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Vol 2, No 43
11 December 2000
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Lithuania in 2000Playing Catch-up
The year in review for Lithuania
Mel Huang

The year 2000 was not very kind to Lithuania. The political landscape shook violently in this year of both local and national elections, where a major realignment process culminated in further political confusion.

The past year was also a disappointment economically, as Lithuania failed to reinvigorate its economy to the same extent as its neighbours. Though recovery from the Russian economic meltdown is progressing smoothly now, the lost time due to the extended campaigning in 2000 and unsound policies by previous governments pushed Lithuania further back in the queue among its Central and East European competitors for the attention of investors and Brussels.

That is not to say 2000 was a completely bad year for Lithuania—far from it. The exciting play of the national basketball team at the Sydney Olympics served as a focus of national pride, capturing the attention of the world and bringing home the country's third consecutive Olympic bronze. Lithuania's NATO integration efforts received praise, keeping the small country near the top of the list for the next round of enlargement.

With the shutdown of one reactor at the controversial Ignalina Nuclear Power Plant, Lithuania also earned the approval of the European Commission, especially Enlargement Commissioner Günter Verheugen.

Double jeopardy

2000 was also a year of politicking. Politics in 2000 was a daily event, and it permeated every aspect of life in Lithuania in this millennium year. The entire year became embroiled in campaigning, starting with the period leading up to the March local elections to the grand prize at the October general elections.

The half-year intermezzo dragged into a long and passive campaign period. Hard battles were fought in the Seimas, where the struggling ruling Conservatives and their Christian Democrat allies fought off the vocal opposition of the left wing. Since many of the strongest opposition groups were not represented in the Seimas, more fights broke out in the press and other public forums.

Minor battles broke out in local municipalities between the newly empowered centrist groups, both eyeing the October elections as their gateway to power and the established left and right wing forces.

Polls at the beginning of the year suggested the collapse of the right wing and significant growth by new centrist forces. Two of the most popular parties in the country—the New Alliance (Social Liberals) and the Liberal Union—jumped from obscurity to prominence, due to the popularity of their leaders, Artūras Paulauskas and Rolandas Paksas.

Capitalising on popular discontent, the centrist groups, alongside the Centre Union, siphoned many votes from the disenchanted swing voters that supported the Conservatives in 1996. By the time of the March local elections, the political tables were turned upside-down with the success of the centrist parties.

When the final polls came out before the October general elections, the trends in public opinion became clear. The Conservatives carved out their niche of loyal supporters. The left wing, by running together in a coalition led by ex-President Algirdas Brazauskas, showed massive upward momentum in the weeks before the election. Four centrist parties running under the "New Policy" slogan also solidified their position but lost momentum.

Both the New Alliance and the Liberal Union looked solid, but their partner, the Centre Union, exhibited a disastrously negative trend; it was toying with the minimum five per cent threshold by the final weeks of polling. Originally, most political analysts predicted a win for the "New Policy" coalition, with the New Alliance winning the most seats; however, those predictions faded quickly with the slow and painful demise of the Centre Union's support.

The elections reshaped the political landscape in Lithuania. Though the "New Policy" alliance wound up forming the new governing coalition, their results were anything but spectacular. The Centre Union failed to reach the minimum threshold, destroying a party that was the most popular political group in 1999.

Analysts realised that the New Alliance and Liberal Union gained at the expense of their coalition partner and not their left or right opponents, which left the group short of the 71 seats needed in the 141-seat Seimas for a bare majority. The left-wingers, under Brazauskas, took that momentum and won the elections with 51 seats. However, they failed in their bid to pressure President Valdas Adamkus to give them a chance to form a government (Adamkus had been more than obvious in his support of the "New Policy" group during the campaign).

The "New Policy" team barely survived its initial tests of confidence—the most notable being the confirmation of the government's programme under new Prime Minister Rolandas Paksas, winning by a mere 72 votes.

All the controversy

The year 2000 also witnessed many controversies that spread far beyond Lithuania's borders. Not surprisingly, many of the controversies were deeply embedded in political infighting. Politicians of all persuasions used various tactics to score political points, ranging from questionable parliamentary resolutions to rowdy street protests.

The Seimas, or rather the struggling-but-campaigning Conservatives, was the source of many a controversy this past year. Seeing their public support dwindle, the Conservatives fought to keep their backers loyal. The passage of a resolution calling for Moscow to compensate Lithuania for the Soviet occupation was clearly one that brought history into the campaign—not surprisingly as part of the "Red Scare" tactic pushed by the Conservatives and their leader, Vytautas Landsbergis.

With the return to politics by archival Algirdas Brazauskas, Landsbergis pushed the theme to solidify the party's supporters from the anti-Communist campaigners of a decade past. The passage of the law, and its hefty USD 20 billion price, cooled ties with Moscow and remains an issue that Paksas must consider. More controversy came with President Adamkus's refusal to sign the bill, leaving it for Landsbergis to sign in his capacity as Seimas chairman.

However, it was a small parliamentary resolution that really caused damage to Lithuania's reputation. Originally seen as a small resolution to placate old-time Christian Democrats, it legalised the declaration of an interim government in 1941 attracting condemnation both inside and outside of Lithuania, mostly from Jewish groups.

The interim government was seen as pro-Nazi, and the resolution did not even mention the collusion of the then-government in the Holocaust. With a major international conference on returning looted Jewish art and cultural items to take place just days later, this could not have happened at a worse time. Described later as a "mistake" by leading Conservatives, they ended up retracting it after prominent Jewish groups and Israel threatened to boycott the conference.

The most public of all the controversies has to be that of Freedom Union leader Vytautas Šustauskas. He is known as a "street politician" for organising and leading wild and strange protests such as the "feast of the poor" and the "march of the destitute." Despite his radical statements, including those rabidly anti-Semitic, he continues to gain support in his centre of power, Kaunas, and elsewhere. His flamboyant style and inflammatory tongue caused concern when he became Kaunas mayor after the March local elections, and politicians from Vilnius and abroad boycotted him during his half-year as mayor. Today he sits in the Parliament, as loud as ever.

It's sad to say the 2000 election year did spark radicalisation to an extreme, and National Socialist rallies were held to support candidates who ran as independents. Prominent politicians, such as Šustauskas, and others in supposedly centrist parties, sparked further fears of extremist ideas creeping into mainstream politics by attending some of the rallies. Everyone involved, of course, has denied this, but the National Socialists remain active, though unregistered.

Extended recovery

Lithuania fell behind its neighbours around Central and Eastern Europe in economic recovery this year. Though Estonia and Latvia began showing signs of progress in the middle of 1999, it took Lithuania until early 2000 to show any improvement. However, a lackluster second quarter immediately dulled that. Growth expectations for 2000 and 2001 are modest at best.

Lithuania was hurt more by the Russian crisis, due to its larger trade dependency on Russia. But the collapse of the Russian market helped local producers to shift their focus to the EU and other countries. The strong dollar and the collapsing euro did not help Lithuania's cause in 2000, as Lithuania's currency is pegged to the US dollar.

Though the government of ex-PM Audrius Kubilius fought back and implemented sound, but difficult, policies to help the economy recover, it was done much too late. The fiscal indiscipline pursued by earlier governments, as well as continual bailouts of state-owned companies (especially power utility Lietuvos Energija) and funds (such as SoDra, the heavily indebted social insurance fund), exacerbated the dismal situation.

The IPO of Lietuvos Telekomas (Lithuanian Telecom) fared poorly, as arguably the least successful telecom IPO in Europe. The timing was bad internationally, as the sector was weak all year. The share price slumped to over 20 per cent less than analysts' predictions, and the issue subscription was less than hot. Though Lithuania shares some blame for the issue, it was the victim of circumstances mostly out of its control.

The issue of Mažeikių Nafta continues to haunt the country, as it still cannot secure a good continual source of crude oil from Russia's LUKOil. With such a large chunk of the GDP dependent on the oil refinery and export terminal, continual uncertainties facing the company are transposed automatically to the entire country.

Privatisation of several companies fell apart or faced falling apart in 2000. Despite the European Commission praising Lithuania for moving on banking privatisation, the two big deals remain dormant or dead. The deal to sell Žemės Ūkio Bankas (Agricultural Bank) to Poland's Pekao and Italy's UniCredito Italiano collapsed in late autumn, while no progress was made in the planned sell-off of the largest state-owned bank, Taupomasis Bankas (Savings Bank), since the lone bid by Estonia's Hansapank. The privatisation of the Lithuanian Shipping Company (LISCO) is also in serious trouble, as court and government scrutiny of the new owners—a Dutch consortium—could retroactively collapse the unsound deal.

What's next?

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As bad as 2000 looks, it did provide some of the needed foundations for Lithuania to build on for 2001 and beyond. NATO integration continues to be on track internally and externally, and, if the government can deliver on its pledge of 1.95 per cent of GDP for defence spending in 2001, it will constitute a substantial symbol of Lithuania's commitment to building its national defence. The foundations for economic recovery have been firmly set, and sustainable quarterly growth has returned since the third quarter of 2000.

However, the biggest "if" for Lithuania in the coming year is the stability and effectiveness of the current governing coalition led by the New Alliance and Liberal Union. If the two conflicting sides can work together without too many controversies and internal splits, the legislative programme could advance on the road to harmonisation with the EU's acquis communautaire.

However, if the two sides argue constantly, it would render the Parliament and government weak and ineffective—especially with strong opposition from the left in the merging Social Democratic bloc.

As the two parties in the coalition are short of a majority, it would need to do a lot to keep the smaller, but vital, parties happy. The government will likely have to placate some of these groups on rural affairs and regional support, most of all, to keep them from totally bolting the government coalition structure into the opposition for any possible confidence vote.

However, part of the EU harmonisation programme requires constitutional changes, and, without the opposition's support, they would be doomed. If Paksas and Paulauskas can provide united leadership in 2001, then chances are that the coalition's programme will be mildly successful. But if the two are to squabble and position themselves for the 2002 presidential race, 2001 could be a chaotic year for Lithuania.

Mel Huang, 8 December 2000

Moving on:


Roman Didenko
Ukraine in Crisis

Tiffany G Petros
No Czech Feminism

Geneva Anderson
Albanian Arts Pyramid

Sam Vaknin
The Black Economy

Year 2000 Review:
Magali Perrault
Austria: Developing Divisions

Catherine Lovatt

Brian J Požun
Bosnia: Deep Scars

Dan Damon
Croatia: Life without Franjo

Tiffany G Petros
Czech Republic: Stable but Lagging

Mel Huang
Estonia: Prosperity and Apathy

Ivana Gogova
EU: Biggest Problems Remain

Gusztáv Kosztolányi
Hungary: Identity Reconsidered

Jens Boysen
Germany: Post King Kohl

Dan Damon
Kosovo: Survival as Victory

Daria Kulagina
Latvia: An Eventful Year

Mel Huang

Wojtek Kość
Poland: Searching for Normalcy

Marius Dragomir
Romania: From Bad to Worse

Slavko Živanov
Serbia: Trouble at Home

Robin Sheeran
Slovakia: The Struggle Goes on

Brian J Požun
Slovenia: A Stable Success

Sarah Whitmore
Ukraine: Life on the Brink

Charlene Caprio
Zagajewski's Memoirs

Brian J Požun
Shedding the Balkan Skin

Martin D Brown
Czech Historical Amnesia

Dejan Anastasijević (ed)
Out of Time

Gusztáv Kosztolányi
Hungarian Oil Scandal

Sam Vaknin
After the Rain

Press Reviews:
Andrea Mrozek
Germany: From Warsaw to Nice


Mixed Nuts

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