Lithuanians Deal Blow To Austerity, Nuclear Plans

Associated Press – 10/15/2012

VILNIUS, Lithuania (AP) — Dealing a blow to the conservative government’s vision of becoming a regional energy powerhouse, Lithuanians voted instead for big-spending politicians and rejected plans for a new nuclear power plant.

The populist Labor Party, led by a Russian-born millionaire, won Sunday’s election in this Baltic nation with 20 percent of the vote, while the center-left Social Democrats came in second with 18.5 percent. The two have agreed to form a new government to replace the center-right coalition, which managed just over 23 percent of the vote.

The exact composition of the next 141-seat Parliament is still not clear pending some run-off votes on Oct. 28, but Labor and the Socialists are expected to gain a majority.

Still, analysts said Monday that the two parties, which campaigned on exorbitant promises, were unlikely to make any radical policy departures, although they would likely slow down harsh fiscal measures needed to introduce the euro in 2014, one of the conservative coalition’s goals.

“Promises that the new government will stop saving and start spending big-time are unrealistic,” said Nerijus Maciulis, analyst at Swedbank. “Otherwise Lithuania will soon find itself in a situation similar to Greece.”

Analysts at Danske Bank agreed, writing in a Monday note that “leftist parties campaigned on a relatively populist and pro-interventionist plank …however we expect the new coalition government to tone down the rhetoric.”

In 2009, Lithuania suffered a shocking double-whammy, as its economy entered a severe recession, plunging nearly 15 percent, and a Soviet-era atomic power plant was shut down, forcing the country to switch to Russian gas.

The nation of 3 million people now imports over 60 percent of its electricity needs — more than any other European Union member. Russia currently supplies 100 percent of Lithuania’s natural gas at a hefty price.

Previous governments, including those led by the Social Democrats prior to the conservative administration, dreamed of building a new, ultra-modern nuclear plant that would allow Lithuania to maintain its traditional role as an energy exporter.

But voters seemed to dash those hopes, with nearly two-thirds rejecting the idea of a new nuclear facility Sunday due to concerns about cost and safety. Although the referendum was only consultative, politicians from the Baltic states of Estonia and Latvia — who are participating in the $6 billion project along with Japan’s Hitachi– could find it difficult to proceed after the Lithuanian vote.

“Russia’s wish for the Baltics not to have an atomic power plant has won,” Latvian Defense Minister Artis Pabriks tweeted.

Analysts, however, said Lithuania could still find ways to decrease its energy dependence on Russia without having to build a €5-billion nuclear plant, perhaps by completing a terminal to import liquefied natural gas.

“In fact, a liquefied gas terminal creates much more serious competition for Moscow than a nuclear power plant,” said Vidmantas Jankauskas, a professor at Gediminas Technical University in Vilnius, the capital.

He said the offshore gas terminal, which Lithuania hopes to complete by 2014, is expected to handle up to 4 billion cubic meters per year, more than enough to meet the country’s annual gas needs.

Suspicion of Russia still runs high among many Lithuanians, who remember decades of repression under the Soviets. Labor Party chief Viktor Upsakich, a Russian-born veteran politician who was forced to resign as economy minister in 2006 because of shady dealings with Lithuania’s powerful neighbor, tried to calm fears that his win would bring the country closer into Russia’s orbit.

“We will work to have good, pragmatic relations not only with this country but other neighbors, too,” he said. “I must stress that everything should be done in the interests of our country and not at the cost of Lithuania’s sovereignty.”