New government sheds its populism

  • 2001-07-12
  • Edvinas Butkus
The incoming leftist Lithuanian government shed a significant part of the economic populism of its leaders last week before entering the very final stage of its formation. After Lithuanian President Valdas Adamkus signed a decree July 5 confirming the composition of the cabinet of Social Democrat leader Algirdas Brazauskas, the Parliament's executive board called an extraordinary session July 9 to hear the government's program.

The Parliament now has 15 days to either adopt or reject it. The government only receives a mandate to function after its program has received parliamentary approval and its ministers have taken oaths of office.

With Brazauskas' appointment backed by 84 votes out of 141 on July 3, there is no doubt that the government's program will draw similar support.

Representatives of the new parliamentary alliance between the New Union (Social Liberals) and Social Democrats finished preparing the new government's draft program last week. The program contains less rhetoric than the declarations made by the Social Democrats when they stood on the opposition side of the aisle.

Budget and finance committee deputy chairman Gintautas Sivickas, a Social Liberal who lent a hand in the section on tax policy, told the Baltic News Service that there is no call for introducing progressive taxation in the program, although the Social Democrats had called for that repeatedly in the past.

Instead, the program calls for introducing real estate taxes.

It also outlines a gradual lowering of the threshold for non-taxable income while lowering capital gains. The new majority said it intends to continue reforming the tax system.

Although the draft program does retain the policy of lowering value-added taxes on the most essential goods, it makes that dependent on increased budgetary revenues.

The document clearly maintains Lithuania's twin foreign policy objectives of EU and NATO membership.

Members of the Social Democratic Party and Social Liberal New Union – the parties forming the new left majority in Parliament – take up most of the seats in the new Cabinet, although there are several political independents as well.

Out of the 13 portfolios, six ministers remain.

Of the key newcomers, non-partisan Deputy Foreign Minister Dalia Grybauskaite will take over as finance minister, while industrialist and political independent Petras Cesna takes over as economics minister. Social Democrat MP Zigmantas Balcytis will take the wheel at the Transport Ministry. He was shadow transport minister under the Social Democratic opposition.

Grybauskaite says her priorities are to meet with the International Monetary Fund on a memorandum of economic policy, to reduce unemployment and to keep the budget deficit within the bounds of the forecast.

Grybauskaite, until now deputy foreign minister responsible for economic issues, replaces Liberal Jonas Lionginas in the post of finance minister.

Political observers are calling her decision to move over to the Finance Ministry a sacrifice and a bad career move. A highly-qualified economist and an experienced diplomat, she would most likely have become Lithuania's ambassador to the EU.

Grybauskaite said she insisted on Lithuania sticking to its international and financial obligations, continuing along the road to NATO and EU membership and continuing fundamental structural reforms before she agreed to join the new government.

Commenting on Lithuania's agreement with the IMF, Grybauskaite said Lithuania would keep its main obligations but would also suggest "minor changes" on capital gains.

The third memorandum signed by Lithuania and the IMF was to have come into force in July; the previous government of Rolandas Paksas approved it a day prior to his resignation on June 20.

The head of the IMF mission to Lithuania and Belarus, Mark Horton, said that the IMF executive was not prepared to confirm the memorandum with Lithuania as long as the new government had not approved it.

Grybauskaite commented on Lithuania's economic situation at the president's office, saying, "It's in the first stage of recovery."

Asked if there would be money to finance the Social Democrats' social programs, Grybauskaite said, "These programs will be carried out as much as they can be carried out."

Economics Minister Cesna, 56, is chief executive of Lithuania's top furniture manufacturer Vilniaus Baldu Kombinatas and vice president of the Lithuanian Industrialists' Confederation.

Cesna had been managing director of the Vilnius-based corrugated cardboard manufacturer Medienos Plausas for six years before taking over as managing director at the furniture plant in 1998.

Cesna said Adamkus and he discussed the upcoming privatization of the natural gas monopoly Lietuvos Dujos, the situation at the oil company Mazeikiu Nafta, the future of Ignalina nuclear power plant and other energy issues. Clearly this is a crucial time for the Lithuanian energy sector.

Cesna said he saw boosting Lithuanian electricity exports and accelerating the implementation of a project to link the country's power grid to the Polish system in order to open up Western markets to Lithuanian electricity as major tasks in the energy sector.