised that if the situation in the work
market does not change, there could be social clashes this
winter as heating prices will rise,” Butkevicis told Reuters.

But DNB Nord economist Rokas Bancevicius said he saw little
leeway for a new government to go on a spending spree.

“Even if budget policy will be slightly looser it might not
actually have a big economic impact,” he said.

How the issue is handled may influence when Lithuania seeks
to join the euro, something it is determined to do despite the
currency bloc’s debt crisis. To adopt the euro, a country has to
keep its budget deficit below 3 percent of output and meet
targets on inflation, debt and long-term interest rates.

President Dalia Grybauskaite, a forceful former EU
Commissioner who oversaw budgets, has the role of choosing the
prime minister after elections. She backs fiscal discipline.

The Social Democrats back more constructive ties with Russia
after Kubilius sought to lower gas prices and restructure the
gas industry, against which the Kremlin loudly protested.

Ex-Soviet state Lithuania and Russia have often had testy
relations since the Baltic state regained independence in 1991.

Lithuanian elections often throw up protest parties.

This year, that party has been formed around a former judge,
whose brother died – though some suspect he was murdered – after
alleging his daughter was assaulted by a paedophile ring, which
was covered up by officials.

The brother, in turn, was suspected of killing a judge he
accused of being a member of the ring as well as the sister of
his ex-girlfriend. He had alleged his former girlfriend was also
complicit in their daughter’s abuse.

“My brother was killed, the daughter of my brother was
abused sexually, that made me go into politics,” said Neringa
Venckiene, the key figure in the new Path of Courage party.

She said people backed her because “the state is totally
ruined, totally degraded”. Polls show her party will just make
it into parliament, but she said it could win 20 to 30 seats.

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