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Baltic Report: January 8, 2004

8 January 2004, Volume 5, Number 1

This issue covers events in the Baltic states from 8 to 19 December 2003.
Although polling stations for the Russian State Duma elections were open in 10 Baltic cities on 7 December 2003, few Russian citizens residing in the Baltics participated, BNS reported the next day. Of the 105,000 eligible voters living in Estonia, just 16,581, or 15.5 percent, cast ballots in Tallinn, Tartu, and Narva. In Lithuania, 3,005 of the 16,595 eligible voters, or 18.1 percent, voted in Vilnius, Klaipeda, Visaginas, and Siauliai. In Latvia, there were 9,361 voters in Riga, Liepaja, and Daugavpils. The Motherland-Patriotic Union bloc and Unified Russia were the winners, receiving 32 and 30.2 percent in Latvia, 27.9 and 26.7 percent in Lithuania, and 28.8 and 29.6 percent in Estonia, respectively. The Communist Party was in third place in Lithuania and Latvia with 21.7 and 18.4 percent, and in fourth place in Estonia with 5.6 percent. The Liberal Democratic Party passed the 5 percent barrier in Estonia and Lithuania with 6.9 and 6.2 percent, but gained just 3.5 percent in Latvia.

In a live television broadcast on RTR (Russian state TV) on 18 December 2003 Russian President Vladimir Putin called for quotas to be introduced in the Baltic states for ethnic Russians to fill positions in state administration and the police forces, BNS reported. Noting Organisation for Security and Cooperation in Europe (OSCE) demands that state administration and police institutions in south Macedonia should have a proportional number of Albanians to the Albanian population living in the region, he called for establishing a similar situation in Latvia where half the population of the capital Riga is Russian speaking. Putin said, "Why, then, can't this principle be applied for Russian-speaking residents in, say, Latvia, where at least 50 percent of the residents of Riga are Russian? Why are differing standards implemented in different parts of Europe? We do not understand this. We will fight this. But that must, of course, be done using civilized methods, so as not to harm our compatriots," Latvian State Television's "Panorama" news program reported the same day. The Russian Foreign Ministry's website ( has posted a report critical of Estonia and Latvia listing the "claims and recommendations" issued to the two countries by international organizations regarding the rights of national minorities, BNS reported on 19 December 2003.

Defense Ministers Linas Linkevicius of Lithuania, Girts Valdis Kristovskis of Latvia, and Margus Hanson of Estonia signed a cooperation memorandum in Tallinn on 12 December 2003 according to which the Baltic Defense College in Tartu will be financed by all three Baltic states beginning next year, BNS reported. At their regular biannual meeting, the ministers agreed that each country will allocate 187,000 euros ($225,000) to finance the college, with Estonia contributing another 224,000 euros to pay for the maintenance of the college campus. Brigadier General Michael H. Clemmesen of Denmark now heads the college, but that post will be taken over by an officer from one of the Baltic states. The ministers agreed that the joint air-space surveillance system Baltnet and the joint Baltic naval squadron Baltron are functioning well and have helped the Baltic states' integration into NATO. The ministers talked about the possible joint participation of their troops in international peacekeeping operations and also signed a joint communique and a 2004 defense-cooperation plan.

The Austrian parliament's upper house, the Bundesrat, overwhelmingly ratified the EU Treaty of Accession on 18 December 2003, providing for the union's expected enlargement in May, TASR reported. The Treaty of Accession was ratified the same day by the Swedish parliament as well. In order to come into force, the treaty must be ratified by each of the current 15 EU members and each of the 10 acceding countries' legislatures. Ratification has been completed in each of the candidate countries. On 19 December 2003, Finnish President Tarja Halonen completed his country's endorsement of the accession treaties, thus joining the ranks of other EU members, Austria, Denmark, France, Germany, Portugal, Spain, and Sweden, BNS reported.
* The Global Information Technology Report of the World Economic Forum, released on 9 December 2003, ranked 102 countries according to their readiness to use information technology for speeding up economic development, LETA reported. Estonia, Latvia, and Lithuania were ranked 25th, 35th, and 42nd, respectively.

The parliament approved a bill on 10 December 2003 intended to raise the country's birth rate by introducing compensation equal to a year's wage for a parent staying at home with a newborn child, BNS reported. The bill, which was passed by a vote of 61 to five, came into effect on 1 January. The maximum compensation for 2004 was set at three times the average monthly salary in 2002, or 15,700 kroons ($1,225), before taxes. Parents whose income is lower than the minimum wage will be paid the valid minimum wage, while those who have not worked at all will receive a minimum 2,200 kroons per month, slightly less than the minimum wage. Only the mother is entitled to the benefit during the first six months, but parents may subsequently decide who stays at home with the infant. Population Minister Paul-Erik Rummo said he expects the measure to increase the annual number of births in Estonia by at least 400, LETA reported. The five votes against the bill were cast by Mikhail Stalnukhin, the only Center Party deputy who participated in the vote, and four Moderates.

Parliament approved the 2004 state budget by a vote of 61 to 27 with five abstentions on 17 December 2003, BNS reported. The ruling coalition of Res Publica, the Reform Party, and People's Union was backed by the opposition Moderates in the budget vote, while the Pro Patria Union abstained. The budget, which assumes 5-6 percent economic growth and 3.8 percent inflation, foresees revenues of 47.62 billion kroons ($3.76 billion) and expenditures of 47.69 billion kroons. Those revenue figures are 20 percent higher than the 39.55 billion kroons in the 2003 budget, primarily due to 5 billion kroons in expected foreign aid from the European Union. Lawmakers also passed an income-tax-reform plan that raises the monthly tax-exempt figure from the current 1,000 kroons to 1,400 kroons in 2004, 1,700 kroons in 2005, and 2,000 kroons in 2006. The personal-income-tax rate will decrease from the current 26 percent to 24 percent in 2005, 22 percent in 2006, and 20 percent in 2007.

The Swedish government decided on 19 December 2003 to provide financial support of 1.35 million kroons ($107,000) for activities promoting social integration in Estonia during 2004, LETA reported. The funds are earmarked for the "Integrating Estonia 2002-2004" program, which has been financed jointly since 2002 by Sweden, Finland, Norway, and the United Kingdom. The program targets workforce mobility, vocational training, language training, school-curricula development, media education, and citizenship awareness. Sweden has provided more than 25 million kroons toward integration activities in Estonia since 1993. Swedish Minister for International Development Cooperation Carin Jamtin said the work of the Estonian state in integrating the Russian-speaking population has yielded good results and continued support from Sweden seems "natural and effective."

Representatives of the ruling coalition of Res Publica, Reform Party, and People's Union agreed at a meeting in Tallinn on 8 December 2003 that the government will begin appointing permanent county governors after the parliament approves amendments in January specifying the tasks of the governors, LETA reported the next day, citing the daily "Postimees." The meeting had been requested by the People's Union whose member, Regional Affairs Minister Jaan Ounapuu, was threatening to resign from the government (see "RFE/RL Newsline," 8 December 2003). The coalition's inability to reach a decision on the tasks and powers of county governors had led to an impasse. Presently, acting governors, whom the law allows to be appointed for only three months, head 10 of the 15 counties. Ounapuu who had been urging the government to adopt a clear position on administrative reform before the end of the year told the daily "Postimees" that parliamentary deputies from Res Publica and Reform Party, which make up the ruling coalition with the People's Union, support the idea of establishing a one-tier local government in which the county governor represents state interests locally, while Ounapuu's own party, the People's Union, favors a system where the county governor is responsible for the "balanced development of the county" and transforming local government associations into autonomous public-law administrative units. There is also a proposal that Estonia follow Finland's example of having the country's president, not the prime minister, appoint county governors to ensure they represent the state as a whole and not just the government under which they are appointed, "Postimees" reported on 8 December 2003.

The parliament passed a bill on 18 December 2003 that provides for more effective control of the financing of political parties and bans corporate donations to parties, BNS reported. The bill passed by a vote of 68-10. The Pro Patria Union and Moderates voted against the bill, arguing it is undemocratic and hampers the emergence of new parties. According to the bill, parties may get financial support only from membership fees, state budget appropriations, donations by individuals, and income from party property. The state will provide 150,000 kroons ($12,000) per year to parties that collected 1-4 percent of the vote in the parliamentary elections held in March 2003; 250,000 kroons will go to parties that collected 4-5 percent. The rest of the allotted 60 million kroons will be divided according to the number of parliamentary seats won by the six victorious parties. The bill prohibits judges, prosecutors, police officers, and legal chancellors from being members of political parties until 2008.

The governing board of the opposition Center Party on 9 December 2003 appointed Kadri Must as the party's new general secretary replacing Kullo Arjakas, BNS reported. Arjakas, who held the post for 12 years, resigned recently, explaining that he felt exhausted and thought it was time to make room for the younger generation. He will continue to work as the party's political secretary. Must called Arjakas the most professional general secretary of Estonia's political parties in recent years. She said that her first task as general secretary will be to complete the reforms of the party's regional organizations, as they will be the basis for achieving the best results for the party in the European Parliament elections in June and local elections in 2005. Must was one of the 16 Center Party members who signed a pro-EU platform at the last party congress in August. She worked at the NATO Parliamentary Assembly in Brussels until November.

The Moderates party's governing council met in Tallinn on 13 December 2003 and voted 32-0 with two abstentions to approve changing the party's name to the Social Democratic Party, BNS reported. The name change still needs the approval of a party congress, which is scheduled for 7 February 2003. Any amendment of the party's statutes has to be endorsed by two-thirds of the congress delegates. Party Chairman Ivari Padar told the meeting that the Moderates have been a social-democratic party in terms of their program since May 2001 and will soon have the appropriate name. Other Estonian political parties welcomed the intentions of the Moderates to change their name but expressed doubts about whether the move will attract more voters. The chairman of the Reform Party's policy-making council, Rain Rosimannus, said that for the sake of clarity, the Moderates should also change their chairman, noting that Padar is "a fine Estonian peasant farmer" and "a fine Estonian peasant farmer has never been a social democrat."

Tallinna Sadam (Port of Tallinn) has initiated a plan to build a railway link around Tallinn to Paldiski as an alternative to the current cargo routes that pass through central Tallinn, LETA reported on 16 December 2003 citing the business daily "Aripaev." The port and the Economy and Communications Ministry are preparing to sign a contract on the plan early next year. It is hoped that approximately 75 percent of the plan's 1 billion kroon ($78 million) price tag would be obtained from the EU ISPA fund. The company that owns the railway infrastructure in Estonia, Eesti Raudtee, cannot partner with the EU in this project since private companies own a majority of its shares. The route around Tallinn is necessary because, beginning in 2007, heavy cargo trains will not be allowed to pass through Tallinn.
* President Arnold Ruutel visited Geneva on 9-13 December 2003 primarily to take part in the World Summit on the Information Society organized by the United Nations and the International Telecommunication Union. On 10 December, he attended an official lunch for heads of state and government hosted by UN Secretary-General Kofi Annan and the summit's opening ceremony and plenary session. Ruutel had talks with Armenian and Croatian presidents, Robert Kocharian and Stipe Mesic. The next day he delivered a report on the development of information society in Estonia and spoke at the roundtable "Information and Communication Technology as a Tool to Achieve the Millennium Development Goals." Ruutel also met with Macedonian President Boris Trajkovski.
* Foreign Minister Kristiina Ojuland said that the latest Italian proposals concerning EU defense cooperation expressed at the foreign ministers meeting in Brussels on 9 December 2003 are aimed in the direction desired by Estonia, BNS reported. She called for an amendment according to which defense cooperation would not be just closer cooperation among some member states, but joint activity in the area of defense, open and respectful of the historic traditions of member states, conducted on a uniform basis, and also offering a solution to non-allied members of the EU.
* Commander of the Estonian Defense Forces Vice Admiral Tarmo Kouts traveled to Sweden to look at the "virtual" multinational peacekeeping exercise named "Viking 2003" on 9 December 2003, BNS reported. More than 700 military and 100 civilians from 26 nations and NATO took part in the computer exercise that was held from 2-12 December. In order to reduce expenses most of the participants did not travel to Sweden, but participated via the Internet as did 40 Estonian military and civilian participants operating from the Baltic Defense College in Tartu.
* The government extended the mission of the Rescue Board bomb experts in Afghanistan on 11 December 2003 and allocated 4.15 million kroons ($350,000) for that purpose, BNS reported. The current mission will end at the end of the year, but after a six month rest period will be extended for an additional year from 1 July.
* The parliament passed a legal amendment on 17 December 2003 according to which former Russian military personnel will be issued only temporary residence permits in accordance with the general procedure, BNS reported. The previous day Russian Foreign Ministry Spokesman Aleksandr Yakovenko said that the proposed amendment is inconsistent with the Estonian-Russian agreement of July 1994 on social guarantees for retired Russian military residing in Estonia and ignores the recommendations of the OSCE.
* Parliament speaker Ene Ergma discussed the state's investments in science and education with visiting former Finnish Prime Minister Esko Aho, who is the head of the Finnish SITRA fund, in Tallinn on 10 December 2003, LETA reported. They talked about the successful activities of SITRA, the state science, education, innovation, and new business ventures support foundation, and the possibilities of launching a similar foundation in Estonia.
* The parliament approved on 10 December 2003 by a vote of 72 to seven a bill which makes category certificates, issued prior to 1999, indefinitely valid as documents attesting to proficiency in Estonian along with the new type of proficiency certificates, BNS reported. The earlier certificates, however, cannot be used to apply for citizenship. The parliament also passed unanimously amendments to the Citizenship Act, under which the state will compensate language learning costs to people who took courses at licensed private schools and successfully passed the citizenship exam.
* The government decided on 18 December 2003 to reinstate the protective customs tariffs against Polish pork, which were introduced in May and abolished on 20 November 2003 after receiving information that Poland was no longer paying subsidies on its pork exports, LETA reported. Poland, however, restored the export subsidies on 29 November 2003. Responding to complaints by Estonian meat processing companies, the government restored the tariffs.
* The government approved on 18 December 2003 raising the minimum monthly wage to 2,480 kroons ($193) and the minimum hourly wage to 14.6 kroons from 1 January, BNS reported. Estonian employers, trade unions, and the government have agreed that by 2008 the minimum monthly wage in the country should make up 41 percent of the average gross wage. Even after the increase the minimum wage will be about 33.7 percent of the forecast average gross pay next year of 7,362 kroons.
* The parliament approved with 55 votes on 17 December 2003 legislation to merge the Tax Board and the Customs Board beginning on 1 January, BNS reported. The merger of the structural units of the boards will take place in four phases through 2005 and is intended to end the duplication of domestic services and investigation activities and result in better services to clients at reduced costs due to the smaller remaining staff. By a vote of 74 to five, the parliament also passed amendments to the Alcohol, Tobacco, and Fuel Excise Act that will raise the excise taxes on fuel, alcohol, and tobacco to bring them into agreement with EU excise taxes.
* The Bank of Estonia recommended in its quarterly economic policy comment several steps to curb what it considered excessive loans to individuals at a time when the country's current account deficit is high and could result in "undermining the competitiveness of the economy in the future," LETA reported on 10 December 2003. It called for the government to revoke housing-loan guarantees by the state-owned KredEx fund that enables individuals to take out loans with just 10 percent self-financing instead of the standard 34 percent when buying new residential space or renovating existing housing. The bank also urged abolishing the deduction of housing-loan interest payments from taxable income and called for keeping the state budget in balance or preferably with a surplus.
* A survey of 32 countries by international research company TNS concluded that Estonia is one of the most developed users of public sector electronic services in Central and Eastern Europe, BNS reported on 16 December 2003. It estimated that 36 percent of Estonia's residents between the ages of 16 and 74 have used the Internet in communicating with the public sector -- looking for information from state agencies' websites, printing out documents, forwarding information, making payments to public institutions, or taking part in public debate. Public-sector e-services are most widely used in Denmark and Norway, where 62 percent to 63 percent of residents have used such services via the Internet. In the 12 months before the study, 26 percent of Estonia's residents had paid taxes and fees via the Internet, the survey found, a share exceeded in Europe only by Finland. According to the survey, Internet usage is 47 percent among Estonian residents aged 16 to 74.
* Prime Minister Juhan Parts told county governors at a lunch on 16 December 2003, "There are too many rural municipalities at present, many of them too weak to cope with drawing up projects required for EU investment funds," BNS reported the next day. He called for reducing the number of town and rural municipalities from the current 241 to between 60 and 80.
* Finance Minister Taavi Veskimagi said on 8 December 2003 that his ministry does not support paying compensation to shipping lines for the disappearance of tax-free on-board shopping when Estonia joins the EU, BNS reported. He rejected requests from Estonia's largest passenger shipping firm, Tallink, to follow the example of Sweden and Finland by lowering social insurance rates for seamen and income taxes.
* Checking faculty and staff at nine Russian schools, one each in Tallinn and Johvi and seven in the northeastern city of Kohtla-Jarve, this year, the Language Inspectorate found that 256 of 296 persons had Estonian fluency below the required level, BNS reported on 9 December 2003. Of these teachers, 73 spoke no Estonian at all although 47 of them held a certificate showing they had passed a language exam.

A delegation of the Russian Federation Council's Foreign Affairs Committee led by Chairman Mikhail Margelov began a five-day visit to Latvia on 14 December 2003, LETA and BNS reported. In talks with the Latvian parliament's Foreign Affairs Committee on 15 December 2003, Margelov said bilateral relations should be developed on pragmatic -- not political -- grounds. He surprised his Latvian counterpart Inese Vaidere on 15 December 2003 by saying he supports the initiative to evaluate the crimes committed by the communist regime in Latvia. Margelov and Latvian parliamentary speaker Ingrida Udre discussed future political and economic cooperation and the possible signing of a Latvian-Russian border agreement. On 16 December 2003 he held talks with Foreign Minister Sandra Kalniete who called for a meeting of the co-chairmen of the Latvian-Russian intergovernmental committee as soon as possible. The next day Margelov traveled to Daugavpils. President Vaira Vike-Freiberga met with him on 18 December 2003 and stressed the importance of signing and ratifying border agreements between their countries. She rejected the call for allowing Latvia's noncitizens to participate in local elections by saying that this would be an incentive for them to gain Latvian citizenship.

Parliament voted 78 to zero with 12 abstentions on 11 December 2003 to prolong the participation of Latvian armed forces in the UN International Security Assistance Force (ISAF) in Afghanistan serving in the German contingent, LETA reported. The Latvian vote was in response to a UN Security Council resolution, passed on 13 October 2003, that prolonged the ISAF's mission in Afghanistan by 12 months. The cost, roughly 260,000 lats ($480,000) for each six-month rotation, is paid from the Defense Ministry budget and thus does not require additional funding from parliament.

On 18 December 2003, the parliament approved amendments to the law on value-added tax (VAT) that will go into effect on 1 May when Latvia is scheduled to join the EU, LETA reported. The amendments, proposed by the Finance Ministry, set two VAT rates: 18 percent, and a 5 percent rate to be applied to medicine and medical supplies, veterinary medicine, baby food, books, mass media, accommodation services, the centralized supply of water, sewage services, and waste disposal, replacing the current 9 percent and 0 percent VAT rates, respectively, on these items. The ministry predicts budget revenues will decrease by 4.2 million lats ($7.78 million) and expenditures by 3.5 million lats in 2004, resulting in a loss of 700,000 lats. In subsequent years, only revenues will be affected, decreasing by 7.2 million lats. This was the last session of the fall parliament. The next session is scheduled to begin 12 January.

Janis Straume, the chairman of the nationalist For the Fatherland and Freedom/LNNK party, one of four parties in the current ruling coalition, announced on 19 December 2003 that his party's board has asked its parliamentary deputies to prepare amendments to require Latvian citizenship of all teachers and headmasters of schools in the country, BNS reported. Straume said many teachers in minority schools have recently acted disloyally toward the Latvian state, adding that advocating the need for two state languages discourages youths from learning Latvian. Education and Science Minister Karlis Sadurskis of the New Era party responded that such a proposal is worth considering, but he noted that noncitizens teaching at Latvian schools "have certificates of top-level proficiency in the state language" and could easily obtain citizenship. Their decision not to become naturalized citizens is probably due to personal reasons, he said. Since one of the aims of the Latvian education system is to bring up loyal citizens, Sadurskis added, it would be preferable to have Latvian citizens in teaching jobs. The Association for the Protection of Latvian Russian Schools opposed the proposal, according to BNS, asserting that it would heighten opposition to the planned education reform.

The Kurzeme Regional Court found former Latvian KGB official Nikolai Tess, who is a citizen of Russia, guilty of genocide and crimes against humanity and handed down a two-year suspended prison sentence on 16 December 2003, BNS reported. The court found Tess guilty of participation in the deportation of 138 Latvians to Siberia in March 1949, but suspended the sentence in light of Tess's age, 82, and poor health, as well as the fact that he was acting on orders from his superiors and not on his own initiative. Russian Deputy Foreign Minister Yurii Fedotov condemned the sentence, charging that the trials of World War II veterans in the Baltic states contradict international law and are politically motivated, Interfax reported. Fedotov said the Tess trial flies in the face of a resolution by the European Court of Human Rights banning the retroactive application of criminal law and "demonstrates once again that Latvia is far from a genuine democracy and does not have a civilized order."

Vaira Vike-Freiberga flew to Geneva on 8 December 2003 to participate in a UNESCO forum called "The Role of Science in the Information Society" at the invitation of UNESCO Director General Koichiro Matsuura, LETA reported. On 9 December 2003, she addressed a session called "Taking Responsibility in the Information Age," which was chaired by Swiss President Pascal Couchepin, and a UNESCO seminar called "Shaping Knowledge Societies." She stressed two fundamental principles for building knowledge societies: equal access to education and freedom of expression as well as the "wish to ensure that the benefits afforded by information and knowledge are not simply used to the advantage of the privileged few, but rather to promote the social, economic, and political transformation that so many of our countries are seeking today." Vike-Freiberga participated in a 10 December 2003 working lunch hosted by UN Secretary-General Kofi Annan and gave a speech at the plenary session of the World Summit on the Information Society. The next day she chaired the roundtable discussion "Diversity in Cyberspace" before returning to Latvia in the evening.

For the Fatherland and Freedom/LNNK (TB/LNNK) held its seventh party congress in Riga on 6 December 2003, LETA reported. TB/LNNK press secretary Sabine Prohorova said the party currently has 1,925 members, seven parliamentary deputies, and two ministers. TB/LNNK parliament faction Chairman Maris Grinblats expressed satisfaction with the foreign policy implemented by Prime Minister Einars Repse, but complained that parliament does not always fully understand steps taken by the government due to poor communication between the two institutions. With the support of 279 of the 363 congress delegates, Janis Straume, who ran unopposed, was re-elected party chairman, BNS reported on 8 December.

The 24-year-old Russian single-hull oil tanker "Hero of Sevastopol" departed from the port of Ventspils shortly after midnight on 6 December 2003, bound for Singapore with a cargo of 55,000 tons of fuel oil, LETA reported. The ship was allowed to depart after EU and Latvian Maritime Administration officials inspected the ship and found it was fit to continue its journey, which will take it along the same route the single-hull tanker "Prestige" took when it sank off the Spanish coast in November 2002. Upon the arrival of the "Hero of Sevastopol" at Ventspils on 3 December 2003, Spanish officials requested that it not be allowed to depart loaded. In addition, EU Transport Commissioner Loyola de Palacio and Enlargement Commissioner Guenter Verheugen requested that Latvia not allow the ship to depart before it could undergo inspections by experts from the EU's Maritime Safety Agency, which it passed. The EU banned single-hull tankers from its ports as of October, but Latvia is not expected to join the union until May and is thus not subject to the EU regulation.

Representatives of the Riga City Council and the Nordic Investment Bank (NIB) signed an agreement for a 10-year, 25 million lats ($46 million) loan in Riga on 10 December, LETA reported. The loan, which the city will begin repaying in two years, will be used to cover short-term liabilities. It will be taken out in euros with an interest rate equal to the one-year Euribor plus 38 basis points. The director of Riga City Council's financial department, Karlis Kavacs, said the management of Riga's short-term liabilities has often been unsystematic and chaotic, with the council sometimes signing agreements with inadequate and unfavorable conditions. He said the city's total short-term liabilities of 51 million lats have been refinanced, with the remaining 26 million lats covered by a loan on similar terms from the Latvian branch of the joint-stock company Nordea Bank Finland.
* Foreign Minister Sandra Kalniete participated in the EU General Affairs and External Relations Council and Intergovernmental Conference in Brussels on 8 December 2003, BNS reported. She expressed satisfaction that Italy as the EU presiding country had taken into consideration Latvia's proposals regarding cooperation in the European Security and Defense Policy.
* U.S. Ambassador to NATO Nicholas Burns visited Latvia on 18 and 19 December in order to discuss urgent issues on NATO and EU security policy, LETA reported. He thanked President Vaira Vike-Freiberga for Latvia's involvement in peacekeeping missions in Iraq, Kosovo, and Afghanistan.
* President Vaira Vike-Freiberga discussed with Danish Foreign Minister Per Stig Moller developments in Europe, the situation after the EU Intergovernmental Conference in Brussels, and the EU budget in Riga on 18 December 2003, LETA reported the next day. Vike-Freiberga noted that Latvia will have to make efficient use of EU structural funds after it joins the organization in May 2004.
* Defense Minister Girts Valdis Kristovskis met with new Czech Ambassador to Latvia, Jan Finferle, on 11 December 2003 and discussed further military cooperation between the two countries, BNS reported. Finferle said the Czech Republic was willing to continue military cooperation, especially in radiation, biological, chemical defense, air space control, air patrols, and military industrial projects.
* At a meeting of the European Parliament (EP) and Russian joint parliamentary cooperation committee in Strasbourg on 17 December 2003, parliament deputies rejected Russia's reproaches to Latvia over alleged violations of the rights of minorities, BNS reported the next day. European People's Party and Europe's Democrats group (EPP-ED) representatives are planning to ask the EP to reprimand Russia over its groundless accusations against Latvia.
* The parliament rejected an offer by the Organization for Security and Cooperation in Europe (OSCE) to send observers to the parliamentary elections in Georgia in January, BNS reported on 13 December 2003. The main reason for the decision was because separate Georgian regions were likely not to participate in the elections and therefore the legitimacy of the elections could be questioned.
* Agriculture Minister Martins Roze told a press conference on 15 December 2003 that Latvia would receive 21 million lats ($38.9 million) of financing from the EU structural fund SAPARD by the end of the year, BNS reported the next day. According to information from the Rural Support Service, as many as 1,520 projects have been submitted for financing from SAPARD by 10 December 2003. Of them, 985 applications were approved, 168 rejected, and 367 are still being reviewed. The sum for 2003 will be more than five times greater than the SAPARD funds received last year.
* National Harmony Party (TSP) Chairman Janis Jurkans announced on 15 December 2003 that the party's council had decided to expel Riga Vice Mayor Sergei Dolgopolov from the party, LETA reported. The reason for the expulsion was that Dolgopolov had not observed the party's program and acted against the party's charter.
* The cabinet approved on 9 December 2003 measures proposed by the Bank of Latvia for preparing Latvia for full-fledged membership in the Economic and Monetary Union (EMU), BNS reported the next day. Latvia plans to join the Exchange Rate Mechanism II on 1 January 2005 when it will also peg its currency, the lats, to the euro, which it would hope to introduce as the country's currency in 2008.
* The parliament approved the mandate of Dzintars Jaundzeikars to replace Arnolds Laksa as a deputy from Latvia's First Party (LPP) on 11 December 2003, LETA reported. On 16 December, Eriks Jekabsons was elected chairman of the parliament Defense and Internal Affairs Committee which Laksa had headed.
* The Central Statistics Committee announced on 8 December 2003 that in November the consumer price index (CPI) in Latvia increased by 0.5 percent compared to October and by 3.6 percent compared to November 2002, BNS reported. In November the costs of goods rose by 0.6 percent (1.5 percent for food) and of services by 0.3 percent.
* The Central Statistical Bureau announced on 10 December 2003 that in the first 10 months of the year imports totaled 2.45 billion lats ($4.5 billion) and exports 1.37 billion lats, LETA reported. As imports increased by 20 percent while exports rose by 16.9 percent, the foreign trade deficit grew to 1.08 billion lats.

Lawmakers approved the state budget for 2004 by a vote of 85 to 24 with five abstentions on 11 December 2003, ELTA and BNS reported. The budget sets expenditures at 13.66 billion litas ($4.7 billion), or 26 percent more than in 2003, and revenues of 11.8 billion litas, an increase of 24 percent. It includes 1.58 billion litas in EU assistance and contributions to the EU of 440 million litas. A member of the Lithuanian central bank's board and vice president of the Lithuanian Free Market Institute, Ruta Vainiene, called the budget "conspiratorial," since "few taxpayers know what their money is paying for." She also noted that the budget is based on an optimistic forecast of 6.2 percent economic growth in 2004.

Parliament Chairman Arturas Paulauskas began the impeachment procedure against Lithuanian President Rolandas Paksas on 18 December 2003, "Kauno diena" reported the next day. Paulauskas formally presented a proposal signed by 86 parliament deputies. The move would be the first impeachment of a president in a postcommunist European country. The parliament approved the formation of a 12-member ad hoc investigation commission, made up of parliamentary deputies and lawyers who are proposed by the Courts' Council and Prosecutor-General's Office. The members of the commission will be formally announced at a special parliament session on 22 December 2003. It likely will include Social Democrats Alfonsas Macaitis and Julius Sabatauskas, Liberal-Centrists Raimondas Sukys and Gintaras Steponavicius, Social Liberal Alvydas Sadeckas, and Conservative Jurgis Razma, and six lawyers chosen from among at least 12 candidates nominated by the Courts' Council and the Prosecutor-General's Office.

A group of parliamentary deputies and lawyers completed the preparation of a draft text of the impeachment of President Rolandas Paksas and delivered it to the various parliamentary factions for discussion on 10 December 2003, "Kauno diena" reported the next day. The 22-page document, which includes accusations, arguments, key facts, evidence, and sources, contains six main charges accusing the president of violating the constitution and his presidential oath. The charges are: Paksas is vulnerable because of his actions and has become a threat to national security; Paksas failed to ensure the protection of classified information; Paksas attempted to influence the decisions of private companies by illegally using his power and that of state institutions; Paksas was unable to reconcile public and private interests; Paksas hindered the smooth functioning of state institutions, discrediting their authority; and Paksas failed to take measures to stop his advisers from abusing their official powers. At a meeting of parliamentary faction leaders, Social Democrat Irena Siauliene ended speculation that the required 85 votes for impeachment have already been lined up when she said that just 20 or so of the 53 deputies in her caucus said they will immediately sign the text.

More than 5,000 people, many of whom arrived on buses from various Lithuanian cities, held an hour-long rally in front of the parliament building on 6 December 2003 expressing support for President Rolandas Paksas, who has been at the center of a corruption scandal, "Kauno diena" reported on 8 December 2003. The main speakers at the rally were members of the Lithuanian Liberal Democratic Party, which Paksas formed and headed before officially resigning when he became the president in compliance with the constitutional requirement that the president have no political party affiliation. The rally adopted a resolution urging parliament chairman Arturas Paulauskas to resign immediately in order not to compromise parliament. A handful of anti-Paksas demonstrators attended the event, along with 300 fully equipped police officers who were on hand to prevent any potential conflicts.

Chairman of the Homeland Union (Conservatives of Lithuania) Andrius Kubilius told a press conference in Vilnius on 8 December 2003 that he believes the ouster of President Paksas is inevitable, "Kauno diena" reported the next day. Kubilius also called on the country's major parties to find a common candidate who would be a "wound-healing president." He said he is certain the 85 votes for impeaching Paksas will be obtained, but it would be better if Paksas resigned voluntarily. In either case, Kubilius said he expects Paksas to seek vindication by again running for president. Kubilius added that Lithuanian society would benefit by not having to face another heated presidential campaign. He called on the Social Democrats, Social Liberals, Liberal-Centrists to find a politically non-affiliated candidate who would be a capable president. Parliament Deputy Chairman Vytenis Andriukaitis, a Social Democrat, agreed that Paksas should resign voluntarily, but interpreted the offer by Kubilius as an indication that his party lacks a strong candidate for president.

In an interview with Lithuanian State Radio on 9 December 2003, Algirdas Brazauskas said he has noticed some signs of Lithuania's diplomatic isolation due to the recent scandal in the president's office, "Lietuvos rytas" reported on 10 December 2003. He noted that in the current situation, "there are no contacts, no visits to Lithuania, and the president does not go abroad." Brazauskas said the scandal has already severely damaged Lithuania's image. "The harm is that we became known not for good reasons," he said. "The talks about ties with Russia's mafia, with international terrorism are terrible words, terrible accusations against Lithuania. Especially when Lithuania does not deserve them, as they are not true." He said that he will not avoid giving direct answers about the scandal during his upcoming visit to Brussels for the EU summit on 12-13 December 2003. Brazauskas repeated his suggestions that Paksas should resign, if possible before the Brussels visit.

Algirdas Brazauskas told reporters at Vilnius International Airport after arriving from Brussels on 14 December 2003 that if the signatures of 85 parliament deputies for the impeachment of President Paksas are needed for Paksas to resign, they will be collected, ELTA reported the next day. Brazauskas presumably was referring to an article in "Lietuvos rytas" on 13 December 2003 in which Paksas was quoted as saying in Svencionys the previous day that he will resign if 85 signatures for impeachment are collected. The president's public-relations adviser, Aurelijus Katkevicius, however, said those remarks were incorrectly interpreted. A total of 56 parliament deputies had signed the impeachment text by 12 December 2003; signatures will be collected until 16 December 2003. Brazauskas said he told leaders in Brussels that the major cause of the impeachment procedure against Paksas is his unfortunate choice of advisers.

Presidential adviser for economic matters Jonas Ragauskas, whose resignation President Paksas requested and approved in November (see "RFE/RL Newsline," 13 November 2003), returned to that post on 15 December 2003, "Lietuvos rytas" reported the next day. Ragauskas said Paksas invited him to rejoin the presidential team the previous week and he accepted the offer. The president's adviser for legal issues, Ona Buisiene, the only one of the president's six top advisers whose resignation Paksas did not accept, announced the same morning that she submitted her resignation for personal reasons, effective from 22 December 2003. On 19 December 2003, Valdas Sutkus resigned as a public adviser on business development issues to President Paksas, noting that he "did not wish to have a part in the ongoing political battle seen in the country for some time," ELTA reported.

Parliament speaker Arturas Paulauskas on 16 December became the 86th parliamentary deputy to sign the draft resolution to impeach President Paksas, "Kauno diena" reported the next day. The 36 signatures needed to launch the impeachment process were gathered quickly earlier in the month (see "RFE/RL Newsline," 12 December 2003), but additional signatures were collected to reach the 85-signature mark required to removed the president from office under the Lithuanian Constitution. (One hundred and thirty seven of the chamber's 141 seats are currently filled, although the Lithuanian Constitutional Court has ruled that the 60 percent requirement for impeachment should reflect its prescribed membership.) The number of deputies voting to impeach Paksas is likely to rise, as five deputies who are also cabinet ministers refrained from signing the draft impeachment document. The collection of signatures proceeded more slowly than planned, and Paulauskas will formally present the signatures to the parliament on 18 December 2003. Presidential spokeswoman Jurate Overlingiene said Paksas continues to maintain his innocence and has no intention of resigning.

Lithuanian lawmakers overwhelmingly backed a resolution on 16 December 2003 to hold the country's first-ever elections to the European Parliament on 13 June, ELTA reported. Voters will elect 13 deputies to the European Parliament in a multiple-mandate district covering the whole country. All registered political parties will have the right to present lists of between five and 26 candidates no later than 65 days prior to the elections. A party will have to receive a minimum of 5 percent of the vote to win representation. Citizens of Lithuania and EU member countries who have permanent residency in Lithuania may run if they are at least 21 years old on the day of the elections.

The Lithuanian government formally approved a draft agreement on 17 December 2003 on the sale of a majority stake in Vakaru Skirstomieji Tinklai (Western Distribution Network, or VST) to NDX, a consortium of nine wealthy Lithuanians who also control stakes in retail conglomerate Vilniaus Prekyba Market, "Lietuvos rytas" reported the next day. NDX agreed to pay almost 540 million litas ($193 million), or nearly 1.73 litas per share, for a 77 percent stake in VST. It also pledged to invest another 420 million litas in the company in the next five years. The deal would represent the second-largest privatization deal in Lithuania's history, exceeded only by the sale of the telecommunications company Lietuvos Telekomas. The privatization of the Eastern Distribution Network (RST), for which state-owned Estonian Energy bid 520 million litas, has been postponed until the privatization of VST can be evaluated.
* Finnish Defense Minister Seppo Kaariainen visited Vilnius on 9 December 2003 for talks with his Lithuanian counterpart Linas Linkevicius and members of the parliament's National Security and Defense Committee, BNS reported. The talks focused on the prevention of duplicating the defense capacities of the EU and NATO, as well as closer cooperation between Lithuania and Finland in the field of military environmental protection.
* Armed Forces Commander Major General Jonas Kronkaitis met with Lithuanian peacekeepers serving in the Kosovo province on 17 and 18 December, BNS reported. They consist of a 30-member infantry battalion stationed in Kachanik and a reconnaissance unit of 93 troops in Mitrovica. Kronkaitis also met with the military commanders of the U.S. and French brigades in which the troops are serving.
* Transportation Minister Zigmantas Balcytis held talks on the integration of the trans-European transportation network, the introduction of taxation for heavy-weight trucks, and aviation problems with his Danish counterpart Fleming Hansen in Copenhagen on 17 December 2003, ELTA reported. Balcytis also noted that greater economic relations with Denmark as well as Danish capital investments in the Lithuanian economy added a lot to the development of air and sea routes between the countries.
* A delegation of military officers, headed by Lieutenant Colonel Ceslovas Slegaitis, traveled to the Kaliningrad Oblast on 10 December 2003 to check whether the Russian Baltic Fleet is complying with the OSCE agreements signed in Vienna in 1999 on the reduction of conventional forces, BNS reported. The delegation inspected the motorized rifle regiment, deployed in the city of Gvardeysk and found no violations of the agreement.
* The parliament decided on 11 December 2003 to extend the fall session until 29 January in order to pass all necessary laws related to the country's Euro-integration, BNS reported. The lawmakers have so far managed to pass just over 20 of the planned 90 laws with another 50 to be adopted in January.
* The parliament ratified the International Convention for the Suppression of Terrorist Bombings on 9 December 2003, BNS reported. The convention strengthens international cooperation on detection, prosecution and extradition of persons related to terrorist bombings. Lithuania had signed the convention that was adopted in New York in 1997 the following year, but went into force only in 2001.
* Socialist Party Chairman Mindaugas Stakvilevicius told a press conference on 19 December 2003 that he will try to legalize before the 2004 European parliament elections the activities of the Communist Party, which was banned in 1991, ELTA reported. He said that the party, if restored in Lithuania, would step over the 5 percent barrier "provided it made a coalition with the most progressive and non-corrupt politicians."
* Prime Minister Algirdas Brazauskas went to the offices of President Rolandas Paksas on 10 December 2003 and urged him to resign, ELTA reported. Paksas ignored the request asserting that he had done nothing for which he should resign. He also sent a letter to parliament chairman Arturas Paulauskas and leaders of the parliament's factions asking them to ask the Constitutional Court whether the law on forming the ad hoc parliament commission formed to investigate the potential threat to national security posed by presidential office staff complies with the constitution.
* The European Bank for Reconstruction and Development (EBRD) and the partially state-owned gas utility Lietuvos Dujos sealed a 12.9 million euro ($16.4 million) grant agreement to support the building of a new 99 kilometers long natural gas pipeline from the southeastern town of Pabrade to the eastern town of Visaginas and the Ignalina nuclear power plant, ELTA reported on 11 December 2003.
* Finance Minister Dalia Grybauskaite and European Investment Bank (EIB) Vice President Sauli Niinisto signed a 13-year loan agreement for 60 million euros ($73 million) in Vilnius on 8 December 2003, BNS reported. The loan will be used to co-finance projects to be implemented with the help of money from the EU Structural and Cohesion Funds.
* The Statistics Department announced on 11 December 2003 that in the first 10 months of the year the country imported goods worth 24.33 billion litas ($9.0 billion) and exported goods worth 18.29 billion litas, BNS reported. The foreign trade deficit amounted to 6.04 billion litas or 7.7 percent less than in the same period last year as exports grew by 8.5 percent and imports by 4.0 percent.
* The international rating agency Moody's raised Lithuania's foreign and domestic currency credit rating from Baa1 to A3 on 11 December 2003, BNS reported. The government's foreign and local currency bond ratings were also raised from Baa1 to A3. The agency has also affirmed the P-2 rating on short-term foreign currency obligations. The outlook on all the ratings has remained positive.
* The parliament passed a revised 2004 budget of the state-run social insurance fund, SoDra by a vote of 40 with 15 abstentions on 16 December 2003, BNS reported the next day. Compared to 2003 it foresees revenues next year increasing by 9.7 percent to 5.25 billion litas ($1.9 billion) and expenditures by 10.2 percent to 5.22 billion litas.
* The Statistics Department announced on 8 December 2003 that the consumer price index in November 2003 was 0.5 percent higher than in October 2003, but 1.0 percent lower than in November 2002, ELTA reported. In November 2003, prices of food and non-alcoholic beverages rose by 0.8 percent, clothes and footwear by 0.9 percent, and commodities and health services by 1.4 percent.