Latvia. According to
Countryaah, Latvia was characterized by a clearer economic upturn
during the year and by domestic political turbulence.
expressed itself in two government crises. Already in 1996,
the Latvian economy turned upward, with growth of 2.8%. In
1997, growth was estimated at 6%, inflation was reduced to
9% and the state budget showed a surplus. Investments
increased sharply and during the year L. Estonia took over
the saturation of foreign investment per capita in the
Baltic States. Towards the end of the year, unemployment
tended to decline. Exports increased strongly during the
year, but imports increased even more strongly and the
deficit in Latvia's current account balance remained alarmingly
The government fell in January after Andris Skele failed
to get his finance ministerial candidate approved. After a
month's government crisis, however, Skele returned as prime
minister at the head of an almost unchanged government.
In the spring and summer, however, the government
gradually fell apart. The DPS (Democratic Party of
Saimnieks), from whose direction the failed prime
ministerial candidate was retrieved, sought to avenge by
distributing compromising material with the implication that
Finance Minister Guntars Krasts would have violated the
Anti-Corruption Act. However, some unsustainable evidence
against Krasts never emerged, but the mass media now began
to more systematically examine the actions of other
ministers. As a result of this review, three of them
resigned on their own, while one was dismissed by the Prime
Minister. A couple of other ministers were allowed to resign
for some other reasons during the spring and summer.
The crisis culminated in the summer when the prime
minister came on an increasingly clear collision course with
the three largest parties in the government coalition: DPS,
Apvieniba Tevzemei un brivibai/LNNK (For the Fatherland
and Freedom/Latvia's National Independence Movement) and
Latvia's Cels (Latvia). Skele was forced to resign, and the
parties agreed that Finance Minister Guntars Krasts would
become the new prime minister at the head of a largely
In November, former Communist leader Alfreds Rubiks was
released from prison after serving six of the eight years he
was sentenced. The border negotiations with the Russian
Federation were completed in October.
In June 1993, a new parliament was elected to appoint
Guntis Ulmanis as president. The beginning liberalization of
the economy immediately led to widespread unemployment. In
1994, foreign investment increased, but the economy
continued to depend on Russia, which was the main supplier
of oil and natural gas as well as the country's main export
market. Despite the massive privatization of state-owned
enterprises, the government continued to deficit the state
budget and trade balance.
In 1995, the bankruptcy control of the commercial banks
led to several of them going bankrupt. The September
parliamentary elections gave no clear victory, as the nine
participating parties each received between 5 and 16% of the
vote. An agreement between the Conservative National Bloc
and two left-wing parties in December allowed Andris Skele
to be appointed prime minister.
In June 1996, Parliament re-elected with 53 votes out of
100 Guntis Ulmanis for the presidential post. In the same
year, relations with Russia improved significantly.
Nevertheless, Latvia continued to make demands for the
signing of a border agreement between the two countries.
In July 1997, Guntars Krast took over the post of prime
minister from Andris Skele, who resigned after being accused
of corruption. In November, Russia reiterated its criticism
of a possible Latvian accession to NATO. Although Riga did
not appear on the list of candidates for inclusion in the
Atlantic pact, the government had on several occasions
expressed its desire to be admitted.
In February 1998, Latvia passed a law allowing the
issuance of passports to foreigners who had remained in the
country since 1991. This was a new attempt to reduce
tensions with the country's Russian minority.
Commander-in-Chief of the Latvian Armed Forces, Juris
Dalbinsh was dismissed from his post in April 1998 after
attending an event for former Latvian members of the German
SS who, together with Germany during World War II, had
fought against the Soviet Union. The same week, the director
of police in Riga was dismissed for failing to provide
adequate protection for a city synagogue subject to a bomb
attack. The same month, Italy declared that the treatment to
be subjected to the Russian minority in Latvia is
inconsistent with the requirements of countries wishing to
join the EU.