VILNIUS (Reuters) - Lithuania's Peasants and Greens Union said on Wednesday it had agreed a deal with the Social Democrats to form a coalition that will focus on reducing inequality in a country where more than a fifth of the population lives below or close to the bread-line.

The Peasants and Greens, with 54 seats in the 141-seat parliament, were the surprise winners in the late-October general election ousting a coalition of the Social Democrats, Labour and Order and Justice parties which had been in power since 2012.

The coalition will concentrate on decreasing inequality and stopping the flood of Lithuanians leaving the country, a member of the European Union since 2004, for a better life elsewhere.

"Priority will be given to education," Ramunas Karbauskis, leader of the Peasants and Greens Union, told reporters.

Income inequality in Lithuania is among the highest in the European Union and has been increasing. The IMF reckons around 20 percent of the population has a disposable income at or below 60 percent of the median, the worst in the bloc after Bulgaria, Estonia, and Latvia.

The two coalition parties won 71 seats in parliament and are also expected to get the backing of a number of independent law makers, giving them a workable majority.

The coalition is expected to take office in early December, after the new parliament appoints the prime minister and approves the government's policy plans.

Saulius Skvernelis, a man who led the Peasants and Greens Union to its general election victory but is not a party member, is expected to become the prime minister.

Karbauskis, a wealthy agriculture businessman and the long-time leader of the Peasants and Greens said he will not take a seat in the new cabinet.

The Social Democrats, who lead the outgoing government, managed only the third place in the election. The Homeland Union, which ended up second, rejected an offer to join the coalition.

(Reporting By Andrius Sytas; Editing by Simon Johnson and Ralph Boulton)