Lithuania’s Prime Minister Gintautas Paluckas resigned Thursday morning following mounting allegations of unethical financial dealings, triggering a looming government reshuffle in Vilnius.

“Just over an hour ago, I informed the president that I have made the decision to resign from the position of prime minister,” Paluckas said in a statement. “I also announce that I have decided to step down from my position as leader of the LSDP (Social Democratic Party).”

The prime minister’s resignation automatically triggered the fall of the Cabinet, though the president may ask ministers to remain in their posts until a new coalition and government are formed.

Paluckas’ decision comes after the president gave a two-week ultimatum to either answer growing questions about his finances or step aside.

A scandal involving loans, EU funds and questionable business ties linked to Paluckas and his relatives erupted in May, prompting a financial crimes investigation and an outcry in Lithuanian society.

In his resignation statement, Paluckas continued to deny wrongdoing while he was in office. “As prime minister, I do not feel that I have made any fundamental mistakes or violations — I have carried out my duties honestly, to the best of my understanding and ability,” he said. 

“Seeing how the fueling scandals are bogging down the work of the government, I believe that I cannot turn our ruling coalition and Cabinet into hostages of these scandals,” Paluckas added. “Therefore, I have decided to make a quick and decisive decision.”

While the Social Democrats stood behind their leader, pressure mounted — not only from the opposition but from within the governing coalition — for him to leave office.

On July 30, Lithuanian Parliament Speaker Saulius Skvernelis, leader of the center-left party Union of Democrats “For Lithuania,” warned his party would exit the coalition if Paluckas stayed in office. 

Skvernelis called the resignation a “logical step, but a belated one,” speaking to journalists on Thursday. 

President Gitanas Nausėda said the coalition-building process is now underway as he sought to downplay the fallout.

“Fundamentally, nothing changes,” Nausėda told Lithuanian national broadcaster LRT Thursday morning. “The Social Democratic Party of Lithuania, which won the last parliamentary election and holds a majority in the Seimas [parliament], will begin talks on forming a potential coalition.”

“There is more than one candidate who could fully carry out the duties of prime minister,” Nausėda said, adding that any contender must be thoroughly vetted to avoid “another situation like this.”