Lithuania election puts pro-austerity PM on way out

Lithuania joined the EU in 2004 with a population of 3.3 million. Eight years later and the population has dropped below 3 million, a first since it broke away from the Soviet Union over 20 years ago, reports Reuters.

The trio of opposition parties, led by the Social Democrats, has promised to reverse the trend and increase government spending in a move to spur the economy and create jobs.

Raising the minimum wage, increasing the tax burden on the wealthy, and delaying euro entry to 2015 were among the opposition's campaign promises.

Exit polls from 94 percent of polling stations on Sunday show the Social Democrats with 38 seats in the 141-seat parliament. Kubilius' Homeland Union Christian Democrats came in second with 32 seats.

But a coalition between the Social Democrats and the left-leaning Labour and Order and Justice parties would give them a total of 79 seats.

Social Democrat leader Algirdas Butkevicius, who is also the party's candidate for Prime Minister, told reporters on Sunday that a coalition partnership is under negotiation.

"Every party has the right to decide they’d prefer to work with someone else and notify the other partners," said Butkevicius.

Kubilius' government is aiming to reduce its deficit in 2013 to below the European Union 3 percent ceiling, down from 9.4 percent in 2009. The country will need to borrow some 7 percent of its GDP next year, or €2.17 billion, in order to refinance its debt.

His government is the first to complete a four-year term in office since the nation won its independence in 1991. He also helped avert national bankruptcy and increased GDP to nearly 6 percent last year.

The country has been struggling with deepening poverty, a 13 percent unemployment rate, and high-energy prices.

Government plans to build a new nuclear power station were also scrapped in a recent referendum. The station would have decreased energy dependence on Russia’s Gazprom but opposition leaders objected to the high costs and have instead vowed to improve trade relations with its former master.

Meanwhile, the coalition’s promise to increase government spending may deepen its deficit, say some critics.

Russian-born millionaire Viktor Uspaskich, who leads the Labour Party, says he may seek to increase the budget deficit above the EU limit.

President Dalia Grybauskaite, who must appoint the new prime minister, has objected to the spending pledges.