Austerity-weary Lithuania ejects government: exit poll

VILNIUS Sun Oct 14, 2012 2:39pm EDT

1 of 7. A man casts his vote in Vilnius October 14, 2012.

Credit: Reuters/Ints Kalnins (LITHUANIA - Tags: POLITICS ELECTIONS)

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VILNIUS (Reuters) - Lithuanians voted out their government in an election on Sunday, an exit poll showed, in a taste of what may await other European leaders forced by the financial crisis to implement unpopular austerity measures.

An ex-Soviet state of about three million people, Lithuania crashed hard when the crisis hit four years ago. It made tough budget cuts in response and is now returning to economic health - but too late for voters fed up with belt-tightening.

An exit poll read out on national television after voting finished suggested Lithuanians had thrown out center-right Prime Minister Andrius Kubilius in favor of a coalition of left-leaning opposition parties who promise to soften the austerity.

One of the likely leaders of the coalition told Reuters he would cushion vulnerable sections society from market forces, but would not throw away prudent economic policies.

"We are going to continue austerity in Lithuania, if we are in government," Algirdas Butkevicius, head of the Social Democrats, said in an interview at his party headquarters after the exit poll came out.

He said his party intended to keep next year's deficit at the same level as the one projected by the government in power now. "Our fiscal deficit I think will be in the next year about 2.5 percent of GDP (gross domestic product)," he said.

The Baltic Sea nation jumped quickly to implement austerity measures and is held up by euro zone countries as a model of how to respond to the crisis. It is a bellwether for governments in Greece, Spain, Ireland and elsewhere, who are being forced to make similar swinging cuts.

The RAIT/BNS exit poll gave the biggest share of the vote, 19.8 percent, to the Labour Party. The center-left Social Democrats, likely coalition partner for Labour, were second with 17.8 percent and the prime minister's Homeland Union was in third place on 16.7 percent.

The final shape of the next government will not be clear until talks take place on forming a coalition. It may come down to a second round, to take place in two weeks, which will settle races in local districts where no candidate had a clear lead.

But it appeared very unlikely on Sunday that the prime minister would be able to stay in power, after voters held him accountable for the tough decisions he took to drag Lithuania out of crisis.

"What kind of crisis management are we talking about?" asked Alfonsus Spudys, 78, on his way out of a polling station earlier on Sunday in the capital, Vilnius. "They scythed people down ... and now they are saying they handled the crisis really well."

Before the financial crash in 2008, Lithuania was booming. Scandinavian banks provided cheap credit which let the country buy more than it sold and over-heated the real estate market.

When the crisis struck, the banks stopped lending. Economic output dropped by 15 percent in 2009. Unemployment shot up. Thousands of young Lithuanians went abroad to seek work.

Kubilius, elected after the crisis began, cut pensions and public sector wages. To save money, only every third street lamp in Vilnius was lit, and fuel for police cars was rationed.

This discipline helped the economy rebound. Gross domestic product grew 5.8 percent last year, one of the fastest rates of any European Union economy. The budget deficit has been tamed.

TOUGH MEDICINE

But many Lithuanians now say the price was too high, even though institutions like the International Monetary Fund (IMF) have heaped praise on the country's leaders.

"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."

The most likely outcome, analysts say, is that a ruling coalition will be formed between Labour, which is led by Russian-born businessman Viktor Uspaskich, the Social Democrats and the smaller Order and Justice Party.

These parties have said they will ease the pain of austerity by increasing the minimum wage, making the rich pay higher income tax than the poor and launching job creation schemes.

However, economists say the country's still-delicate finances dictate that whoever is in government will have to stick, for the most part, to the existing austerity program.

(Writing by Christian Lowe; Editing by Rosalind Russell)

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