Event

The two-round parliamentary elections, which were held on 14 and 28 October, have brought to power the opposition Social Democrat Party (LSDP), paving the way for a centre-left coalition that also includes the centrist Labour Party (DP), the populist Order and Justice Party (TT) and the lately joined Polish minority party. However, President Dalia Grybauskaite had battled strongly against the formation of such a coalition, as allegations of vote buying by the DP party had been circulating. What is more, just before the second round of the election, it had become publicly known that the DP party, its leader Viktor Uspaskicht and a few other members were charged with fraud in an earlier internal bookkeeping affair. President Grybauskaite sought the ruling of, consecutively, the Central Electoral Commission (CEC) and the constitutional court on the results of the poll. However, both institutions upheld the election results, with merely one DP-seat being invalidated by the CEC. Last 20 November, LSDP leader Algirdas Butkevicius was endorsed as Prime Minister by Parliament and has two weeks to form its cabinet, which should be appointed in the next few days.

Impact on country risk

As soon as it is formed, the government will see its political stability challenged as the verdict of the court investigating the allegations of old accounting fraud by the DP and its leader should fall shortly. In the event of a conviction, the only other option to form a coalition would be to include the outgoing Homeland Union-Christian democrat Party but governing with this party could prove to be tricky as the LSDP campaigned against the existing austerity measures. However, the announced centre-left coalition, if maintained, is expected to have little room of manoeuvre as the president, who remains a very popular and influential political figure in Lithuania, focuses on the continuity of  policy. Besides, Butkevicius is not committed to the 2014 agenda for the adoption of the Euro, contrary to outgoing PM Kubilius.

Analyst: Florence Thiéry, f.thiery@credendogroup.com