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Latvia, country in northeastern Europe. Latvia is one of the Baltic states, along with Lithuania and Estonia. Its name in Latvian is Latvijas Republika (Republic of Latvia). Rīga is the capital and largest city, as well as the chief port. Latvia is situated on the eastern shore of the Baltic Sea. Ethnic Latvians constitute a slight majority of the population, while Russians represent the largest minority group. Many of the Russians or their ancestors settled in Latvia after the Union of Soviet Socialist Republics (USSR) annexed the republic in 1940. Latvia was a republic of the USSR until 1991, when it regained its independence. In 1993 the country held its first post-Soviet democratic elections. Since the early 1990s, Latvians have been working to transform the country�s centralized, Soviet-developed economy into one based on the principles of the free market.

Latvia covers an area of about 63,700 sq km (about 24,600 sq mi), of which 2,550 sq km (980 sq mi) is inland water. It is bounded on the north by Estonia and the Gulf of Rīga, an inlet of the Baltic Sea; on the east by Russia; on the south by Belarus and Lithuania; and on the west by the Baltic Sea. Like the other Baltic republics, Latvia consists mostly of a low-lying plain. An upland area in the eastern part of the country constitutes the largest expanse of land in the Baltics with an elevation of more than 200 m (660 ft). The landscape of Latvia bears traces of glaciation and includes numerous lakes, streams, marshes, and peat bogs. The relatively unindented coastline extends 530 km (330 mi), with many sandy beaches. The northern half of the coastline faces the Gulf of Rīga, a deep inlet of the Baltic Sea that is shielded from the open sea. The gulf juts into the northern portion of Latvia, forming the wide Kurzeme (Courland) Peninsula in the northwest. The largest river is the Daugava (Western Daugava), which is one of the principal rivers of the Baltic drainage area. Originating in Russia, it flows into Belarus and then northwest through Latvia to drain into the Gulf of Rīga. The republic�s major hydroelectric power stations are situated on the Daugava. Other major rivers are the Gauja, the Venta, and the Lielupe.

Some 47 percent of Latvia is forested, mainly with pine, spruce, birch, and aspen. Forest cover is most dense in the north. The country�s mixed forests, meadows, and marshes support a number of animal species. Common mammals include elk, deer, wild boar, wolves, and lynx. Seals can be found along the coast. Latvia�s wide variety of birds includes black storks, herons, nightingales, woodpeckers, owls, and partridges.

Natural resources are limited in Latvia. Peat (a compact, high-carbon material used for fuel and mulch) is the most plentiful mineral deposit; peat bogs cover about 10 percent of the total land area, mainly in the eastern portion of the country. There are also deposits of gypsum, a mineral used in construction materials. Amber, a fossil tree resin, is found along the coast.

Latvia�s climate is dominated by air masses from the Atlantic Ocean. In the western part of the country, winters are mild and summers are relatively cool. The east experiences slightly colder winters and warmer summers. Latvia has high levels of humidity and frequently cloudy skies. Annual precipitation averages between 560 and 790 mm (22 and 31 in), with the upland areas receiving the most. Snow covers the ground for two to four months of the year, sometimes longer. Rainfall is heaviest in July and August.

Like most former republics of the USSR, Latvia suffers the negative environmental legacy of decades of ecological and environmental mismanagement. Soviet economic policies favored the rapid buildup of heavy industries, which generate more pollution than do light industries. The Soviet government never implemented emission-control technologies, and industrial pollution continues to be a problem due to the high cost of upgrading or replacing existing technologies and facilities.

Industrial, agricultural, and municipal enterprises have produced dangerous levels of water pollution. Water pollution is especially severe in the Daugava River and the Gulf of Rīga because of the outflow of untreated wastewater at Rīga, which lacks an adequate sewage treatment plant, and industrial discharge from factories along the Daugava and its tributaries. In addition, chemicals and petroleum products at military bases have contaminated soil and groundwater.

Air pollution in Latvia is particularly heavy during windless, cloudy weather. The main air pollutants are sulfur dioxide, ammonia, phenols, formaldehyde, and nitrogen oxides. Latvia suffers from high levels of acid rain, which has defoliated more than half the country's trees. In addition, the extraction of peat continues to damage wildlife habitats. Environmental issues began to be discussed publicly in the late 1980s as part of Latvia's independence movement. The government has designated 12.5 percent (1997) of the country protected and has ratified international environmental agreements pertaining to air pollution, biodiversity, climate change, endangered species, hazardous wastes, ozone layer protection, ship pollution, and wetlands.

The population of Latvia (2001 estimate) is about 2,385,231, yielding an average population density of 37 persons per sq km (97 per sq mi). Latvia is highly urbanized. Some 74 percent of the population lives in urban areas, with nearly one-third of the total population residing in Rīga. Other important cities include Daugavpils, an industrial center; and Liepāja, a seaport with an ice-free harbor. Numerous towns and small cities are located along the country�s rivers, waterways, and coastal areas.

Ethnic Latvians constitute about 55 percent of the population. Russians, who live mostly in Latvia�s urban areas, are the largest minority, representing about 32 percent of the population. Other minorities include Ukrainians, Belarusians, Poles, and Lithuanians. Before 1940, when the Soviet government annexed Latvia, Latvians comprised about 77 percent of the population within Latvia�s present-day boundaries. After World War II ended in 1945, a large influx of Russian workers into Latvian cities reduced the Latvians� overwhelming majority. The Latvian population also decreased significantly during the war and the subsequent Soviet-conducted mass deportations to Siberia and other parts of the USSR.

The official language of the republic is Latvian, an Indo-European language related to Lithuanian. Ethnic minorities in Latvia often also speak their own native languages, which include Russian, Lithuanian, and Polish. Lutheranism, a Protestant denomination, is the traditional religion of most Latvians, with the exception of those in eastern Latvia, who are predominantly Roman Catholic. Other forms of Christianity�most notably Eastern Orthodoxy�are practiced by ethnic minorities to various degrees. There is only a small community of Jews in Latvia, as most of the country�s Jewish inhabitants were killed by German Nazis and their Latvian collaborators during World War II. Religious expression was strongly discouraged during the Soviet period. However, most Soviet restrictions on religion were lifted in the late 1980s, stimulating a revival of religious practice.

Latvia has an adult literacy rate of nearly 100 percent. Education is compulsory for nine years beginning at age six or seven. Universal and free education has been strongly emphasized in Latvia ever since the period of independence prior to Soviet annexation. Since 1991 Latvia�s educational system has been restructured according to an international model put forth by the United Nations Educational, Scientific and Cultural Organization (UNESCO). Since Latvian was adopted as the official state language in 1989, the study of Latvian has become compulsory in all schools. However, Latvia has a number of schools that offer primary instruction in minority languages. The largest institution of higher education is the University of Latvia (founded in 1919), located in Rīga, followed by Rīga Technical University (1862).

Latvian culture is rooted in native folklore, which survived the centuries through a rich oral tradition of ancient legends, songs, and poetic verses. Subjects of folklore have commonly included the seasons, myths, family life, and the land. Latvia�s national epic, Lāčplēsis (1888; The Bear Slayer)�written by Andrējs Pumpurs�is based on traditional Latvian folk stories. Latvian literature emerged most notably in the 19th century, as more Latvians began receiving formal education. Among the first writers of note were Indrikis the Blind, who published poetry in the early 1800s, and Juris Alunāns, the first widely published Latvian poet. The most prominent figure in Latvian literature is the poet and playwright Jānis Rainis, whose greatest work, the epic tragedy Fire and Night (1905), deals with Latvian prehistory. Rainis was also a social reformer who spent six years in Russian imperial prisons and 15 years in exile in Switzerland before becoming independent Latvia�s minister of education in the 1920s. During the Soviet period the Communist regime imposed severe restrictions on artistic expression, and many Latvian writers, such as Anšlāvs Eglītis, fled their homeland to live and work abroad. Latvia�s most prominent contemporary writers include poet Vizma Belševica and novelist Alberts Bels.

Museums in Latvia include the Latvian Historical Museum (1869) and the Rainis Museum of the History of Literature and Arts (1925), both located in Rīga. Latvia�s national symphony orchestra and philharmonic orchestra are critically acclaimed. The country�s highly rated Rīga Ballet, known as one of the best in the former USSR, has produced stars such as dancer Mikhail Baryshnikov. Other popular cultural activities include the country�s many folk festivals and the permanent circus in Rīga. Popular spectator sports include basketball and soccer.

Latvia was a constituent republic of the USSR from 1940 to 1991. As such it was fully absorbed into the Soviet economic system. The country was forcibly industrialized, resulting in environmental degradation and rapid urbanization as people from across the USSR were resettled in Latvia to work in the factories. Since achieving independence Latvia has aspired to reintegrate with Europe. This widely held goal allowed the country�s leaders to early on initiate economic reforms intended to establish a market economy such as found in western European nations. These policies allowed prices for goods to be set without government involvement; restrained government spending; and privatized agricultural land, small businesses, and banking institutions.

The transition to a European-style economy was not smooth, however. The first difficulty was a severe shortage of fuels and raw materials, caused by the disruption of trading relationships resulting from the breakup of the Soviet Union. This forced Latvian enterprises to cut back or cease production, casting many of the workers into unemployment. After a sharp decline, the gross domestic product (GDP), which measures the value of all goods and services in the country, did not start growing again until 1994. A year later a banking crisis swept the country. Unwise loans and lax government oversight created conditions in which the nation�s largest bank and some of its smaller institutions failed and were unable to pay depositors the money they had entrusted to the bank. The government restored confidence by creating a stricter regulatory system to oversee banking practices.

Today the economy of Latvia is among the healthiest of the former Soviet republics. The GDP was increasing in the mid-1990s. Inflation was contained and the national currency was stable, both of which encouraged international trade and economic growth.

Latvia�s gross domestic product was $6.3 billion in 1999. Industry contributed 28 percent of GDP, a smaller proportion than in earlier years because of a sharp drop in industrial production following Latvia�s independence from the Soviet Union in 1991. Agriculture, fishing, and forestry contributed 4 percent of the GDP, and the broad services sector, which includes trade and financial activities, produced 68 percent.

Nearly all of Latvia�s agricultural land was gathered into collective or state-managed farms during Soviet rule. Since independence a government privatization program is returning the farmland to private ownership. Principal agricultural activity is dairy farming and pig breeding. Leading crops include potatoes, barley, sugar beets, wheat, and cabbages. The Latvian fishing fleet sails from Rīga and Liepāja to search the Baltic Sea and Atlantic Ocean for mackerel and herring. Some 47 percent of Latvia is forested, and timber cutting is a significant economic activity. Agriculture, forestry, and fishing employs 19 percent of the workforce.

The processing of raw materials from Latvia�s farms and forests accounts for much of the country�s industrial production. The leading manufacturing branches are food products, particularly goods made from milk and sugar refined from beets; textiles and clothing, notably leather and rubber footwear; wood products, such as plywood and paper; and transportation equipment, primarily buses. Industry, including manufacturing, construction, mining, and power generation, accounts for 26 percent of the workforce.

Latvia, a country with few natural resources, must import all of its natural gas and oil and one-half of its electricity. The imported electricity comes from neighboring Lithuania and Estonia. Of that generated inside Latvia, three-quarters is produced in hydroelectric plants and the remainder in facilities burning fossil fuels.

Latvia�s principal exports are forestry products, textiles, prepared foodstuffs, and machinery and equipment. Leading imports are mineral products (notably fuels), machinery and equipment, and textiles. Russia is the country�s chief trading partner, buying nearly one-quarter of Latvia�s products and supplying one-fifth of its imports. Other important export purchasers are Germany, the United Kingdom, Lithuania, and Sweden; other sources for imports are Germany, Sweden, Finland, and Lithuania.

Latvian officials promoted economic independence by abandoning the Russian ruble. The Latvian ruble, the rublis�which was first issued in May 1992 as a transitional currency designed to compensate for shortages of Russian rubles in the country�became Latvia�s official currency in May 1993. Later the same month, the lat, the country�s new currency, began replacing the rublis as the sole legal tender (0.59 lati equal U.S. $1; 1999 average).

Newspapers and periodicals flourished in Latvia after the first nongovernment-controlled publications appeared in the late 1980s. Since then, however, rising production costs and consolidations have reduced the number. In 1996 some 24 daily newspapers were published. Commercial radio and television broadcasting began in Latvia at the time of independence; 25 radio and 30 television broadcasting companies were in operation by 1995.

Latvia is a member of the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (World Bank), and the European Bank for Reconstruction and Development (EBRD). In mid-1995 the country became an associate member of the European Union (EU). It subsequently submitted an application for full EU membership. In December 1997 Latvia and Lithuania were among five Eastern European countries invited to join the EU as part of its second round of expansion; no timetable was set for that expansion. Estonia was invited at that time to join the organization in its first round of expansion, with talks beginning in March 1998.

The present republic of Latvia is a legal successor to the independent republic of the same name that existed from 1918 to 1940. The 1922 constitution, which was fully restored in 1993, is recognized as the country�s supreme legal document.

The national legislature of Latvia, called the Saeima, is a unicameral (single-chamber) body composed of 100 members elected by popular vote to four-year terms. The legislature elects the president of Latvia by secret ballot. The president may serve no more than two consecutive four-year terms. (Until 1999 the president�s term was three years.) With the approval of the legislature, the president selects a prime minister and a cabinet of ministers, who carry out the day-to-day operations of the central government. For purposes of local government, Latvia is divided into 33 administrative districts (26 counties and 7 municipalities). All citizens of Latvia age 18 and older may vote. In October 1998 the country held a general election in which six parties won representation in the Saeima by securing the required threshold of 5 percent of the vote. A newly formed conservative party called the People�s Party won the largest number of seats (24). Latvia�s Way won the second largest number of seats (21), followed by the Fatherland and Freedom Union (FFU), a right-wing nationalist party, and the People�s Movement for Latvia, also known as Siegerists�s Party, which promoted extreme nationalist and anti-Russian policies. Latvia�s Way and FFU formed a ruling coalition with a small third party, excluding the People�s Party from the cabinet. The Democratic Party Saimnieks, which won the largest number of seats in the previous election in 1995, failed to gain enough votes to win representation in 1998.

Latvia�s judicial system consists of the Supreme Court, the Constitutional Court, regional and district courts, and administrative courts. The Supreme Court is the highest court of appeal. The Constitutional Court was established in 1996 to ensure that legislation is in conformity with the constitution. Most judges are appointed for life with the confirmation of the Saeima. The members of the Constitutional Court are appointed by the Saeima for ten-year terms.

When it was a Soviet republic, Latvia had no defense forces apart from those of the USSR. Since becoming independent in 1991, Latvia has developed its own armed forces, which now include an army of 2,400 troops, a navy of 840, and an air force of 210. There is also a border guard and a home guard reserve consisting of volunteers. Conscription for military service is mandatory for all males for a period of 12 months, beginning at age 18.

Latvia is a member of the United Nations (UN), the Council of Europe, and the Partnership for Peace program of the North Atlantic Treaty Organization (NATO). Latvia�s relations with Lithuania and Estonia are loosely coordinated through the Baltic Assembly, an intergovernmental body created in 1991. Consisting of members of the three countries� parliaments who are designated to meet occasionally, the assembly has accomplished little beyond occasional declarations. Like its Baltic neighbors, Latvia is not a member of the Commonwealth of Independent States (CIS), a loose political alliance of most of the former Soviet republics.

The ancestors of today�s Latvians first appeared in what is now Latvia around 2000 bc. Beginning in the 13th century, Latvia was successively dominated by Germany, Poland, and Russia. German Crusaders began the forcible conversion of the Baltic peoples to Christianity early in the 13th century. By 1290 the Livonian Order of the Teutonic Knights, a German crusading order, had completed its conquest of Latvia, which along with southern Estonia was then known as Livonia.

The Baltic coast was a prized possession for its trade opportunities, and in an attempt to conquer it, Russian tsar Ivan IV Vasilyevich (Ivan the Terrible) attacked Livonia in 1558, thereby instigating the Livonian War. Unable to withstand the Russian incursions, the Livonian Order disbanded, and Livonia was partitioned in 1561. The dynastic union of Poland and Lithuania absorbed the provinces of Latgale and Vidzeme to the north of the Daugava River. Kurzeme and Zemgale provinces to the west and south became Kurland (Courland), an autonomous duchy under the Polish-Lithuanian sovereign. In 1581 the free city of Rīga was incorporated into the Polish-Lithuanian Commonwealth, a political union formed in 1569. Meanwhile, the Livonian War continued, ravaging eastern Latvia and most of mainland Estonia, until Russia�s defeat in 1583. Sweden conquered Rīga in 1621 and acquired Vidzeme in 1629 but lost both to Russia in the Great Northern War (1700-1721). By 1795, after the partitions of Poland in 1772, 1793, and 1795, Russia controlled all of Latvia.

Although serfdom in Latvia�prevalent since German domination�was abolished by the Russians in the early 19th century, German and Russian landowners in Latvia continued to hold political power. Despite this, the Latvians came together to form political and cultural associations, and a Latvian independence movement arose. In 1917 Russia�s monarchy was overthrown in the February Revolution (see Russian Revolutions of 1917). Political destabilization accompanying the Russian Civil War that followed the revolution gave the Latvians their desired opportunity, and in November 1918, just after the end of World War I, Latvia proclaimed itself an independent republic. By February 1919, however, Latvia was overrun by Red Army troops of Soviet Russia, led by the Bolsheviks (later Communists), who sought to establish a Soviet regime. A newly formed Latvian army, with some assistance from German army units still in the country, drove back the Bolshevik forces. The German army then supported a coup d�état against the Latvian government, replacing it with one controlled by Baltic Germans. Aided by Estonian troops, Latvian forces successfully overthrew the Baltic German government. The independent nationalist Latvian government was reinstalled in early July, although Red Army troops were not completely expelled until January 1920. In August a Latvian-Russian treaty stipulated that Russia would respect Latvia�s sovereignty. In December 1922 the Communists founded the Union of Soviet Socialist Republics (USSR), which bordered Latvia to the east.

In May 1920 the people of Latvia elected the country�s first president, Jānis Čakste. Latvia�s first constitution, promulgated in 1922, introduced a democratic system of government. In September of that year the Saeima (parliament) passed an agrarian reform bill that initiated land reform in favor of farm workers; the old landed estates were promptly expropriated and distributed to landless peasants. Political instability ensued in the years that followed, however, in large part because many parties were vying for seats in parliament.

In 1934 Latvian prime minister Kārlis Ulmanis claimed he had discovered a Communist plot to overthrow the government. He instituted martial law by declaring a state of emergency, suspending parliament, and banning all political parties. Most Latvians tacitly accepted Ulmanis�s argument that he needed additional powers to maintain Latvian democracy, and Ulmanis secured authoritarian rule without noticeable opposition. In 1936 he assumed the title of president in addition to that of prime minister.

On August 23, 1939, about a week before World War II broke out, Germany and the USSR signed the German-Soviet Nonaggression Pact. The treaty contained a secret protocol that sanctioned the USSR to annex Latvia and its Baltic neighbors. Latvia adopted a neutral position after the outbreak of the war. However, in June 1940 the USSR accused Latvia of forming a secret anti-Soviet military alliance with neighboring Estonia and forced the Latvian government to resign. The same month Soviet forces occupied Latvia. Latvian elections were held under Soviet supervision (only one, Soviet-appointed, candidate was allowed to run for each position), and a Communist regime was installed. In August Latvia officially became the 15th constituent republic of the USSR and was thereafter known as the Latvian Soviet Socialist Republic (SSR).

More than 30,000 Latvians were deported or executed in the first year of Soviet occupation. Nazi German forces attacked the USSR in June 1941 and invaded Latvia the following month, suspending Soviet control in the region. Latvians initially hoped the invasion would bring renewed independence, but it soon became clear that Germany intended to annex Latvia. On July 28 Germany set up a puppet government and created a new territorial unit, called Ostland, out of the Baltics and Belorussia (now Belarus). Latvia�s Jewish population was systematically exterminated during the Nazi occupation. In 1944 Soviet forces expelled most of the German forces from Latvia (Germany retained southwestern Latvia until the war ended in 1945), and Latvia was officially reinstated as part of the USSR. By the end of the war, an estimated 180,000 Latvians had died. At least 100,000 more had fled to Sweden and Germany before Soviet forces arrived.

After the war, a patriotic guerrilla movement arose to oppose Soviet rule, but the movement received no outside assistance and was eventually crushed. Latvian residents suspected of opposing the Communist regime were subject to arrests, executions, and deportations to the gulags (Soviet concentration camps) in Siberia and Central Asia. The deportations reached a massive scale in 1949. Altogether at least 100,000 Latvians were sent to the gulags, where many perished due to harsh conditions. In a process known as Sovietization, the country�s cultural and political institutions were reorganized to conform with Soviet models. Latvian language and culture were suppressed, and all non-Communist social and political organizations were prohibited. The Communist Party of Latvia, a branch of the Communist Party of the Soviet Union (CPSU), held exclusive political power. Russian immigrants and Russified Latvians dominated the party.

By the early 1950s almost all of Latvia�s privately owned farms had been collectivized, or combined, and taken over by the state. The Communist government implemented a process of rapid industrialization, leading to a continuous influx of immigrants from Russia and other Soviet republics to work in new industries in Latvia�s urban areas. Latvia became one of the most urbanized republics in the USSR, with about 70 percent of the population residing in cities. It was also the most industrialized of the Baltic states. Latvia�s economy became fully integrated into that of the USSR, as the new factories were dependent on raw materials from other parts of the USSR and were used to supply products to other Soviet republics.

Political liberalization in the USSR during the late 1980s sparked a revival of Latvian nationalism. Latvian was declared the official state language, pro-independence political groups formed, and the Latvian Supreme Soviet (legislature) voted to end the Communist Party�s monopoly of power. In March 1990 the republic held its first multiparty legislative elections since 1931. Then in August 1991, during a coup attempt by Communist hard-liners in Moscow, Latvia declared its full independence. The coup attempt failed, leading to the downfall of the Communist Party in the Soviet Union�s central government. In September the Soviet government conceded the independent status of Latvia, Estonia, and Lithuania, and all three republics were admitted to the United Nations (UN) later that month. The USSR itself collapsed in December. In June 1993 Latvia held its first parliamentary elections as an independent republic, and in July the constitution of 1922 was fully restored. The new parliament, again called the Saeima, elected economist Guntis Ulmanis as president, and he selected Valdis Birkavs to be prime minister.

Citizenship and voting eligibility were major issues in Latvia during the early 1990s. In the 1993 elections, only residents (including nonethnic Latvians) who had lived in Latvia before 1940, along with their descendants and spouses, were eligible to vote. This was a result of legislation passed in late 1991 that guaranteed citizenship to these residents only; all other residents (mostly Russians and other Slavs) were required to apply for naturalization once a new citizenship law had been finalized. The Saeima adopted this new citizenship law in June 1994 and amended it the following month. In its amended form, the citizenship law requires a minimum of five years of permanent residence and a demonstrated proficiency in the Latvian language. In 1997 about 30 percent of Latvia�s residents were not citizens of Latvia. Some of them were citizens of other countries, such as Russia, but most were stateless. Tensions rose between Latvia and Russia in early 1998 over the citizenship law. In October 1998, 53 percent of Latvians approved a proposal to relax citizenship regulations.

The withdrawal of former Soviet troops (under Russia�s jurisdiction) from Latvian territory began in 1992 and was completed at the end of August 1994. In return for the removal of the troops, Latvia agreed to allow Russia to operate its radar base in Skrunda until 1998. In other relations with Russia, Latvia demanded the return of a section of territory along the Russian-Latvian border that the Soviet government had transferred to Russia in 1944. However, in February 1997 Latvia gave up this claim.

Since gaining independence, Latvia has sought closer ties with the West. In February 1994 Latvia joined the Partnership for Peace program, which provided for limited military cooperation with the North Atlantic Treaty Organization (NATO). In 1995 Latvia became an associate member of the European Union (EU), the world�s largest trade bloc, and went on to apply for full membership. Latvia also has attempted to strengthen ties with Lithuania and Estonia. In late 1991 the three countries established an intergovernmental body, the Baltic Assembly, to encourage political and economic cooperation. In September 1993 the countries signed a free-trade agreement that removed duties on imports and standardized visa and customs regulations. However, in the mid-1990s relations became strained between Latvia and its Baltic neighbors over the demarcation of their sea borders. At stake were national rights to fishing areas and offshore oil reserves. After extensive negotiations, Latvia and Estonia concluded a maritime border agreement in February 1997. An agricultural agreement, effective that January, completed the process of establishing a Baltic free-trade area.

In domestic affairs, the Latvian government initiated economic reforms in the early 1990s with the aim of achieving a market economy and encouraging foreign investment. The country initially suffered a significant decline in industrial output and standard of living. In 1992 the government attempted to stabilize the economy while broadening the scope of reform. At that time a significant number of state-owned retail enterprises had already been transferred to private ownership, and the privatization of farmland was under way as well.

Latvia�s first postindependence government collapsed in July 1994 as the ruling coalition split over the Latvian Farmers� Union�s demand for high tariffs on agricultural imports. Members of the Farmers� Union left the coalition, which was led by Birkavs�s Latvia�s Way party, resulting in the resignation of Birkavs and his cabinet. In September a new coalition government formed with Maris Gailis of Latvia�s Way as prime minister. Gailis�s term as prime minister was rocked by numerous bank failures, including the collapse of the nation�s largest commercial bank, Banka Baltija, in May 1995. As a result of the banking crisis, Latvia�s budget deficit for 1995 was double the figure expected, and growth in gross domestic product (GDP) came to a standstill.

In the 1995 elections, Latvia�s Way lost its plurality, receiving only 14.6 percent of the vote. The left-leaning Democratic Party Saimnieks received the highest percentage with 15.1 percent, and the right-wing nationalist People�s Movement for Latvia received 14.9 percent. In December 1995 the parliament approved Andris Škēle, an entrepreneur with no political affiliation, as prime minister. Škēle worked to accelerate economic reforms and attract foreign investors. President Ulmanis was reelected to a second term in June 1996. In August 1997 Guntars Krasts, from the conservative Fatherland and Freedom Union (with which relatively few Saeima members were affiliated), became prime minister of a new coalition government. In March 1998 Škēle formed a new conservative party, the People�s Party. In the parliamentary elections in October 1998 the People�s Party won 21 percent of the vote and more seats than any other party. However, Latvia�s Way, which took 18 percent of the vote, formed a ruling coalition with the Fatherland and Freedom Union (FFU) and the centrist New Party. Vilis Krištopans of Latvia�s Way was chosen in November to head a center-right coalition government. Discord within the cabinet caused Krištopans to resign in July 1999, and Škēle formed a new center-right coalition government.