Prudence to remain in Lithuania

Published on 16/10/2012 01:04

Lithuania’s newly elected coalition government tried to reassure financial markets yesterday it will not throw away fiscal prudence, after voters fed up with years of austerity measures gave opposition parties their backing.

A former Soviet and now EU state of about three million people, Lithuania crashed hard when the crisis hit four years ago. It slashed spending and, after a brutal recession, is now returning to economic health – but too late for voters who have seen their spending power eroded and unemployment soar.

The Labour Party, led by Russian-born millionaire Viktor Uspaskich, won Sunday’s election with 20 per cent of the vote, while the centre-left Social Democrats came in second with 
18.5 per cent. The two have agreed to form a new government to replace a centre-right coalition, which managed just over 23 per cent of the vote.

Mr Uspaskich said the coalition would stick for now to a deficit under 3 per cent of gross domestic product, but that this could be exceeded later.

Social Democrat leader Algirdas Butkevicius, who is in the running to be prime minister, said any softening of austerity would be gradual.

“Our position is not to be spending lavishly with borrowed money,” he said yesterday. “First you have to earn money to get higher revenues for budgets.”