Lithuania by Aneta Piasecka

Capital: Vilnius Population: 3.3 million GNI/capita, PPP: US$17,310

Source: !e data above was provided by !e World Bank, World Development Indicators 2011.

Nations in Transit Ratings and Averaged Scores 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Electoral Process 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 Civil Society 1.50 1.50 1.50 1.50 1.50 1.75 1.75 1.75 1.75 1.75 Independent Media 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 Governance* 2.50 2.50 2.50 n/a n/a n/a n/a n/a n/a n/a National Democratic 2.75 Governance n/a n/a n/a 2.50 2.50 2.50 2.50 2.75 2.75 Local Democratic 2.50 Governance n/a n/a n/a 2.50 2.50 2.50 2.50 2.50 2.50 Judicial Framework 1.75 and Independence 2.00 1.75 1.75 1.75 1.50 1.75 1.75 1.75 1.75 Corruption 3.75 3.50 3.50 3.75 4.00 4.00 3.75 3.75 3.50 3.50 Democracy Score 2.21 2.13 2.13 2.21 2.21 2.29 2.25 2.29 2.25 2.25

* Starting with the 2005 edition, Freedom House introduced separate analysis and ratings for national democratic governance and local democratic governance to provide readers with more detailed and nuanced analysis of these two important subjects.

NOTE: !e ratings reflect the consensus of Freedom House, its academic advisers, and the author(s) of this report. !e opinions expressed in this report are those of the author(s). !e ratings are based on a scale of 1 to 7, with 1 representing the highest level of democratic progress and 7 the lowest. !e Democracy Score is an average of ratings for the categories tracked in a given year. 340 Nations in Transit 2011

E S

n 2010, Lithuania celebrated the 20th anniversary of the restoration of its independence. Over the past two decades, the country has established a functioning democracy with well-protected political and civil rights and a Irobust market economy. Lithuania joined NATO and the European Union in 2004 and the Schengen visa-free zone in late 2007. Following impressive gains and recognition in the foreign policy arena, much- needed public sector reforms in Lithuania have been stagnating. Public apathy and alienation from the political process have deepened, and trust in major democratic institutions—including the parliament, government, political parties, and courts— has continued to decline. !e dramatic economic recession of 2009 continued throughout 2010, resulting in growing unemployment, expansion of the country’s informal economy, and rising emigration. !e center-right ruling coalition of the Homeland Union –Lithuanian Christian Democrats (HULCD), the Liberal and Center Union (LCU), the Lithuanian Liberal Movement (LLM), and the Rising Nation Party (RNP) survived its second year in power, despite squabbling among smaller coalition members and frequent criticism from President Dalia Grybauskaitė. President Grybauskaitė— whose 2009 election campaign focused on reducing corruption and fighting energy sector monopolies—has been vocal in her criticism of the Lithuanian government for lack of progress in these and other areas. Government efforts to cut spending began reining in Lithuania’s public sector deficit, though this figure remained high at year’s end. !e state also conducted an unprecedented appraisal of all publicly- owned commercial assets.

National Democratic Governance. !e center-right ruling coalition continued to focus on Lithuania’s economic and fiscal challenges. Although the coalition lost its parliamentary majority in the spring of 2010, it garnered enough support to pass the 2011 national budget. President Grybauskaitė enjoyed solid public support as she undertook a sweeping reshuffle of top officials. After a dramatic fall in GDP and budget revenues in 2009, the economy and inflows into the nation’s coffers stabilized as the government continued to squeeze the bureaucratic apparatus. Lithuania’s national governance rating remains unchanged at 2.75.

Electoral Process. As of 2010, non-party members were allowed to run individually in local government elections in 2011, but the parliament did not uphold the Constitutional Court’s ruling to allow civil movements to run for local government office. Political parties remained the most unpopular public institution in Lithuania, supported by only 3 percent of the population. !e parliament Lithuania 341 received a blow in late 2010 when it failed to impeach one of two MPs, partners in crime who, according to the Constitutional Court, had breached the constitution and parliamentary oath. Lithuania’s electoral process rating remains unchanged at 1.75.

Civil Society. Nongovernmental organizations (NGOs) were affected by the economic crisis and severe shortfalls in funding. New grassroots movements were established with obvious political ambitions in light of the dramatically low public trust in existing political parties and the upcoming local government elections in 2011, where non-party members (albeit not grassroots movements) may participate for the first time. Lithuania’s civil society rating remains unchanged at 1.75.

Independent Media. Lithuania’s media market suffered from growing taxes levied on journalists, as well as low advertising revenues. !ere are no signs of open censorship in the mass media, and most outlets remained highly critical of both the national and local governments during the year. However, independent media often presented one-sided views and lacked investigative depth. Meanwhile, the use of online media continued to expand rapidly. In 2010, 60 percent of the population used the internet, a slight increase from 2009, with the most popular use being the online reading of newspapers and journals. Progress in online media development and usage offset a continuing decline in the quality of media programs and watchdog media; Lithuania’s independent media rating remains unchanged at 1.75.

Local Democratic Governance. In 2010, Lithuania’s ten regional administrations were abolished, yet the reform was strongly criticized for not removing ambiguities in the division of power or making governance at the municipal level more transparent and accountable. !e long-running debates on direct mayoral elections again failed to produce a result, although the parliament finally allowed non-party members to appear on proportional ballot lists in local government elections. Owing to a lack of visible improvements, Lithuania’s local democratic governance rating remains unchanged at 2.50.

Judicial Framework and Independence. Despite Lithuania’s widely acknowledged need for court reform, no breakthrough was reached in 2010, with only minor, slow-paced changes accomplished. Public distrust of courts grew dramatically during the year, reaching 44 percent. Reform of the penal system began in 2010, entailing prison mergers and cuts in the prison management apparatus. Lithuania’s judicial framework and independence rating remains unchanged at 1.75.

Corruption. Lithuania’s national anticorruption program, updated in 2009, stipulates clear-cut objectives, tasks, and assessment criteria for anticorruption work, including an increase in the number of e-services provided by the State Tax Inspectorate, publication of land-planning projects online, and anticorruption advertisements in the media. However, the implementation of the content of the 342 Nations in Transit 2011

anticorruption program has moved slowly. Lithuania’s corruption rating remains unchanged at 3.50.

Outlook for 2011. Lithuania’s government is expected to survive another year, although it would find itself subject to reappointment by the parliament if even one cabinet member were to change. Local government elections will be held in February 2011, where the opposition parties are likely to perform better than the members of the center-right ruling coalition. Prospects for healthcare and court reform remain fairly dim, while the coalition may strengthen its push in the fight against corruption. Although the economic situation is predicted to improve in 2011, the current wave of emigration may persist. Unemployment will continue to be an issue, although it may start to gradually decline. A search for a strategic investor in a new nuclear power plant will likely dominate the energy-sector agenda in 2011.

Lithuania 343

M R

National Democratic Governance 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 n/a n/a n/a 2.50 2.50 2.50 2.50 2.75 2.75 2.75

Since the onset of Lithuania’s recession in 2009, economic and fiscal challenges have been the focus of the center-right ruling coalition between the Homeland Union–Lithuanian Christian Democrats (HULCD), the Lithuanian Liberal Movement (LLM), the Liberal and Center Union (LCU), and the Rising Nation Party (RNP). Polarization and infighting among the smaller coalition partners did not significantly undermine the work of government in 2010, though it left analysts and even coalition members in constant expectation of a coalition breakdown. !e ruling coalition lost its parliamentary majority in the spring of 2010 after the defection of one HULCD party member. However, this change was preceded by a support agreement between the coalition and the Lithuanian Peasants’ Popular Union (LPPU), a party with three parliament members. LPPU promised to support the coalition until after the vote on the 2011 budget, but withdrew its support when the draft budget law was submitted to parliament without first being negotiated with the cabinet. In the fall of 2010, the LCU and RNP parliamentary factions merged into the United Group, thus enhancing their stability. Before the merger, each of the two parliamentary factions possessed only the minimum number of members (seven) required to establish a faction. !ree ministers left Prime Minister Audrius Kubilius’s cabinet in 2010. Because Lithuania’s constitution requires the dissolution of the cabinet once more than half of its members have been replaced, these changes left the cabinet two reappointments shy of a dissolution vote by the parliament. Among the year’s most controversial personnel changes was the resignation of foreign affairs minister Vygaudas Ušackas, which followed a public spat with President Grybauskaitė over the direction of foreign policy. President Grybauskaitė expressed a loss of trust in Ušackas, although some of her own actions—including her refusal to attend an informal meeting with United States President Barack Obama, or her too-positive comments on the stabilizing effect of President Alexander Lukashenka’s re-election in Belarus—also raised eyebrows in 2010. Despite her criticism of the government as a whole, President Grybauskaitė remains supportive of Prime Minister Kubilius, maintaining that he is the most able politician to head the government. !e president enjoyed solid public support as she continued to reshuffle top political appointees, bringing in a new security chief, a new prosecutor general, and a new head of the Financial Crime Investigation Service. However, political analysts questioned the pace of the president’s reform efforts. !e State Social Insurance Board (SoDra) remained without a permanent chair for almost a year, while President Grybauskaitė continued to blame the government for failing to 344 Nations in Transit 2011

reform the social security system. In November, the Ministry of Social Security and Labor appointed a SoDra chair. !roughout the year, Lithuania struggled to emerge from a painful economic recession caused by a decline in both external and internal demand. After a dramatic drop in GDP and budget revenues in 2009, the economy and inflows into the nation’s coffers began to stabilize. In 2010, the government reversed two of the unpopular measures it had imposed the year before, reducing corporate income tax and excise duties on diesel fuel to their previous levels. However, other tax increases from 2009 were not revoked. !e April 2010 announcement that all citizens would be obliged to pay the health insurance tax regardless of their income resulted in public outrage and a run on the Labor Exchange by individuals registering as unemployed. Meanwhile, the cabinet’s rhetoric on improving the business environment contrasted with a lack of initiatives to reduce existing disincentives to legal self-employment. Unemployment soared to 18.1 percent in the beginning of the year (by the end of the year it was closer to 17 percent), and the shadow economy appeared to expand.1 Renovation programs for apartment buildings, which the government portrayed as a key element of its stimulus package, failed to gain momentum, once again leading to criticism from the president. Despite some fiscal consolidation and attempts to curb Lithuania’s public spending, in 2010 the government managed to decrease the public deficit only slightly, from 9 to 8 percent of GDP. Some progress was made in streamlining the bureaucratic apparatus, a crisis-induced policy since 2009. Previously, the bureaucratic apparatus had been growing by several thousand employees per year, while the first half of 2010 saw staff reductions of about 3 percent.2 !e government’s ad hoc approach to reform, combined with opposition from certain political circles and officials, prevented comprehensive, institutional and administrative changes. According to public opinion surveys, public trust in the government remained low, hovering around 10 percent.3 In mid-2010, the government embarked on changes in public asset management, though these attempts stalled at the end of the year. For the first time in Lithuania’s postcommunist history, the state appraised all of its commercial assets. Having concluded that there was a dire need for more efficient asset management, the government proposed setting up a holding company to manage state-owned commercial assets. However, squabbling within HULCD as well as opposition from President Grybauskaitė brought this initiative to a virtual standstill. In recent years, the transparency of Lithuania’s executive branch has been increasing, with all bills and legislative proposals posted online as of mid-2009. According to the United Nations 2010 E-Government Survey, Lithuania ranked 28 out of 184 in e-government development, the same rank as in 2008.4 In the same survey, Lithuania’s e-participation—defined as the area of services allowing participation in public affairs via the internet—moved from 22nd place in 2008 to 19th in 2010. In 2010, Lithuania went from being a net exporter of electric energy to a net importer. A power exchange system implemented on January 1 is intended to Lithuania 345 strengthen market mechanisms while keeping power prices low after the closure of the Soviet-era Ignalina nuclear plant on the last day of 2009. Large companies representing 35 percent of Lithuanian energy consumers may now purchase electricity at market prices rather than regulated tariffs. Gradual liberalization is foreseen for the electricity market; by 2015, all customers should be able to purchase electricity at market prices. Late in the year, the government held a tender for a strategic investor in a new nuclear power plant, but the last contender withdrew its bid in early December. According to opinion polls, only 7.8 percent of the population believes Lithuania will build a nuclear power plant by 2020 (the plant’s projected date of completion), and as little as 8.8 percent thinks Lithuania will be able to find a strategic investor to finance a major share of the nuclear power plant’s building costs.5 Meanwhile, the government was unable to consummate an electricity grid deal with Poland or move ahead with the construction of an electricity grid to Sweden—projects which, if implemented, have potential to solve Lithuania’s energy problems in terms of cost, safety, and supply.

Electoral Process 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75

In 2007, Lithuania’s Constitutional Court ruled that it was unconstitutional for local government election candidates to run exclusively on party list ballots. !e expectation in 2010 was that parliament would amend Lithuania’s electoral law to reflect this ruling, enabling civil movements to participate in the February 2011 local elections. Prominent politicians, including the former leader of the LCU, Artūras Zuokas, founded their own movements, while political parties founded parallel movements. Two new parties also entered the political scene in 2010—the Lithuanian National Union, created in late 2009 and led by Kazimiera Prunskienė, and the Christians’ Party led by former Prime Minister Gediminas Vagnorius. Beyond the 2011 campaigns, the future of these new formations is unclear. !e lifespan for most new political organizations and parties is quite short, operating as they do among a wide spectrum of existing parties—many of them immature newcomers—who are prone to unstable, ad hoc coalitions, infighting, and weak leadership. In 2010, there were 42 registered parties in Lithuania.6 Political parties remain the most unpopular public institution in the country; they are viewed positively by only 3 percent of the population.7 A number of regulatory changes to political party laws were introduced in 2010. As expected, non-party members were allowed to run individually for local government posts, but the parliament did not uphold the Constitutional Court’s ruling to allow civil movements to run for local government office. Additionally, restrictions on the amount of annual donations to a single party or a party member 346 Nations in Transit 2011

during an election year were changed, raising them to 20 times the average monthly salary per year. !e parliament, which, like political parties, suffers from low levels of public trust, was discredited still further when the Constitutional Court ruled that two members of parliament (MPs) had breached the constitution and their parliamentary oath by committing voting fraud. One of the accused MPs, Linas Karalius, had been absent on an unauthorized holiday, while a colleague—MP Aleksandr Sacharuk— had voted illegally on his behalf. In November, the parliament impeached Karalius for missing parliamentary sessions and committee meetings, but allowed Sacharuk to retain his position, an outcome that sparked outrage among the public and within the parliament, and resulted in the opposition calling for early elections. !e HULCD coalition suffered a drop in public support as a result of its highly controversial decision to impose a health insurance tax on all individuals, regardless of income. As the news of the tax broke in April, the party’s popularity rating dropped from second to fourth place.8 !e party also struggled to cope with its more radical Christian Democrat wing, whose illiberal rhetoric, including homophobic speeches, may have also contributed to falling popularity.9 In late summer, reports surfaced of a possible challenge to the LSDP leader Algirdas Butkevičius, who was elected party chair in 2009. !e revolt against the representative of the Social Democratic flank was allegedly organized by Democratic Labor flank members. After an unsuccessful attempt to remove Butkevičius, one of his presumed challengers, Andrius Šedžius, left the party and registered the Lithuanian Democratic Labor Party (LDLP), a new party named after the political formation that replaced the Communist Party in 1990.

Civil Society 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1.50 1.50 1.50 1.50 1.50 1.75 1.75 1.75 1.75 1.75

In 2010, grassroots movements continued to expand in Lithuania. !is trend was associated with the opportunity to manifest their political ambitions in the run-up to the 2011 local government elections, where non-party candidates will be allowed to run for the first time. Examples of new movements included the movement Homeland Revival and Future (TAIP) led by the former head of LCU, Artūras Zuokas, and an offspring movement of the RNP called Oak. Groups such as these have benefited from extremely low public trust in political parties and candidates’ reluctance to be stuck with a party label. In the future, they are likely to develop into formal political organizations, with their own labels. !ere are three legal forms of nongovernmental organizations (NGOs) in Lithuania: associations, property-based public institutions (such as schools, hospitals, and research institutes), and charity or sponsorship funds. Statistics on the number of organizations are ambiguous; the number of officially registered NGOs is far larger than the number of operating entities. Reportedly, some fictitious Lithuania 347 organizations have been founded in order to take advantage of the 2-percent tax deduction available to private individuals who donate to NGOs.10 At the beginning of 2010, there were 7,957 active associations, 2,578 public institutions (schools and hospitals excluded), and 225 charity and sponsorship funds.11 A decrease in proceeds from the personal income tax led to reduced funding through the 2-percent provision. Moreover, while the number of recipient organizations increased in 2010, the number of donors decreased for the first time since the 2-percent option was introduced in 2003. In 2009, 15,600 organizations received funding from 530,000 donors; in 2010, 16,700 organizations received funding from just 437,000 donors.12 According to the 2010 World Giving Index produced by the Charities Aid Foundation, only 4 percent of Lithuanians give to charity and 6 percent volunteer, which ranks Lithuania 147th out of 153 countries surveyed.13 However, opinion polls indicate that giving to charity has increased, with 44 percent of the population claiming to have donated in 2010, up from 38 percent in 2009.14 Companies in Lithuania may donate up to 40 percent of their annual taxable profits to NGOs. Most NGOs lack permanent sources of income and are now facing a dramatic decline in funding. In recent years, NGOs have increasingly adjusted their activities to qualify for EU funding, but this drive to attract EU donations has had the effect of distracting many from their core objectives. NGOs may bid for government contracts, but this practice is uncommon owing to a complex administrative process. Lithuanian nonprofits are required to pay a 15 percent profit tax on commercial proceeds exceeding LTL 25,000 (approximately US$10,000). Business associations and trade unions are traditionally the most influential nongovernmental groups in the policymaking arena, but labor has been losing influence in recent years. Unions sign collective agreements with employers on behalf of all employees, and the labor code requires all employers to comply. However, in most cases, the role of unions is limited to negotiating wages and employee duties. Interest groups’ influence depends largely on personal connections and corrupt practices; unlike the labor lobby, the business community possesses strong contacts and extensive resources.15 !e Lithuanian Confederation of Trade Unions, Lithuanian Labor Federation, and Solidarity are coalitions of labor groups, while the Lithuanian Confederation of Industrialists and the Lithuanian Business Employers’ Confederation are the country’s leading employer organizations. !ese labor and employer groups together with the government constitute the Tripartite Council, which makes recommendations on national labor policy. Despite its wide powers, the council has low representation—trade unions claim only about 15 percent of the workforce, while the employer confederations represent 1 percent of business enterprises. In recent years, the council has been widely censured for blocking much-needed liberalization of Lithuania’s tight and inflexible employment regulations. Reforms of higher education in 2009 introduced student voucher-based financing, council-based university management involving public leaders, and increased independence in property and assets management. In 2010, these 348 Nations in Transit 2011

controversial reforms broke the stagnation of state-run universities, stimulating renewal of curriculums as well as improvements in internal quality-assurance systems. Voucher-based financing will be introduced in preschools as of 2011, with the aim of increasing their accessibility and transparency of financing. While secondary education is also undergoing changes, with moves toward more autonomy and less bureaucracy, improvements are also needed in the overall teaching methods and systems for assessing achievement. History was made in May when Vilnius hosted its first Baltic Pride march. A thousand or more gathered to protest the march, among them two MPs who were later arrested for abusing police officers; a heavy police presence ensured the safety of march participants. Homophobic attitudes are prevalent in Lithuania, and previous city authorities in the nation’s capital had forbidden gay equality marches from taking place.

Independent Media 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75

Lithuanian media continued to suffer from low advertising revenues and growing taxes in 2010. Social security contributions paid by journalists increased in 2010 and will do so again in 2011, delaying the media sector’s recovery from the economic crisis. Television has fared better than other media; leading national broadcasters TV3 and LNK continued to report a profit in 2010, while Lietuvos Rytas TV managed to increase its market share and reduce losses. !e B2B Group, controlled by the Norwegian media conglomerate Schibsted, disrupted the media industry by launching free live broadcasts of major TV channels on its website (www.15min.tv). Owners of TV3, LNK, and the National Radio and Television sued the company but lost their case before local administrative courts. At year’s end, B2B group received a warning from the National Radio and Television to stop live broadcasts and the case was under consideration by the Vilnius district court. !e outcome of this legal battle will have significant implications for the media industry. Currently, B2B only re-broadcasts 5 out of 30 national TV channels. !ere are no signs of open censorship in the mass media, and most outlets remained highly critical of both the national and local governments during the year. However, independent media continued to be criticized for one-sided views and a lack of investigative depth. !e current economic crisis further aggravated the apparent decline in quality journalism and watchdog media in Lithuania, a trend observed in recent years. Additionally, the journalist community increasingly voiced concerns over the deteriorating quality of media. Transparency of media ownership has decreased in recent years as mass media outlets have been purchased by conglomerates whose real owners are unknown to the general public. Public trust in mass media is around 40 percent, just over half of what it was a decade ago.16 Lithuania 349

!e internet continued to grow in importance in the media market. In spring 2010, a total of 55 percent of Lithuanian households were connected to the internet, and 60 percent of the population used the internet, a slight increase over the past year and double the figure of six years before.17 !e use of online media continued to expand rapidly. According to household surveys, online reading of newspapers and journals was one of the most popular uses of the internet and reportedly accounted for 87 percent of internet use in 2010.18 News portals in Lithuania’s extensive online media market competed intensively over quality and quantity of information, also expanding their video materials. !e most popular internet media outlets in 2010 were www.defi.lt, www.lrytas.lt and www.balsas.lt. Media in Lithuania are privately owned, with the exception of the state-owned Lithuanian Radio and Television. !e television market comprises 30 broadcasters. !e leading national broadcasters are TV3 (owned by the Scandinavian conglomerate MTG), LNK (owned by Lithuania’s MG Baltic), and the Lithuanian National Television LTV1. In recent years, several new national outlets joined the market through digital video broadcast terrestrial (DVB-T), which according to the Communications Regulatory Authority covers around 92 percent of Lithuania’s territory.19 !e number of digital television subscribers in 2010 almost doubled compared to 2009, reaching 246,000 households in June 2010.20 Lithuania is set to make a full transition to digital television by 2012. !ere are around 50 radio broadcasters in Lithuania and all are commercial except for Lithuanian National Radio broadcasting. !e state-run LR1 has the largest audience, comprising 21 percent in spring 2010, and M-1 ranks second with 14.4 percent.21 Traditionally, radio has been dominated by small local shareholders but in recent years has attracted large industries and other commercial interests. !ere are 4 national daily newspapers—Lietuvos Rytas, Vakaro Žinios, Respublika, and Lietuvos Žinios—and around 70 regional dailies across the country. !e Lietuvos Rytas Group and Respublika Group dominate the newspaper market. In 2010, an unknown company, allegedly controlled by controversial banker and businessman Vladimir Romanov, acquired a 50.15 percent stake in Diena Media News, which publishes the regional dailies Kauno Diena, Vilniaus Diena, and Klaipėda. Lithuania has no sector-specific regulation of media ownership concentration, but legislation on competition sets a general limit at 40 percent market share.

Local Democratic Governance 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 n/a n/a n/a 2.50 2.50 2.50 2.50 2.50 2.50 2.50

In 2010, regional administrations were abolished with the aim of removing ambiguities in the division of power that had impeded decentralization, distribution of fiscal allocations, and transparent and accountable governance at the municipal level. !e reforms were criticized for eliminating two-thirds of regional-administration functions (58 out of 88), reassigning 10 of the remaining 350 Nations in Transit 2011

functions to local governments, and 20 to the national government.22 Territory planning, regional development, and land administration were assigned to the national government, while supervision of specialized schools and buildings, fishing, and hunting was given over to local governments. !is division of regional- administration functions was seen as illogical by local governments, who felt that only the “unprofitable” functions had been left to them. More than half of the official positions (1,300 out of 2,400) within regional administrations were also abolished, with less than half being transferred to the national government and none to local governments. As a result of the reform, expenditure on salaries was set to decrease by 44 percent after July 2010, with the remaining portion being transferred to the national government. Prior to the reform, Lithuania had one level of local government that encompassed 60 municipalities led by elected officials and 10 regional administrations governed by central appointees. Despite the long-running debate on direct mayoral elections, in 2010 parliament failed to pass a bill on constitutional amendments in their favor. !e main opposition to direct mayoral elections came from HULCD, which argued that administrative powers of directly elected mayors were not clearly defined. Political parties’ fear of losing influence in local governments is another likely obstacle to direct mayoral elections. At present, mayors are elected by municipal councils whose members are chosen in general elections. Executive powers are vested in the municipal council and administration, which is led by a director appointed by the municipal council at the suggestion of the mayor. In 2010, non-party members (except for civil movements) were finally allowed to appear on proportional ballot lists. Public trust in local government hovers around one-third of the population. Most Lithuanians doubt their power to influence decision-making in local government, but also acknowledge the role of self-governance in addressing local community needs.23 !e dialogue between local authorities and communities seems to be growing gradually, but public confidence is continuously undermined by cases of graft and mismanagement. Alytus Mayor Česlovas Daugėla was arrested in October 2010 on suspicion of corruption, while Vilnius Mayor Vilius Navickas was removed from office after proof surfaced of his instructions to municipal council members to delay decisions and investigations that would potentially benefit opposition parties. !e year saw slow progress in increasing the transparency of municipal decision-making. Online availability of municipal services and the quality of official municipal websites increased in 2010, but still remains quite low. Legislative proceedings by municipal councils were rarely available on the internet, and decisions were unknown to the public until their enactment. Reportedly, the majority of local government services are not available online; the Vilnius municipality is an exception, with online information provided on 41 percent of its services.24 In 2010, local governments continued to suffer from budget revenue shortfalls related to the economic crisis, though they did managed to reduce their overall debt. !e City of Vilnius’s plans to privatize municipally-owned enterprises, utilities, and real estate assets met some public opposition but were eventually implemented Lithuania 351 with limited success. Municipal governments have a limited degree of financial independence. !eir budgets are composed of ever-shrinking central government subsidies and independent revenues collected from personal income tax, property and land taxes, and local fees. Central budget allocations account for about half of municipal budgets. !e remaining portion comes from independent municipal revenues in which personal income taxes comprise the largest portion. !ere are wide regional disparities in local government revenues, which are leveled through revenue transfers among municipalities. A large share of independent proceeds goes to the central government wage fund and utility payments, so in reality municipal councils are free to distribute less than one-tenth of municipal budgets.

Judicial Framework and Independence 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2.00 1.75 1.75 1.75 1.50 1.75 1.75 1.75 1.75 1.75

Minor, slow-paced changes were accomplished in Lithuania’s judicial system in 2010, but no breakthrough was reached despite the country’s widely acknowledged need for court reform. A 2009 pedophilia case that had led to two murders, among them a district court criminal trial judge, tainted the justice system even further as the main suspect was found dead in 2010. !e case revealed serious procedural flaws in pre-trial investigations and widespread defiance of professional duties among law and order officials, eventually leading to the resignation of the prosecutor general. Backlash against the judiciary—with its lengthy investigations and trials and corruption—brought public trust in the court system to its lowest point in 12 years. In 2010, distrust in courts rose 10 percent,25 to 44.4 percent. Apparently, only two-fifths of all reported crimes are solved, while public opinion polls indicate that one-third of victims do not even report crimes.26 Unrelenting criticism of the justice system by politicians and the news media further damaged the public’s opinion of the courts. During the year, discussions continued on reforming the prosecution service and state security service, with a view toward making them accountable to the government, rather than the president, but no tangible progress was made. !e number of lawsuits in Lithuania has grown considerably over the past few years, especially civil suits. !e workload of judges grew by an average of 27.8 percent annually between 2007 and 2010.27 In 2010, court workloads were alleviated somewhat by technological modernization, such as the decision to audio record sessions. Transferring excessive court duties to notaries, inspections, registries, and so on, continued in 2010 and some of the functions were renounced. In the fall, the Ministry of Justice proposed introducing a class action in the court system to reduce litigation costs for aggrieved parties and alleviate court workloads. Class actions are viewed as especially desirable after the Constitutional Court ruled that crisis-induced salary cuts for public sector workers and pension cuts for working retirees must be proportional, temporary, and compensated. 352 Nations in Transit 2011

Responding to criticism of the country’s overcrowded prisons and reported human rights abuses, the government undertook broad reform of the penal system in 2010. So far, changes have been limited to prison mergers and cuts in the prison management apparatus, but public-private and fully private prisons are set to go into operation in 2015–2017 to allow for better conditions for inmates and higher public security. Two cases from the previous year stirred up a fierce internal debate about Lithuania’s counterterrorism policy. In early 2010, the parliament approved the findings of a 2009 parliamentary investigation revealing that between 2004 and 2006, Lithuania’s national security agency had helped the CIA to set up two secret facilities in Lithuania capable of holding terrorism suspects. !e investigation confirmed that U.S. aircraft had flown into the country, but no evidence was found regarding actual confinement or interrogation of prisoners. In April 2010, the public became aware of the detention, since late 2009, of a young, Lithuanian female Muslim convert, Eglė Kusaitė, accused by Lithuanian prosecutors of plotting a terrorist act in Russia. In 2010, Kusaitė reported physical and psychological abuse by Lithuanian as well as Russian security officials, who were allegedly allowed to take part in pre-trial investigation. In December 2010 the Prosecution Service of the Republic of Lithuania concluded that the suspect’s complaint was not supported by any objective records and refused to conduct a pre-trial investigation of Kusaitė’s complaints In July, the lead prosecutor in the case against Kusaitė was removed after he refused Kusaitė the opportunity to meet with the head of the Human Rights Monitoring Institute, and made a public statement that raised doubts about his objectivity.28 !e case against Kusaitė is shrouded in secrecy, reinforced by the court’s decision not to conduct the trial publicly. In November 2010, Lithuania’s Constitutional Court ruled that the EU-level Law on European Parliament Elections was in breach of the Lithuanian constitution, as it prevented non-party members from participating in elections to the European Parliament. In the same month, President Grybauskaitė vetoed a law that would have permitted dual citizenship for citizens of the EU and NATO member states.

Corruption 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 3.75 3.50 3.50 3.75 4.00 4.00 3.75 3.75 3.50 3.50

Lithuania’s national anticorruption program, updated in 2009, stipulates clear- cut objectives, tasks, and assessment criteria for anticorruption work, including an increase in the number of e-services provided by the State Tax Inspectorate, publication of land-planning projects online, and anticorruption advertisements in the media. However, fewer than half of these goals were carried out in 2010. Responsibility for anticorruption work is spread out among seven authorities and two parliamentary committees, none of whom appear to share information; this inhibits focused and coordinated anti-corruption efforts. Lithuania 353

!e parliament identified anticorruption work as an official priority in 2010 and included 11 draft law packages at the top of its fall agenda. Only a quarter of the draft bills were adopted, the most important of which allows for confiscation of assets deemed not proportional to a suspect’s income. Opinion data shows that, until recently, 84 percent of the population regarded official anticorruption work as ineffective. 29 !e current center-right coalition has been vocal about reducing corruption in the area of public procurement, with some visible changes since 2009. As of February 2010 the Public Procurement Office (PPO) began online publishing of all reports and decisions of purchasing organizations. In March, the PPO launched investigations of the 50 riskiest public procurements, obliging contractors to review unaccepted bids or suspend contracts found to be in violation of laws over the year. In April, in what was seen as an unprecedented move, the PPO disclosed information on the top 100 contractors and suppliers of public procurement. Although a centralized online public procurement system exists, less than 1 percent of all public tenders are carried out through this system. During the year there was some follow-through on high-profile cases brought by the Special Investigation Bureau (SIB) in 2008 and 2009 after a series of corruption-related arrests in municipal authorities across the country. In early 2010, Deputy Minister of Healthcare Artūras Škikas, a member of LCU, went on trial for bribery involving an alleged donation to LCU and was sentenced to two years in prison. !e head of the Lithuanian postal service was arrested in March for racketeering and fraud in his former position at a private bank. Parliament Member Mantas Adomėnas of LHUCD faced allegations of corruption for influencing a public tender, though no formal charges were brought. A high-profile case of mismanagement of public funds also surfaced, in relation to the closure of the Ignalina nuclear power plant. Public officials and civil servants were perceived in 2010 as being among the most corrupt actors in Lithuanian society, though more trusted than political parties, the parliament, or the judiciary. Almost a third of respondents admitted that they or members of their households had given a bribe in some form over the past 12 months.30 !e regulatory system is the chief way that the state intervenes in the economy. In 2010, drug price controls were introduced at the initiative of President Grybauskaitė, who repeatedly called for a bigger state role in the economy. !e president also attempted to usher in price controls on basic foodstuffs in what she and the public perceived to be a monopolized retail market. Businesses in Lithuania are burdened with onerous reporting regulations that amount to some 1,000 requirements in the areas of corporate, labor, and tax law, statistics, and consumer protection, and another 1,000 in vertical sectors of the economy, such as transport, finance, trade, and construction.31 !ere are about 150 regulatory agencies in Lithuania, and over 300 permissions or licenses required. A revision of business protection procedures coupled with functional and institutional mergers was launched in 2009 aiming to prevent abuse, excessive interventions, and 354 Nations in Transit 2011

unjustified penalties for businesses. In late 2010, the government decided to reduce the number of legal acts containing business regulations by 25 percent by the end of 2011.

A: A P Aneta Piasecka is head of international relations and project management at the International School of Law and Business in Vilnius. Kaetana Leontjeva, who assisted in the writing of this report, is a policy analyst at the Lithuanian Free Market Institute.

1 Lithuanian Office of Statistics, “!e Unemployment Rate in I Quarter 2010 Was 18.1 Per Cent,” 25 May 2010, http://www.stat.gov.lt/en/news/view/?id=8612&PHPSESSID=c20c67; and Milda Seputyte, “Lithuanian Unemployment Rate Fell to 17.1% in Fourth Quarter,” Bloomberg News, 18 February 2011, http://www.bloomberg.com/news/2011-02-18/ lithuanian-unemployment-rate-fell-to-17-1-in-fourth-quarter.html. 2 Between 1 January 2010 and 1 July 2010, the number of civil service employees shrank from 56,845 to 55,286. See Civil Service Department under the Ministry of the Interior website, http://www.vtd.lt/index.php?621891589. 3 “Kuri valdžia dirba kokybiškai” [Which Branch of Power Operates Most Efficiently], Veidas, 22 March 2010 (in Lithuanian). 4 United Nations Department of Economic and Social Affairs, United Nations E-Government Survey 2010 (New York: United Nations, 2010), http://unpan1.un.org/intradoc/groups/ public/documents/un/unpan038851.pdf. 5 “Mažai kas tiki, kad naują atominę elektrinę turėsime iki 2020 m.” [Few Believe in a Nuclear Power Plant by 2020], Veidas, 6 December 2010, http://www.veidas.lt/aktualijos/mazai-kas- tiki-kad-nauja-atomine-elektrine-turesime-iki-2020-m (in Lithuanian). 6 Website of the Department of Statistics of the Republic of Lithuania. http://db1.stat.gov.lt/ statbank/default.asp?w=1280. 7 “Mažėja pasitikėjimas partijomis, Seimu, Vyriausybei” [Public Trust in Parties, Parliament and Government Falls], Delfi.lt, 24 April 2010, http://www.delfi.lt/news/daily/lithuania/ mazeja-pasitikejimas-partijomis-seimu-vyriausybe.d?id=31474153 (in Lithuanian). 8 “Artėjant rinkimams – vėl švytuoklės principas” [Pendulum Swings Again as Elections Approach], Veidas, 6 October 2010, http://www.veidas.lt/politika/artejant-rinkimams- %E2%80%93-vel-svytuokles-principas (in Lithuanian). 9 “Lietuviškieji ‘talibai’ erzina partijų lyderius” [Lithuanian ‘Talibs’ Irritate Party Leaders], Veidas, 18 May 2010, http://www.veidas.lt/komentatoriai/lietuviskieji-talibai-erzina-partiju- lyderius (in Lithuanian). 10 Jolita Žvirblytė, “2 proc. paramos gviesiasi nealkani” [2 Percent Tax Deductible Is Sought by !ose Not Hungry], Lithuania Gazette, 25 April 2009, http://verslas.delfi.lt/business/2- proc-paramos-gviesiasi-nealkani.d?id=21842579 (in Lithuanian). 11 Website of the Department of Statistics of the Republic of Lithuania. Lithuania 355

12 State Tax Inspectorate, “Nuo sumokėto pajamų mokesčio gyventojai šiemet skyrė apie 38 mln. litų paramos gavėjams” [Citizens Donated About 38 mln Litas of !eir Paid Income Tax to Charity Recipients], October 2010, http://www.vmi.lt/lt/?itemId=10819099 (in Lithuanian); and State Tax Inspectorate, “Paramos gavėjams gyventojai šiemet skyrė apie 72 mln. litų nuo sumokėto pajamų mokesčio” [Citizens Donated About 72 Mln Litas of !eir Paid Income Tax], 16 November 2009, http://www.vmi.lt/lt/?itemId=10813474 (in Lithuanian). 13 Charities Aid Foundation, $e World Giving Index 2010 (Kent, UK: Charities Aid Foundation, 2010), http://www.cafonline.org/pdf/0882A_WorldGivingReport_Interactive_070910.pdf. 14 “Lietuviai šiemet dosnesni” [Lithuanians are More Generous !is Year], Veidas, 13 December 2010, http://www.veidas.lt/aktualijos/lietuviai-siemet-dosnesni (in Lithuanian). 15 R.J. Hrebenar, C.H. McBeth, and B.B. Morgan, “Interests and Lobbying in Lithuania: A Spectrum of Development,” Journal of Public Affairs 8 (2008): 51–65. 16 “Žmonės mažiausiai pasitiki partijomis” [Public Trusts Parties the Least], Delfi.lt, 20 November 2010, http://www.delfi.lt/news/daily/lithuania/zmones-maziausiai-pasitiki- partijomis.d?id=38780659 (in Lithuanian). 17 Department of Statistics of the Republic of Lithuania, “Information Technology in Households,” press release, 13 August 2010, http://www.stat.gov.lt/lt/news/view/?id=7963. 18 “Internetu reguliariai naudojosi 58 proc. visų 16–74 metų amžiaus gyventojų” [58 Percent of All Inhabitants Aged 16–74 Regularly Used the Internet], Market News, 13 August 2010, http://www.marketnews.lt/naujiena/internetu_reguliariai_naudojosi_58_proc_visu_1674_ metu_amziaus_gyventoju;itemid=19546 (in Lithuanian). 19 Communications Regulatory Authority of the Republic of Lithuania (RRT), Annual Report 2009 (Vilnius, RRT, 2010), http://www.rrt.lt/en/reviews-and-reports/rrt-annual-repots. html. 20 Communications Regulatory Authority of the Republic of Lithuania, “2010 Q2 Report on Electronic Connections’ Sector,” n.d., http://www.rrt.lt/en/reviews-and-reports/reports-on- the-urpp/2010_617.html. 21 TNS, “Radijo auditorijos tyrimas 2010 m. pavasaris” [Survey of Radio Audience, Spring 2010], n.d., http://www.tns.lt/lt/ziniasklaidos-tyrimai-radijo-auditorijos-tyrimas-duomenys- 2010m-pavasaris (in Lithuanian). 22 Ministry of the Interior, “Apskričių viršininkų administracijų reforma” [Reform of Regional Administrations], n.d., http://www.vrm.lt/index.php?id=1321 (in Lithuanian). 23 “Savivaldos reforma—populistų įkaitė” [Reform of the Local Governments—a Hostage of the Populists], Kauno žinios, 30 March 2010, http://www.kaunozinios.lt/naujienos/ savivaldos-reforma-populistu-ikaite_12011.html (in Lithuanian). 24 Information Society Development Committee, under the Ministry of Transport and Communications, “Elektroninių paslaugų internete, teikiamų valstybės ir savivaldybių institucijų ir įstaigų tyrimas” [Survey on Online e-services Provided by State and Local Governments’ Institutions and Agencies], 8 March 2010, http://www.ivpk.lt/main-stat. php?cat=62&n=105 (in Lithuanian). 25 “Nepasitikėjimas teismais Lietuvoje viršijo visus rekordus” [Distrust of Lithuanian courts breaks all records], Veidas, 15 March 2010, http://www.veidas.lt/visuomene/teisesauga/ nepasitikejimas-teismais-lietuvoje-virsijo-visus-rekordus (in Lithuanian). 26 “Lietuvoje išaiškinama tik du penktadaliai nusikaltimų” [Only Two Fifths of Crimes are Solved in Lithuania], Veidas, 3 May 2010, http://www.veidas.lt/visuomene/teisesauga/ lietuvoje-isaiskinama-tik-du-penktadaliai-nusikaltimu (in Lithuanian). 27 “Teisėjai ir prokurorai nebepakelia darbo krūvio” [Judges and Prosecutors Can No Longer Bear the Workload], Veidas, 31 May 2010, http://www.veidas.lt/teisejai-ir-prokurorai- nebepakelia-darbo-kruvio (in Lithuanian). 356 Nations in Transit 2011

28 “Justinas Laucius nušalintas nuo Eglės Kusaitės bylos (papildyta)” [Justinas Laucius Removed from Eglė Kusaitė Case], Balsas.lt, 22 July 2010, http://www.balsas.lt/naujiena/494541/ justinas-laucius-nusalintas-nuo-egles-kusaites-bylos-papildyta/rubrika:naujienos-lietuva- kriminalai (in Lithuanian). 29 Transparency International, Global Corruption Barometer 2010 (Berlin: Transparency In- ternational, 2010), http://www.transparency.de/fileadmin/pdfs/Wissen/Korruptionsindices/ GCB_2010.pdf. 30 Ibid. 31 !e Ministry of Economy of the Republic of Lithuania, “Taikomojo mokslinio tyrimo ‘Administracinę naštą verslui sukuriančių informacinių įpareigojimų supaprastinimo galimybės geresnio reglamentavimo kontekste’ ataskaita” [Report on Applied Scientific Research ‘Possibilities of Simplifying Reporting Requirements Imposing Administrative Burden on Business in the Context of Sounder Regulation’], 22 July 2010, http://www. ukmin.lt/lt/veikla/veiklos_sritys/reglamentavimas/studija/index.php (in Lithuanian).