For the first time since Lithuania restored its independence, the country will have a coalition government in which no one party will enjoy a majority. The task of forming the government and the parliament’s leadership has been entrusted to the Liberal Union and the New Union (Social Liberals). Led by young, charismatic leaders, both parties have gained enough voter appeal to bring a breath of fresh air to Lithuania’s stale political arena of the past decade. Supported by representatives of the Centre Union, the Modern Christian Democrats and other smaller parties, the “new” players have good prospects of enjoying a majority (no less than 71 seats) in the 141-seat parliament.
Yet, dominated by the left-leaning New Union and the right-of-centre Liberal Union, the new government may appear rather unstable. The New Union, a party that was established around one leader rather than driven by ideology, leans to the right on property ownership but favours leftist views on social values, while the Liberal Union, ever since its inception, has demonstrated unwavering commitment to classical right-wing principles.
While some dissension is sure to arise regarding specific issues, the overall stance is likely to be conducive to business development, privatisation, and foreign capital investment.
Privatisation may accelerate, absorbing certain objects of strategic infrastructure and showing increased reliance on the stock exchange. Paksas’ opposition to the major oil deal with Williams International suggests that privileged privatisation schemes will be avoided and equal conditions for domestic and overseas buyers will be ensured. Exemptions that were conferred on foreign investors in the past will most likely remain in place, but the granting of new privileges may be excluded from the law. A reduction of government investments and borrowing may be put high on the policy agenda. The abolition of corporate income taxation and reduction in the personal income tax – the fulcrum of the Liberal Union’s platform – may eventually become a reality, provided the Social Liberals scrap their reverse plans to increase the role of direct income taxation and to differentiate value added tax depending on the “necessity” of different commodities for people. It is also anticipated that the rules of tax calculation and payment will be spelled out.
Right after the elections the new parliament will debate the year 2001 budget, the first budget compiled based on the principle of strategic planning. Another major change is the inclusion of non-budgetary funds (26 in operation today) in the general budget. Strategic planning and the consolidation of the budget would significantly enhance the management of state financial resources as well as the fiscal deficit.
The removal of regulatory hurdles to business activity and the squeezing of bureaucracy – originated as Sunset and Sunrise programmes by the Kubilius administration -will continue if the governing coalition manages to build administrative discipline and consensus. It may also be anticipated that employer-employee relationships will be relieved of the most oppressive governmental incursions and dictates.
None of the major contenders for political power vowed to get to grips with the country’s biggest headache, agriculture. Besides, those who came out on top in the parliamentary elections advocate a shift towards direct payments, a system that is already in place. Transition to private fully funded pension insurance may accelerate, although measures and resources that will underlie the transition are still unclear. The incoming rulers are committed to preserving the current monetary regime, although some time will pass before they discover how this province is handled and what its enigmatic terms mean.
Land reform is one process that is very likely to speed up after the elections. Likewise, foreigners and legal entities may finally be allowed to purchase agricultural land. In 1996, the Seimas adopted an amendment to the constitution that stipulates that land may only belong to Lithuanian citizens and the state by the right of ownership. Legal entities and foreigners (OECD and NATO members) can buy agricultural land only with government’s approval. Earlier this year the cabinet proposed an amendment to Article 47 that would allow ownership of agricultural land by foreign citizens and legal entities. Debates on this issue are underway.
Whatever changes are in store, their form and contents will depend on the coalition partners’ willingness and ability to find common ground, leaders’ personal convictions and beliefs, the level of expertise, experience of state governance, and bureaucratic inertia. No small part will be played by Lithuania’s international obligations and the global market.
