Unholy alliance could spell trouble for Lithuania

VILNIUS -- The potential forming of a coalition between the Liberal Democrat Party led by impeached former LithuanianPresident Rolandas Paksas and the Labor Party lead by Viktor Uspaskich, accused of corruption, would would put Lithuaniain danger of a fiscal crisis, the international credit rating agency Fitch Ratings warns.

The agency notes that having again chosen Russian-born Uspaskich as its leader, despite the fact that he had been in hiding from Lithuania's law enforcement agencies for a year, the Labor Party could score one of the best positions in the parliamentary elections due to take place in October. The prospects of the Liberal Democrats are also assessed as good, following municipal elections in February 2007 in which they obtained almost 13 percent of the vote.

However, Fitch Ratings believes that the Social Democrat Gediminas Kirkilas' led minority coalition is "likely to remain in power until scheduled parliamentary elections, as neither the Social Democrats nor the Conservatives would necessarily benefit from an early poll."

According to the agency, "parliamentary elections are likely to yield another coalition government and Fitch believes another Social Democrat-led coalition is likely. However, the return to Lithuania from Russia of the founder of the Labour Party, Russian-born businessman Viktor Uspaskich, is a factor which could affect the outcome of parliamentary elections."

Should the Social Democrats retain control over the Cabinet following the elections, and should Kirkilas win in the presidential elections in 2009, the agency notes that this "could lead to a weakening of the checks and balances in the Lithuanian political system."

Fitch Ratings is a non-governmental international agency, which rates the development level of nations as well as their economic perspectives.