Lithuania's leftists move to form government

Lithuania's leftwing and populist opposition were crafting a three-party government coalition Monday after voters ground down by austerity evicted the centre-right in a general election. Analysts said sweeping changes to the defeated Conservative-led coalition's policies were unlikely, given the budgetary constraints Lithuania faces in the wake of one of the world's deepest recessions. The centre-left Social Democrats, leftwing populist Labour party and rightwing populist Order and Justice movement won a combined 79 seats in the Baltic state's 141-member parliament, results from Sunday's run-off polls showed. The trio had already launched coalition talks after Labour and the Social Democrats pushed the Conservatives into third place in the first round of the election on October 14. "We have agreed to form a three-party coalition, with the post of prime minister going to the Social Democrats, and to begin drawing up our government programme," Social Democrat leader Algirdas Butkevicius said Monday after meeting with his Labour and Order and Justice counterparts. "We don't have any points of disagreement," he added. "We'll have several priorities, including the refurbishment of buildings, reforming the heating sector and raising the minimum wage. We're also going to set up a working group to reform tax policies," he explained. The new premier must be nominated by President Dalia Grybauskiate by the end of November, and Labour leader Viktor Uspaskich said Butkevicius was "certain" to get the job. He quit as finance minister in 2005, a year after Lithuania joined the European Union, when a Social Democrat-led government failed to close the gap between spending and revenue amid breakneck economic growth. In any case, the new government's hands will be tied, analysts said. "Taking into account financial markets, EU membership and the EU's excessive deficit procedures, the room for manoeuvre would be limited," Ramunas Vilpisauskas, director of the Institute of International Relations and Political Science in Vilnius, told AFP. "A few symbolically-important pledges may be implemented. But I guess that a major part will stay on paper," he added. One constraint is Lithuania's goal of adopting the euro, which is pegged to the national currency, the litas. Unfazed by the eurozone crisis, Lithuania has argued that it makes sense to join the monetary bloc -- potentially by 2015 -- and a new government is seen as unlikely to change course. A hurdle for would-be members, the eurozone's fiscal control rules are being given teeth to try to prevent the kind of breaches long committed by countries that use the euro. "There is no way around the fact that fiscal consolidation will have to be continued," said Danske Bank economist Lars Christensen. The parties also pledge to "reset" ties with Soviet-era master Moscow, rocky since Lithuania split from the communist bloc in 1990. Tensions have spiked after a complaint by Vilnius paved the way for an EU competition probe of alleged market abuses by Russian energy giant Gazprom, Lithuania's sole gas supplier. The Conservative government stepped up plans to build a liquefied natural gas terminal by 2015 to tap imports from new sources and lessen Gazprom's clout. Uspaskich has strong ties with Russia, where he was born. The controversial ex-minister, member of the European Parliament and businessman -- who made his fortune importing gas and producing gherkins -- is locked in a long-running party funding probe by Lithuanian prosecutors and tax authorities. The new coalition government will assume power at a time of economic uncertainty for the nation of three million. The Conservatives beat a Social Democrat government in the 2008 election with a belt-tightening message. But Lithuania's slump was far worse than expected, as the economy shrank by 14.8 percent in 2009. The Conservative-led coalition brought in austerity measures much wider in scope than those adopted in western members of the 27-nation EU, avoiding a currency devaluation or international bailout. Growth returned in 2010, at 1.4 percent, before hitting 6.0 percent in 2011, but too few voters felt the benefits, analysts said. The pace slowed to a forecast 2.5 percent this year, due to the continued woes of Lithuania's European trade partners.