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Opposition groups in coalition deal

Opposition Social Democrats won Lithuania's parliamentary election after campaigning on promises to reverse unpopular austerity policies and boost social spending in the recession-scarred Baltic state.

Party leaders have agreed to form a coalition government with two other centre-left opposition parties that have also called for a larger government role in the economy after four years of tight budgets aimed at avoiding bankruptcy and paving the way for the euro.

The election result was a blow to prime minister Andrius Kubilius, whose conservative party, Homeland Union-Christian Democrats, finished second in the poll.

Algirdas Butkevicius, the Social Democrats' leader and the likeliest prime minister candidate, said his party was ready to create a coalition with two populist parties - the Labour Party and Order & Justice.

"Society, voters, elected these three parties. We have most of the votes in the parliament, and citizens provided us the right to form a new government and implement our programmes," Mr Butkevicius said.

Together the three parties would control 78 seats in the 141-member Parliament.

Mr Butkevicius, a former finance minister, has said that more money should be invested in production and the country should postpone plans to introduce the euro until the European Union can sort out its ongoing financial crisis.

Mr Kubilius' government, which came to power in December 2008, has said it would like Lithuania to adopt the common currency in 2014.

Lithuania suffered one of Europe's worst recessions in 2009, with economic output declining 14%. To stave off bankruptcy, the government was forced to raise taxes and cut expenditures. Joblessness soared, tens of thousands fled the country, and living standards declined dramatically - particularly due to higher energy costs after Lithuania closed a Soviet-era nuclear power plant that had been a cheap source of kilowatts.

Mr Kubilius' government has drawn up plans to build a new £4 billion nuclear power facility, though opposition parties - including those that will probably make up the new government - have slammed it as a luxury too expensive for a country of three million people.

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