Lithuania

The election of a new centre-left government in October is set to raise questions over the future policy direction in Lithuania, and specifically relating to the painful austerity drive and internal devaluation experienced by the small EUR30.5bn Baltic economy. In particular, we note that a strong mandate for the centre-left parties in the Seimas could reduce fiscal accountability. We therefore believe that the commitment to further fiscal consolidation on the part of the central government may be less clear-cut going forward, underpinning our expectation for only a gradual narrowing of the fiscal deficit over the coming years.

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