Lithuania election: Opposition parties heading for win

Social Democrat party leader Algirdas Butkevicius celebrates in Vilnius , Lithuania, 28 October 2012 Initial results looked set to secure Social Democrat leader Algirdas Butkevicius as PM

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An opposition coalition is set to win Lithuania's election, with budget cuts and joining the euro the key issues.

With three-quarters of votes cast on Sunday counted, PM Andrius Kubilius's government looked set to be ousted.

The Labour Party and the Social Democrats started talks with the right-wing populist Order and Justice movement after a first round of voting on 14 October.

The three groups were on course to win 78 of 141 seats in parliament.

Incomplete results on Sunday evening gave the Social Democrats 38 seats, Labour 29 and Order and Justice 11.

Mr Kubilius's Homeland Union conservatives were on course to finish as the second biggest party, with 32 seats, according to unofficial results.

Voter turnout was said to be around 35%.

Labour's leader, Russian-born millionaire Viktor Uspaskich, said the figures meant Social Democrat leader Algirdas Butkevicius was "certain" to become the Baltic state's next leader.

Mr Butkevicius has promised to raise the minimum wage, make the rich pay more tax and put back euro entry until 2015, a year later than the government hopes.

Nuclear affordability

Lithuania's 3.3 million inhabitants face an unemployment rate of 13% and declining living standards, as well as high energy costs since the country closed its Soviet-era nuclear power plant in 2009.

They voted against government plans to build a new nuclear power station - seen as a way of cutting dependence on imported Russian energy - in a referendum held at the same time as the first round of elections, which were for half of parliament's seats.

Opposition parties had questioned the plant's affordability. They have promised to improve the ex-Soviet state's strained relations with Russia, still Lithuania's biggest trade partner.

But analysts say there will be little room for fiscal manoeuvre. Among the EU's poorest countries, the Baltic state needs to borrow 7% of its GDP - some 7.6bn litas (£1.75bn) - next year to refinance debt and fund the deficit.

Mr Kubilius came to power in 2008, just as the global financial crisis was bringing a dramatic end to an extended Lithuanian boom fuelled by cheap Scandinavian credit.

He staved off national bankruptcy with a drastic austerity programme as economic output dropped by 15%, unemployment climbed and thousands of young people emigrated in search of work.

The budget deficit has since been tamed and GDP reached growth of 5.8%.

Lithuania's approach won praise from other governments and the International Monetary Fund, but analysts say the rebound came too late to translate into a political revival for the conservatives.

Delaying euro entry means the country could run a bigger deficit than euro accession rules permit.

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