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September 22, 2017

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Voters in Lithuania ditch gov't in austerity thumbs-down

VILNIUS, Lithuania -- Lithuania's opposition prepared to take power on Monday after voters rejected a government that won widespread praise abroad for steering its citizens through the financial crisis with heavy budget cuts.

An ex-Soviet state of about three million people, Lithuania crashed hard when the crisis hit four years ago.

It slashed spending in response 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 center-left coalition now likely to take over promised during campaigning for Sunday's parliamentary election that it would ease the pain by raising the minimum wage, shifting the tax burden towards the better off and postponing adoption of the euro.

One coalition leader told Reuters the budget deficit might, at a later date, be allowed to go above the level that eurozone policymakers view as prudent.

But the new government will have to walk a tightrope.

Lithuania is still heavily indebted, and if debt markets — which welcomed its predecessor's austerity drive — do not trust the plans to ease the belt-tightening, the cost of borrowing could go up so high the country plummets into another crisis.

Debt markets showed no immediate reaction on Monday.

Voters, Not IMF, Hold Cards

With most votes counted early on Monday, it was clear the government of Prime Minister Andrius Kubilius had lost — having won praise from big European powers and the International Monetary Fund (IMF) for its thrift.

"If the IMF was voting then he (the prime minister) would be re-elected," said Kestutis Girnius, who teaches at the Institute for International Relations and Political Science in Vilnius.

"But the IMF does not live in Lithuania, and they could not live on a Lithuanian salary."

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