Lithuania offers battered Europe a break from populist drama

Lithuania offers battered Europe a break from populist drama
There's little debate in Lithuanian politics about where the country is headed.
By Tim Gosling in Prague October 6, 2016

Lithuanians go to the polls on October 9 to vote in the first round of a general election. Prime Minister Butkevicius of the Social Democrat Party (LSDP) hopes to be the first ever premier to complete his term and win re-election. The incumbent leads tight polls, suggesting a broad coalition will result. That reflects the fact that whichever way the vote goes, major policy is unlikely to change, with the country largely immune to the populist wave engulfing much of Europe.

Economic and fiscal policy, aimed at continuing the steady recovery from the meltdown seen in 2009, is largely uniform amongst the challengers. Indeed, while much of the EU continues to rock from the rise of extremist parties, Lithuania has, for now at least, largely left behind the erratic policy that stemmed from a series of elections in the first decade of the century that were hijacked by populists. 

The nationalist Order & Justice (TT) could yet force its way again into government as a junior coalition member. However, its stance is soft compared with those to the west, and it is now challenged by new centrist parties for its role.

The lack of progress made by populist parties most likely reflects Lithuania’s fear of Russian aggression and its dependence on the EU and US for security assurances. Russia is the major issue that presses on the Baltics. The threat from the east – genuine or not – means Lithuania and its neighbours remain amongst the most dedicated Europhiles.

Indeed, all of the Baltic states rushed to join the euro even whilst still clawing their way back from economic crisis in 2009, and there is little serious Euroscepticism evident amongst major Lithuanian parties. That has left little space for Brussels-bashing in political discourse, despite general opposition to the idea of migrant quotas.

Another point of stability is President Dalia Grybauskaite. She remains Lithuania’s highest profile politician despite her largely ceremonial post. A former European commissioner, she has raised her profile via a forceful stance towards Moscow, an enthusiastic role in promoting the EU, and as part of the vanguard of centre-right female leaders making their presence felt across Europe.

Again, showing how the percieved reawakening of Russia's imperial ambitions is producing a consensus in Lithuania, Grybauskaite caused quite a kerfuffle in 2012 as she vetoed the appointment of the left-leaning LSDP coalition due to objections over the inclusion of the Labour Party (DP), which faced charges of vote rigging. However, the president has since formed a cooperative working relationship with Butkevicius over the past four years.

For the PM’s part, he has moved steadily from the left towards the centre, and shed early suggestions that he could deal more “pragmatically” with Moscow. The LSDP did well in 2012 by taking advantage of unhappiness provoked by the harsh austerity policies of the former centre-right government led by Homeland Union (TS-KD). However, despite some loosening of the purse strings, the current coalition has continued to try to balance Lithuania’s fiscal indicators.

That approach is unlikely to change. “Whilst political uncertainty [over the eventual make-up of the next government] is high,” wrote Fitch Ratings analysts on October 4, they add that they do not “expect a change in government to materially alter the existing economic, fiscal and social policy agenda”.

Sober

It’s not that Lithuania has seen none of the wave of sentiment against the “political elite” that has provoked the rise of Trump and Orban or the Brexit vote. However, the political alternatives offered in the Baltic state remain sober, curtailed by the looming Russian issue.

With the mainstream parties hit by a rash of scandals in recent months, the conservative agrarian Peasant and Green Party (LVZS) is the main upstart threatening to disrupt this election. Polls suggest the party will be part of any eventual coalition.

While LVZS has made some points of criticism towards Brussels, and of support for increasing the power of national capitals, the debate remains cool compared with many across Europe. The pro-business Liberal Movement (LS) is the other new party likely to make the grade, although it has been hit recently itself by a corruption scandal.

The centre-left Social Democrats lead the polls on 16%, but that support is on the slide. LVZS is polling 11-13%, with Homeland Union around 11%. LS is lagging badly in the wake of its scandal and sits on around 4-6%, however, it is widely forecast to cross the 5% threshold to enter parliament. Order & Justice and Labour should also take a handful of seats.

It appears a safe bet that the next government will, like the departing one, feature at least three parties. But whichever way the wind blows, policy will likely remain largely consistent. Conservative economic policy will persist, while the Russian question looms to keep any strong populist voices at bay. “[The] implications of the two main scenarios for economic policy differ only slightly, because all three large parties would likely continue the current tight fiscal policy,” writes Otilia Dhand at Teneo Intelligence.

The alignment of many of the parties to the right of centre makes it a distinct possibility that the Social Democrats could win the most votes at the election, but find themselves in opposition to a coalition led by Homeland Union in tandem with the LVZS and LS. However, LVZS has made clear its disdain of Homeland Union, while it remains to be seen how strongly LS can recover from its current collapse. Butkevicius may yet make a little Lithuanian history.

Governments in Vilnius have been marked by a lack of continuity since independence that has interrupted projects home and abroad, and done nothing to help smooth vital cooperation with Estonia and Latvia, the other two Baltic states. A referendum on the plans of the previous coalition to build a regional nuclear plant at Visaginas was even attached to the last parliamentary ballot in 2012, only for Butkevicius to try to resurrect a slightly altered plan less than a year later.

However, there is one project that unites Lithuanian politics: the effort to wean the country from its dependence on Russian energy. Despite past economic and political difficulties, Butkevicius has built on his predecessor’s long and bitter fight to wrest control of the country’s gas pipes from Moscow in order to deploy a floating liquefied natural gas (LNG) terminal in Klaipeda.

The ship provides the only alternative to Russian supplies of gas in the Baltic region. Despite the struggle to improve the economic prospects of the “Independence”, the project has quickly become a national symbol and the struggle to make it work will continue, no matter the result of the election. However, the key to that is found not in the Lithuanian parliament so much as next door in Latvia.

News

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss