* PM Confident of passing 2010 budget
* Economy shrank 14.2 percent in Q3
By Darcy Lambton
LONDON, Nov 27 (Reuters) - Lithuania expects to return to growth next year, but meeting European Union criteria to adopt the euro means entry would most likely take place in 2013, Prime Minister Andrius Kubilius said on Friday.
The prime minister said he was convinced political and economic measures that had been taken would guarantee economic and social stability to attract foreign direct investment and the 2010 budget would be passed in parliament.
The economy shrank 14.2 percent in the third quarter year-on-year, figures showed on Friday, and a 6.1 percent expansion in quarterly terms was not enough to convince analysts the small Baltic Sea country is now on a growth track.
"We have our third quarter results which were really very good, if you look into quarter by quarter we have six percent growth," an upbeat Kubilius told Reuters Insider television in an interview. "We see that the situation is stabilising and starting to improve."
Asked when Lithuania would emerge from recession, he said:
"From a technical point of view it can be that we shall have during the first quarter quite a positive one (quarter), so technically we can see positive growth will come quite soon, but we see that to come back to the levels which we had back in 2008 ... of course it will take quite a long time."
On returning to growth in 2010, the prime minister said: "I am absolutely sure about that, the question is when -- the first half or the second half."
EURO HOPES?
Kubilius said his government was making severe cuts to the budget, including measures worth 8 percent of GDP this year and 5 percent of GDP in 2010. This meant 2013 was now more likely as a target date to adopt the euro. "It's more realistic," he said.
The prime minister said he did not expect to carry out his threat to resign as he expected the budget would be passed. Asked if the budget would go through parliament, he said:
"Absolutely. We had some slight changes in the coalition but still we have a majority and during this week we had a second reading in the parliament and we had quite a comfortable number of votes in the parliament."
The prime minister confirmed Lithuania would be tapping international markets next year.
"Of course with such a deficit we are going to borrow in international markets, which we are doing very successfully during this year, especially in October.
"We hope that such trust in international financial markets towards our policies will continue, so we are going to borrow around (overall) 13 billion litas (4.3 billion Euros) in 2010."
Estonia's hopes to join the euro zone as soon as 2011 would be positive, rather than a threat to investment in Lithuania.
"...I am quite happy they will manage to achieve such a result. It will be an additional argument in our domestic politics to put forward the reforms which we are doing."
He said Lithuania was attractive for investment in terms of mobile penetration and digital infrastructure and noted that Barclays invested in Lithuania at the peak of the crisis. (Editing by Matthew Jones) ((London newsroom))