Lithuania votes in the second round of national elections

Lithuania is voting in the second round of national elections, with budget cuts and joining the euro seen as key issues.

Polls opened at 07:00 with half the seats being contested.

Two centre left parties, the Labour Party and the Social Democrats, finished first and second in the first round on 14 October.

PM Andrius Kubilius’ governing conservatives, unpopular for cutting pensions and public wages, came third.

Having won 34 seats in the first round, Labour and the Social Democrats hope to win enough of the 67 seats available on Sunday to allow them to form a coalition government.

Lithuania’s 3.3 million inhabitants face an unemployment rate of 13% and declining living standards, as well as high energy costs since the country closed its Soviet-era nuclear power plant in 2009.

They voted against government plans to build a new nuclear power station – seen as a way of cutting dependence on imported Russian energy – in a referendum held at the same time as the first round of elections.

Opposition parties had questioned the plant’s affordability. They have promised to improve the ex-Soviet state’s strained relations with Russia, still Lithuania’s biggest trade partner.

The populist Labour Party, founded by Russian-born millionaire Victor Uspaskich, won 18 seats in the first round of voting, while the Social Democrats won 16 seats and the ruling Homeland Union 13.

Led by former finance minister Algirdas Butkevicius, the Social Democrats have promised to raise the minimum wage, make the rich pay more tax and put back euro entry until 2015, a year later than the government hopes.

But analysts say there will be little room for fiscal manoeuvre. Among the EU’s poorest countries, the Baltic state needs to borrow 7% of its GDP – some 7.6 billion litas – next year to refinance debt and fund the deficit.

Andrius Kubilius came to power in 2008, just as the global financial crisis was bringing a dramatic end to an extended Lithuanian boom fuelled by cheap Scandinavian credit.

He staved off national bankruptcy with a drastic austerity programme as economic output dropped by 15%, unemployment climbed and thousands of young people emigrated in search of work.

The budget deficit has since been tamed and GDP reached growth of 5.8%.

Lithuania’s approach won praise from other governments and the International Monetary Fund, but analysts say the rebound came too late to translate into a political revival for the conservatives.

Delaying euro entry means the country could run a bigger deficit than euro accession rules permit.