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Tuesday 18.02.2020 | Name days: Kintija, Kora

Lithuania: analysts predict worse things for ruling LFGU ahead

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Ramūnas Karbauskis, chairman of the LFGU (left) and Seimas speaker Viktoras Pranckietis

Linas Jegelevičius for the BNN

The smooth adoption of a new Lithuanian budget is in question owing to a single man in Seimas, the Lithuanian Parliament – Viktoras Pranckietis. Unable to unseat him even with the second attempt over the course of one week, the ruling Farmers and Greens Union (LFGU) were scrambling after the failed vote on Tuesday to look thoroughly through the ranks some of which derailed the Speaker’s ousting by tampering the ballots and thus raising the question if the LFGU still has a majority in legislature.

LFGU leader: we still have majority

If not, then the ruling party’s parliamentary agenda, and the bill of the new year’s budget, can be in trouble.

Having vowed after the Pranckietis voting to look for filibusters in the LFGU ranks, the Council of the ruling party sounded way less bellicose on Wednesday, explaining that the partly leaders abandoned the idea of separating the wheat from the chaff – look for the rebels. Yet the ruling Coalition decided to expel Remigijus Žeimaitaitis, the leader of Order and Justice Party (OJP) who saw his OJP fraction crumble lately, from the Coalition.

With everybody’s eyes set on the new budget, Ramūnas Karbauskis, chairman of the LFGU, was focusing Wednesday on assuring all that the «farmers» still have a majority in the Parliament and are able to pass the budget bill.

«The inter-fraction agreement we’ve signed is still in place, nothing has changed in the regard. We will see that clearly during coming budget deliberations,» the LFGU leader sounded upbeat.

However, all the signs are indicating that a huge battle over the budget looms ahead.

Analyst: Coalition is fragile

After the Lithuanian government, led by PM Saulius Skvernelis, failed to convince the parliament on the need of car and real estate taxes this week, the growing political turmoil threatens to spiral out, harming the stability of public finances, analysts say.

«The ruling Coalition has become very fragile and even vulnerable,» Vytautas Dumbliauskas, associate professor of Mykolas Romeris University in Vilnius, stated to BNN. «Thence the remaining stretch in power will be very hard for the «farmers». The litmus test on their and the coalition’s unity will be the adoption of the new budget. So far things are not going well towards it,» he added.

Following the parliament’s Tuesday vote, the government was mulling various scenarios as what to do next.

Try to convince lawmakers to change their minds? Cancel the planned increase in the basic child benefit but still increase it to disadvantaged families, or further slow labour taxation cuts? All for the sake of the striving to balance revenue and expenses.

Coalition parties vote differently

More than a half of lawmakers representing the ruling LFGU and the Social Democratic Labour Party (SDLP) backed the proposal to expand the real estate tax base, but the finance minister, Vilius Šapoka, heard firm «no» from the Electoral Action of Poles in Lithuania – Christian Families Alliance (EAPL-CFA) and the political group «For Lithuania’s Welfare», which was formed on the basis of former members of the Order and Justice group.

The proposed car pollution tax was backed by the LFGU and several members of the political group “For Lithuania’s Welfare”, but the SDLP and the EAPL-CFA thumbed it down.

Meanwhile, additional taxation of banks and retailers were expected not to pass scrutiny of on legal experts.

Lack of leadership

Analysts say the turmoil is the result of politicians’ fear of making unpopular decisions ahead of the upcoming general election, the lack of leadership of the ill Prime Minister Saulius Skvernelis, and also LFGU leader Karbauskis’ focus on the dispute with Speaker of the Seimas Viktoras Pranckietis.

«There is clearly no agreement on key positions and the Coalition will be weakening further. I’d not be very surprised if we have a minority government at the end. The prospects of the LFGU seem very dim to me – there are many LFGU MPs who have ended up in Parliament accidentally. Now this is becoming very clear,» Dumbliauskas accentuated.

Tomas Janeliūnas, professor of Vilnius University and a well-known political analyst, also pointed out to BNN that the inability to strike accords on key bills shows that there’s no solid majority that would support the government’s proposals.

In his words, the government’s failure to secure more revenue could force it to back away from its plans to increase social payments, and that would wipe out the goal of making any significant contribution to the reduction of social inequality.

What is next?

Marius Dubnikovas, a financial analyst from the Lithuanian Business Confederation, told Lithuanian press that tax proposals are presented in the parliament by non-competent people and decisions are made at the very last minute.

Dubnikovas called the ongoing discussion in the parliament «a fight between the middle class and yesterday’s people who believe in the state’s very tough and rough hand».

Economist Žygimantas Mauricas from the Luminor bank believe the chaos in the parliament is the outcome of fairly late submission of the tax bills as both the society and the Seimas lacked time to have a good look into them.

He estimates that the government would try to compensate for lost budget revenue by further slowing the increase of non-taxable income.

«I don’t think the government and Seimas would dare to introduce any cuts. They made generous promises, and next year is an election year. I would say they will focus on the ongoing tax reform, especially if we speak about the upcoming year and the increase of the non-taxable income. They might decide to increase it less,» Mauricas told Lithuanian media.

Amid the state’s growing commitments, stalling tax collection and failure to resolve the public sector’s efficiency problem, Lithuania might be forced to raise taxes to plug its budget deficit in case of economic slowdown or a crisis, instead of promoting economic growth, Mauricas says.

The Finance Ministry estimates economic slowdown in the country over the next couple of years. Lithuania’s economy should grow 3.7 per cent this year, and slow to 2.4 per cent next year and to 2.3 per cent in 2021-2022.

Budget bill to be revisited soon

Yet Speaker of the Seimas Viktoras Pranckietis, who is in the cusp of parliamentary wrangling recently, believes that the Seimas still has a majority to adopt the next year’s budget.

However, Karbauskis, exasperated by the failure to remove the Speaker, acknowledged this week that it’s no longer clear if the ruling parties have a majority.

Pranckietis survived a second no-confidence vote as members of the ruling block failed to garner the necessary number of votes. In the Tuesday vote, 63 MPs voted in favour of his removal, five were against and 11 ballots were damaged. At least 71 votes in favour were necessary to remove Pranckietis.

The government was likely to table a revised budget bill in a few weeks.

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