Finance minister suddenly resigns, raises question of coalition's fate

  • 2005-04-20
  • By TBT staff
VILNIUS - The first victim in Lithuania's shaky coalition government was claimed this week, as Finance Minister Algirdas Butkevicius announced his resignation over what he said was a lack of trust in his policy.

Butkevicius, a Social Democrat, handed in his resignation to Social Democratic Chairman and Prime Minister Algirdas Brazauskas on April 19, asking for the request to take effect May 2.

"I felt a strong opposition from coalition partners. It is quite difficult for me and the prime minister to fight against the partners. I realized that this could be understood as distrust in the finance minister," he told reporters on April 19.

In a radio interview earlier that day, the finance minister said he was exasperated at the behavior of the ruling coalition's political council members, whom he accused of changing their minds overnight.

"I am stunned, although it might not be correct for me to speak like that, with the course of negotiations on the tax reform," he said.

"While discussing ways to offset a decline in budget revenues, which would result on the elimination of road tax, the political council ruled to follow the suit of some countries, which levy the solidarity tax - a temporary tax - for example, to relieve financial pressure," Butkevicius said.

On April 18 the coalition's political council rejected a proposal to impose an additional 4 percent levy on corporate profits and agreed to introduce a so-called solidarity tax on corporate turnover. This, in turn, would offset declining budget revenues due to the proposed income-tax reduction.

The minister said that the so-called solidarity tax might be against EU law, and Lithuanian businessmen were likely to appeal against the new tax to the European Court of Justice.

"Decisions on tax reform cannot be spontaneous, any sequels of reform for Lithuania's economy after two or three years should be taken into account," the minister stressed.

When asked how his resignation would influence the coalition, Butkevicius said he did not think it would collapse. The coalition consists of the Social Democratic Party, the Social Liberal Party, the Labor Party, the Union of Farmers' Party and the New Democracy Party.

Observers have criticized the coalition, which is less than four months old, for being ineffective and dragging its feet on much-needed reform, particularly dealing with taxes.

Butkevicius said he expected to meet with Brazauskas, although there was nothing Brazauskas could say to convince him to stay.

Juozas Olekas, parliamentary faction leader of the Social Democratics, told the Baltic News Service that the faction backed the minister's resignation and that the party would likely nominate three or four candidates at the next Cabinet meeting to fill the vacancy.

Andrius Kubilius, leader of the right-wing opposition Homeland Union, has already predicted that the finance minister's resignation signals the beginning of the coalition's eventual demise.

"The finance minister's resignation is the beginning of the ruling coalition's end," he was quoted as saying.

Kubilius, who has been perhaps the government's harshest critic, said he understood the finance minister's wish to resign. "I understand the finance minister, who is unable to persuade his partners in the coalition to undertake tax reform and is forced to either implement a program that belongs to the coalition partners, not him, or to resign," he said.

Professor Algis Krupavicius, director of the Policy and Public Administration Institute of Kaunas Technical University, said that Butkevicius' resignation was the first real crisis of Brazauskas' Cabinet.

"As in all democratic states, the finance minister ranks second after the prime minister in terms of political weight," he said.

Krupavicius was quick to spread the blame around the entire government.

"During public discussions on tax reform, the finance minister took quite a passive position. Sometimes the minister and the ministry's position was not clear," he said.

"The Finance Ministry is responsible for the absence of a clear legal assessment on whether another tax on corporate turnover would be against EU law. This is real negligence," stressed the political scientist.

Regarding the Cabinet's fate, in Krupavicius' opinion the coalition is unlikely to collapse, though the Social Democrats may consider the possibility of withdrawing. "The Social Democrats have an opportunity to consider the coalition's activity and whether they are interested in its survival," he said. "The most realistic scenario is that the minister will be replaced, and the crisis should be over. However, the reason of the crisis - tax reform - will not disappear and will be affected."