CONSERVATIVES HOLD THE FORT ON MARKET REFORMS.

The governing Fatherland Union/Lithuanian Conservatives (FU/LC) and their Christian-Democratic junior allies are widely seen to be headed for defeat in the parliamentary elections this coming October. The electorate is in the throes of a cyclical mood of discontent with the Conservative-promoted market reforms. FU/LC, led by Parliament Chairman Vytautas Landsbergis, is nevertheless determined to put up a pitched electoral fight. Although reduced to a minority in parliament recently, it managed on July 18 to enact–by a minuscule 72 to 71 margin–a set of amendments to the electoral law which should work to its advantage and, at least, limit its losses in the upcoming elections. That effort demonstrated the Conservatives’ resolve to make the most out of their remaining strength in these elections and the post-election period.

The Conservatives, however, refuse to sacrifice market reforms and budgetary prudence on the electoral altar. Even as the campaign gets underway, FU/LC is pushing unpopular reform measures while resisting the left-of-center opposition’s attempts to stop the transition to the free market and to return to profligate etatism. As part of their budget-balancing efforts, for example, the Conservative-led government and parliament have doubled the value-added tax on residential heating, from 9 percent to 18 percent, effective this coming autumn. They have amended the law on civil service, cutting the benefits of some categories of state employees, and sparking protests from the hard-hit policemen. The government and the parliamentary leadership, moreover, propose to raise the level of individual contributions to the ailing Social Insurance Fund (SoDra); and they seek to introduce excise taxes on liquefied gas, angering the many motorists and carriers who had switched to that fuel in order to avoid paying the excise tax on gasoline.

Bucking public opinion polls, the government and FU/LC leadership advocate a constitutional amendment which would allow foreign citizens and companies to purchase agricultural land in Lithuania. Foreign purchase of nonagricultual land has been allowed since 1996. But local interests as well as the country’s cultural mindset militate against yielding agricultural land to foreigners. The European Union, however, requires that constitutional change as part of qualifications for admission to the EU. On July 31, Landsbergis appealed to public opinion to accept the need for the constitutional amendment in order to encourage foreign investment and facilitate the country’s admission to the European Union. The Conservatives seek to push the constitutional amendment through this parliament, ahead of the leftward swing which is expected in October.

Lithuania’s farmers are posing a special problem with their recent protests against the government’s policies. The organized protest movement mainly seeks hefty price support measures at the expense of the state budget for a wide range of farm products. The movement has become politicized under the leadership of Ramunas Karbauskis, whose left-of-center, anti-EU, eastward-looking Peasant Party scored impressive countrywide gains in the local elections which were held earlier this year. The government is currently trying to hold the line–and a cap on public spending–in difficult negotiations with protest leaders. The latter for their part seek to cut into the Conservatives’ rural base of support ahead of the parliamentary balloting.

The left-of-center Democratic Labor Party (DLP) and Social-Democratic Party (SDP), meanwhile, have launched a legislative initiative for the retention of state ownership and management of “enterprises of strategic significance.” The proposed legislation would preclude the privatization of electrical power plants, railways, airports and other state-owned assets; it would even retain state control over Mazeikiai Nafta and associated enterprises, which form the country’s oil sector and were recently privatized with the participation of American capital. The DLP and SDP have joined forces in a bloc to contest the upcoming elections.

Addressing the country on July 24 and 28, the Conservative Prime Minister Andrius Kubilius warned against a “wave of populism overcoming economic rationality” in the runup to the elections. Kubilius announced, as did Landsbergis in his July 31 address, that the government and the parliamentary leadership will persist with market reform measures, because any course reversal would only postpone the day of reckoning for the country, irrespective of electoral cycles, as well as slowing Lithuania’s return to Europe. By taking politically unpopular measures in the pre-electoral stage, the Conservatives are in effect simplifying the successor government’s task of managing the economy (ELTA, July 20, 24, 27-28; BNS, July 21, 24, 28, 31; see the Monitor, January 11, March 28, July 6).

MILITARY UPDATE.