THE END OF THE RAINBOW: COALITION TALKS WITH

C O N F I D E N T I A L SECTION 01 OF 02 VILNIUS 001352

SIPDIS

STATE FOR EUR/NB

E.O. 12958: DECL: 10/28/2014
TAGS: PGOV PREL LH
SUBJECT: THE END OF THE RAINBOW: COALITION TALKS WITH
CONSERVATIVES COLLAPSE

REF: VILNIUS 1323

Classified By: Pol/Econ Officer Christian Yarnell
for Reasons 1.4 (b) and (d)


1. (C) SUMMARY: The Conservative Party suspended formal
talks with the Brazauskas-Paulauskas coalition on October 28,
following major disagreement over the constitution of a
so-called "rainbow coalition." Immediately following the
collapse of talks, the Brazauskas-Paulauskas coalition
formally agreed to begin negotiations with the upstart Labor
Party led by Russian-born millionaire Viktor Uspaskich. The
Labor Party has said it will accept PM Brazauskas's and
Parliamentary Chairman Paulauskas's remaining in their
respective positions, although Uspaskich hopes to get more
key posts in Parliament as compensation. A coalition of the
Social Democratic, New Union, Labor, and Peasant parties
would have a solid majority of 84 MPs in the 141-seat
Parliament, and would leave President Adamkus little choice
but to endorse its proposed Cabinet. Detailed negotiations
will continue well into next week, however. Brazauskas has
signaled to the Labor Party that, if his demands are not met,
he could form a minority Cabinet among the Social Democrats,
New Union, and Liberal Center, and the Conservatives have
said they would throw their needed support behind this
minority Cabinet. Brazauskas is driving a hard bargain, but
we expect him to form a coalition government with Labor
before the end of next week. END SUMMARY.

--------------
Conservatives and Liberals Back Out of Talks
--------------


2. (U) "Rainbow" coalition negotiations between the
center-left Brazauskas-Paulauskas alliance (Social Democratic
and New Union Parties) and the center-right bloc of
Conservatives and Liberal Centrists, launched following
October 24 elections (ref A),have all but collapsed. The
ideological adversaries -- Conservatives as successors of the
independence movement Sajudis and Social Democrats as
Communist Party offspring -- failed to bridge their
differences and agree on a sharing of power. The
Conservatives (25 seats in Parliament) rejected demands by
the Social Democrats (20 seats) for the top leadership
positions in the government and key ministerial posts. The
Social Democrats, in turn, dismissed the Conservative
compromise proposal of a two-year rotation of the top
government spots. The crisis came to a head when
Brazauskas's party signed an agreement on October 28 to
launch formal negotiations with the Labor Party.
Conservative leader Andrius Kubilius responded by suspending
talks on the "rainbow" coalition. The Liberal Center joined
with the Conservatives and refused an invitation to join in
talks with Labor.

--------------
Labor Party Eager for Coalition
--------------


3. (U) The Labor Party (39 Parliamentary seats),meanwhile,
has already declared that it considers PM Brazauskas and
Parliamentary Speaker Paulauskas acceptable candidates to
remain in their current leadership posts. Uspaskich has
limited his appetite to six ministerial portfolios (of lower
importance) and complimented the current
Brazauskas-Paulauskas Cabinet for implementing a program
similar to his own. Brazauskas cautioned that there was more
to negotiate, however, noting that he could still form a
minority Cabinet comprised of Social Democrats, New Union,
and the Liberal Center if necessary. The Conservatives
indicated on October 29 a willingness to support such a
minority Cabinet, bolstering Brazauskas's bargaining position
vis-a-vis Labor.

--------------
Negotiation Details
--------------


4. (U) Social Democrats demand for themselves the post of PM
for Brazauskas and seven ministries (out of 13 total) that
would administer the bulk of EU funds: Finance,
Transportation, Environment, Economy, Agriculture, and Social
Security and Labor. A majority of portfolios in the Cabinet
would not only enable PM Brazauskas to steer policy, but
would also enable him to continue on uninterrupted as PM.
(Note: According to Lithuanian law, the PM must step down if
more than half of the Cabinet ministers change.) The New
Union wants for itself the posts of Parliamentary Chairman
and Ministers of Foreign Affairs and Education. Uspaskich
has said that Labor could accept as few as six Cabinet
positions, as long as it received the lion's share of
committee chair posts in Parliament as compensation. Peasant
Party leader Prunskiene is battling for control of the
Ministry of Agriculture, but, according to media reports, is
unlikely to assume the post herself.


5. (U) A Brazauskas-Paulauskas-Uspaskich-Prunskiene (Social
Democrats, New Union, Labor, and Peasants) coalition,
including a few independents, would have a solid majority of
84 MPs in the 141-seat Parliament. Talks on the division of
portfolios, personalities, and Cabinet program will continue
well into next week, but President Adamkus would have little
choice but to endorse the Cabinet of this coalition.

--------------
Comment
--------------


6. (C) Brazauskas has played hardball throughout the
post-election negotiations, even though his Social Democratic
Party finished third in the elections with only 20 of 141
Parliamentary seats. Yet the Brazauskas-Paulauskas coalition
remains the only partner acceptable to all sides, and
electoral math dictates that Brazauskas be included in the
next government. His flirtation with the right succeeded in
frightening Labor, which is desperate to be included in the
government following a very expensive campaign with high
expectations of success. Uspaskich's willingness to allow
Brazauskas and Paulauskas to remain on as PM and
Parliamentary Chairman, respectively, removes the most severe
obstacle to a coalition agreement. We expect the Social
Democrats, New Union, Labor, and Peasants to announce the
formation of a coalition government headed by PM Brazauskas
by the end of next week, although a minority Cabinet
excluding Labor remains a remote possibility.
MULL