By Patrick Lannin and Andrius Sytas
VILNIUS (Reuters) - Lithuania headed for political deadlock after the coalition winners of a weekend election said they would push ahead with talks to form a government despite a presidential veto of one of their parties over allegations of voter fraud.
The Social Democratic party, which with its allies snatched victory on Sunday in a vote against years of austerity, rejected any change in the make-up of the coalition despite President Dalia Grybauskaite saying one of the three parties was unfit to govern because of the fraud allegations.
"We have not changed our opinion. We want to fulfil our promises to voters, because they trusted us," Social Democrat leader Algirdas Butkevicius said after meeting with senior party members of his party on Monday.
Butkevicius, whose party took most seats in the election and who is likely to be the next prime minister, ruled out including the Homeland Union party of outgoing Prime Minister Andrius Kubilius in a new administration.
"We would really disappoint the voters if we started to wander and began forming some new coalition," he said.
The Social Democrats, the Labour Party and the Order and Justice Party - headed by impeached former president Rolandas Paksas - capitalized on voters' anger at years of austerity that restored the country's finances after the global crash, but led to soaring unemployment and an exodus of Lithuanians seeking better opportunities abroad.
Grybauskaite said she refused to back a coalition which included Labour, which stands accused of buying votes during the two rounds of the election.
"A party which is suspected of gross violations in the election, which is suspected of false accounting and non-transparent activities cannot participate in the government's formation," the president told reporters.
Grybauskaite, 56, a former European Union budget commissioner, is popular with voters. Under the constitution she has the power to nominate the prime minister.
The Labour Party denies wrongdoing.
"The principle of the presumption of innocence must be kept to," said Viktor Uspaskich, the party's leader. "The will of the people must not be spat upon".
Grybauskaite said police were investigating 27 election irregularities, 18 of which concerned alleged vote buying, with the Labour Party accused of involvement in most of them.
Separately, Uspaskich is on trial for alleged tax fraud, which he denies. His party increased its representation in the 141-seat parliament to 29 lawmakers from 10.
"We call our state a democratic state, ruled by law," Uspaskich said on public television.
Grybauskaite said she probably would name Social Democrat Party leader Algirdas Butkevicius as prime minister.
But with the president and winning parties at loggerheads, it was not clear what the new government would look like.
"The rules for solving confrontation between a formed majority in parliament and president which refuses to nominate its candidate for prime minister is not clearly defined in the constitution," political commentator Arturas Racas told Reuters.
"If both parties do not relent this is a stalemate, there is no clear solution. The only way to solve it will be a ruling by the Constitutional Court," he said.
Butkevicius said a compromise might be to exclude Uspaskich and other Labour party members facing legal probes from government posts. He ruled out forming a minority government.
Whatever the make-up of the new administration, economists said it would have little choice but to keep a tight rein on spending as Lithuania remained highly indebted and needed to maintain the trust of financial markets.
Butkevicius has said he would stick to fiscal responsibility and aim to take Lithuania into the euro zone in 2015, broadly extending the policies of Kubilius. [ID:nL6E8L2DQJ] He has also backed closer ties with Russia.
Kubilius won praise abroad for slashing Lithuania's budget deficit after a brutal economic crisis began four years ago.
The economy has now returned to growth, and rose a faster-than-expected 4.4 percent in the third quarter.
But Kubilius saw his popularity slide at home as wages fell, unemployment rose and tens of thousands of people left the small Baltic country in search of work.
(Editing by Michael Roddy)