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Baltic Report: December 6, 2000


6 December 2000, Volume 1, Number 37
REGIONAL
EU RELEASES ECONOMIC FORECASTS FOR BALTIC STATES.
The European Commission on 22 November predicted that Estonia's GDP will increase by 6.2 percent this year, the largest rise among the 13 countries applying for EU membership, and by 6.3 percent in 2001, BNS reported. The corresponding GDP growth forecasts for Latvia were 3.6 percent and 4.5 percent and for Lithuania, 2.3 percent and 3.2 percent. The EU predicted that Lithuania will have the lowest inflation rates: 1 percent this year and 2.5 percent in 2001. The corresponding figures for Estonia were 3.8 percent and 2.8 percent and for Latvia 3.4 percent and 3.9 percent.
* The total turnover on the Baltic states stock exchanges in the first 10 months of 2000 was 1.399 billion euros ($1.25 billion), BNS reported on 13 November. Securities turnovers on the Riga Stock Exchange, the Lithuanian National Stock Exchange, and the Tallinn Stock Exchange were 778.79, 323.19, and 297.22 million euros, respectively.
* The European Bank for Reconstruction and Development decided on 13 November to allocate 10 million euros ($8.7 million) into the Baltic Investment Fund to support medium-sized companies in the Baltic states, LETA reported. The fund will select companies with future potential and help raise their capital up to the necessary level for medium term return on capital.
* The "Financial Times" reported on 16 November the results of a world-wide survey on the cost of living in 156 cities. The research was made on the basis of expenses of families with two children of pre-school age. Riga was ranked the 101st most expensive, Vilnius the 121st, and Tallinn the 134th. Warsaw was ranked 148th with St. Petersburg 7th and Moscow 36th.


ESTONIA
GOVERNMENT APPROVES SECURITY POLICY PRINCIPLES.
The Estonian government on 14 November approved the country's security policy principles, ETA reported. NATO had earlier recommended the approval of such a document. In its final form, the document states that Estonia does not foresee any direct military threat in the near future but notes that organized crime, the proliferation of weapons of mass destruction, and possible environmental disasters are possible threats to state security. Other non-military risks include mass migration caused by ethnic or economic disasters, international terrorism, and trade with drugs and weapons. Foreign Minister Toomas Hendrik Ilves noted that the participation of the environment, social affairs, economics, and interior ministries show that security is not solely a military issue.

TALLINN SAYS EU TOO SLOW WITH MEMBERSHIP TALKS.
Estonia's chief EU negotiator, Alar Streimann, and Foreign Minister Toomas Hendrik Ilves, said on 16 November that the EU is unwilling to heed Estonia's request to increase the speed of membership talks, BNS reported. Streimann said that at the latest round of such talks in Brussels two days earlier, the EU admitted that its procedures do not allow for faster progress in membership talks and that there are difficulties receiving prompt answers to questions. Ilves regretted that the EU may have heeded the opinion of some Estonian politicians that the pace of the talks should not be too fast, and he stressed that many lawmakers, both in the ruling coalition and the opposition, regard early accession to the EU as a priority.

PRO PATRIA UNION CALLS FOR RADICAL ADMINISTRATIVE REFORM.
The Pro Patria Union's policy-making council issued a statement on 19 November calling for radical administrative reform by reducing the number of ministries, counties, and local self-governments, BNS reported. It urged that political decisions be made by ministers and not chancellors of ministries or general directors of government departments, who implement the decisions. With regard to its proposal to slash the number of counties, the union also suggested that they be made more independent while centralized control be increased. The statement also called for decreasing the number of local authorities from the current 247 to some 60-80. The council will present these proposals to its coalition partners, the Reform Party and the Moderates, for consideration.

RULING COALITION PROPOSES LARGER 2001 BUDGET.
The council of the ruling coalition proposed on 20 November that the government increase the 2001 state budget by 300 million kroons ($16.28 million) to 29.75 billion kroons, BNS reported. The budget would remain balanced and additional funds would come from an increase in the dividends of state-owned enterprises (210 million kroons), expected larger corporate tax revenues (70 million kroons), and income from fines (20 million kroons). The council recommended that the additional funds be allocated to emergency services, a fund financing free school lunches, broadcasting, regional investments, dredging the shipping lane between the mainland and the western island of Hiiumaa, and the Migration Fund.

NAVY RECEIVES NEW FLAGSHIP FROM DENMARK.
In ceremonies marking the 82nd anniversary of the founding of the Estonian navy, Danish armed forces' commander in chief General Christian Hvidt and naval commander Rear Admiral Tim S. Jorgensen signed documents officially transferring the frigate "Beskytteren" to Estonia, BNS reported on 21 November. The 74.3-meter-long ship, built 25 years ago, will be renamed "Admiral Pitka," after the founder of the Estonian navy, and will become the new flagship of the Estonian navy. It replaces the mine ship "Sulev," which will be scrapped. Equipped with a hospital, helicopter deck, and facilities for refueling at sea, the new flagship will take part in rescue operations. During the ceremony, President Lennart Meri underscored the importance of military ties between the two countries.
* Swedish Foreign Minister Anna Lindh ended a brief tour of the Baltic states in Tallinn on 13 November, where she held talks with Prime Minister Mart Laar and President Lennart Meri, BNS reported. She told the president that Sweden wants to accelerate the adoption of new members into the EU on the principle of "who is ready is ready." She noted that Estonia had to do serious work, particularly in the fields of legal reform and the environment.
* On 14 November Estonia closed talks on the culture and audio-visual policy chapter at European Union accession talks in Brussels, ETA reported. Estonia has closed 15 out of the 31 accession chapters. Estonia has presented an official position on all chapters except the institutions chapter, which will not be discussed before the end of the EU inter-governmental conference, and the other topics chapter, which at present includes no issues.
* The Estonian government on 14 November approved a 12 million euro ($10.3 million) loan to local municipalities in order to improve their water systems, ETA reported. The 20-year loan from the European Investment Bank, still must be approved by the Estonian parliament.
* In debating the draft traffic act, the Estonian parliament on 14 November, by a vote of 37 to 24 with one abstention, decided to establish the blood alcohol level of 0.2 per thousand for drivers, despite calls for a higher, 0.5 level, by some members, "Postimees" reported. The traffic act will ban the use of cellular telephones without so-called hands-free equipment while driving in towns. The top speed limit will be raised to 120 km/h and 90 km/h on the highways and in cities, respectively.
* The number of registered job-seekers in Estonia grew from 42,900 in September (4.9 percent of the working-age population), to 47,600 (5.5 percent) in October, "Aripaev" reported on 14 November. The number of unemployed was highest in Ida-Virumaa (10 percent) and lowest in Parnumaa (2.8 percent). Ludmilla Smirnova, the head of the statistics bureau of the Labor Department, said that the number of new job-seekers in October reached a "record high" (9,500), in part due to amendments to the unemployment law that went into force on 1 October. Those amendments extended the period of paying unemployment benefits from 180 days to 270 days and changed the regulations for registering as jobless. In October, unemployment benefits were paid to 25,100 people, up 8.5 percent on September. The actual number of unemployed is probably much higher: the Estonian Confederation of Trade Unions put the figure at 100,000.
* The government on 14 November set next year's state unemployment benefit at the same level as this year, 400 kroons ($22.03) a month, BNS reported. It also established a study stipend for unemployed people of 600 kroons a month with a possible additional travel subsidy of up to 200 kroons for unemployed residing more than 30 kilometers from their place of study. The government also endorsed the minimum hourly wages for relief work at 5.90 kroons for those receiving the unemployment benefit and at 8.25 kroons for those not receiving the benefit.
* The Estonian Finance Ministry noted that 160 of 247 local governments would not receive expected revenue from personal income tax this year, BNS reported on 14 November. Using data for the first 10 months, the ministry estimated that the shortfall would reach 94.6 million kroons ($5.2 million), or 3 percent of the ministry's original projection of 3.781 billion kroons.
* Defense Ministry Deputy Chancellor Margus Kolga and Georgian Deputy Defense Minister Gela Bezhuashvili agreed on 15 November in Tallinn to prepare a memorandum of mutual understanding in the sphere of defense, BNS reported. The two countries will start regular defense consultations, with Estonia sharing its experience with Georgia in building up its defense forces and border guards and in integrating with Western structures.
* The state secretary of the Economics Ministry of Sachsen-Anhalt, Peter Voecks, opened his German state's representation in Tallinn on 15 November, BNS reported. Voecks noted that this third state representation in Estonia is a clear sign of the development of Estonian-German relations.
* The Justice Ministry signed a contract on 15 November with the construction firm EMV for the building in Tartu of a new prison that would meet all EU requirements, ETA reported. The construction of the prison for 500 inmates, costing 365.7 million kroons ($20 million), should be completed by the end of 2002. Estonia has ratified a 15-year loan agreement with the Nordic Investment Bank for 200 million kroons for the prison construction and will allocate the remainder from the state budget over 2001-2003.
* Population Minister Katrin Saks announced on 20 November that far fewer Russian citizens are living in Estonia than the Russian embassy has suggested, BNS reported. Saks estimates their number to be about 75,000, while the embassy has claimed that there were more than 100,000. The latest Estonian citizenship data indicate that there are about 1.115 million Estonian citizens, accounting for 77 percent of the country's population. Of the other residents, some 175,000 are stateless persons with alien passports, 110,000 have passports of other countries, and some 30,000-40,000 are illegal residents.
* The Tallinn city government on 22 November agreed to rent the Aleksandr Nevsky cathedral in Tallinn's Toompea for 99 years to the pro-Moscow Orthodox congregation for no fee, BNS reported. The city's ruling coalition had promised the agreement to gain the support of the People's Choice alliance of Russian-speaking deputies earlier in the month. The city, however, requested the congregation to pay 6.7 million kroons ($360,000) for insuring the cathedral. Although the Moscow patriarchate has many more congregations recognizing its authority in Estonia, it has officially registered only the Kuremae nunnery in northeastern Estonia and the Nevsky congregation in Tallinn.
* After serving three years as the Russian ambassador to Estonia, Aleksei Glukhov left Tallinn on 22 November as the first foreign envoy after the restoration of independence to return home without an Estonian state order, BNS reported. All other foreign ambassadors had left Estonia with the Cross of the Terra Mariana. Although the Estonian Foreign Ministry had proposed awarding the cross to Glukhov, he turned down the offer. His successor will be Konstantin Provalov, 50, who has worked in the Russian embassies in Burma and India.
* Eesti Energia (Estonian Energy) signed an agreement on 23 November with an international syndicate of six banks for a loan of 35 million euros ($30 million) at an interest rate of six-month Euribor plus 0.80 percent, BNS reported. The loan, which is for five years with an option to extend it another two years, will in part be used to finance the renovation of grids throughout the country and the building of a substation in Tartu.
*Estonian Foreign Minister Toomas Hendrik Ilves told a European conference of EU member and candidate countries (with Switzerland as an observer) in Souchaux, France, on 23 November, that every EU member country must be represented by a commissioner in the European Commission, BNS reported. He asserted that there must be a balance between big and small countries in the EU and voting must only be by a qualified majority.
* The Council of Europe, Finland, and Estonia organized an international roundtable in Tallinn on 24 November to discuss the situation of Roma in the Baltic states, BNS reported. The Roma population is about 800-1,000 in Estonia, 7,000 in Latvia, and 3,000-5,000 in Lithuania. Representatives of Roma organizations noted that their members did not integrate into the society due to their desire to retain their linguistic and cultural identity, but the attitude of the society has made it difficult for them to find work and to go to school.
* Estonian Education Minister Tonis Lukas and Czech Minister for Youth Affairs and Education Eduard Zeman on 24 November in Prague signed a program for cooperation in education and a two-year cooperation accord for higher education.
* At its second congress in Tallinn on 25 November the Estonian Russian Unity Party expressed its support for Estonia joining the EU, if approved by a referendum, but the ERU opposed joining NATO, BNS reported. The party's new chairman, businessman Gennadi Kulkov, said that NATO membership would upset the geopolitical balance between the West and Russia.


LATVIA
RUSSIAN EXTREMISTS ATTEMPTS TO DISRUPT LATVIA FOILED.
Latvian security police arrested several groups of Russian extremists who attemptied to disrupt activities in Latvia before 18 November, Latvia's National Day, BNS and LETA reported from 15 through 24 November. Latvian police on 15 November detained four members of Russia's National Bolshevik Party after they illegally entered Latvia by jumping off the St. Petersburg-Kaliningrad train. The police announced that the Russian extremists were in Latvia "with the purpose of carrying out actions aimed at discrediting the Latvian state." The Russian Federal Security Service the previous week had warned Latvia about possible provocations by Russian extremists and had assisted the St. Petersburg police in detaining some National Bolsheviks who intended to travel to Latvia. The security police on 16 November detained four local National Bolsheviks who apparently knew about the travel plans of their Russian colleagues and plannedto cooperate with them. Three National Bolsheviks surrendered to police on 17 November after seizing the steeple of St. Peter's Church in Riga and threatening to blow themselves up with grenade-like objects if four recently detained National Bolsheviks were not released. The three also hung a red cloth from the steeple. After an hour of negotiations and a telephone conversation with the Russian embassy, the three surrendered to the police.Security Police Chief Janis Reiniks announced that the three were Russian citizens, who would be prosecuted for entering Latvia illegally and for hooliganism. The Russian Embassy and its consular offices in Riga was briefly evacuated on 17 November when a telephone call warned the embassy thatNational Bolsheviks were planning an action similar to the seizure of St. Peter's steeple. Vladimir Moskovtsev, the leader of the National Bolshevik party's branch in Latvia, was detained by the police on 24 November.

INTERNATIONAL ARBITRATION COURT LOSS RESULTS IN PROSECUTION.
Prosecutor-General Janis Maizitis told BNS on 24 November that criminal charges may be brought against the Foreign Ministry officials who failed to send representatives to the International Court of Arbitration in Stockholm, which ruled last month that Latvia should pay $3.1 million to the Swedish company SwemBalt AB because Latvia had violated the Latvian-Swedish intergovernmental agreement on the promotion and mutual protection of investments, LETA reported on 14 November. The company had brought the ship "Feederchif" to Riga in 1993 with the purpose of establishing a trade center on board the vessel, but the planned projects were not implemented. In 1996, when the owners had failed to show up and the condition of the vessel had deteriorated and there was a danger of its sinking, the Riga Port Administration auctioned the ship, which was then cut into scrap metal. Prime Minister Andris Berzins ordered a probe to establish who was guilty in the matter and why Latvia failed to defend its interests properly. The court ruling cannot be appealed.

RIGA SUBMITS NOTE TO RUSSIA OVER INCIDENTS IN ST. PETERSBURG.
The Latvian Embassy in Moscow on 21 November submitted a note to the Russian Foreign Ministry about two acts of vandalism that took place at its consulate in St. Petersburg on 18 November, Latvia's National Day, BNS reported. Unidentified persons threw a bottle containing an inflammable substance at the consulate building; the ensuing flames were put out by a Latvian guard. Later that day, a group of National Bolsheviks picketed the consulate, shouting anti-Latvian slogans and throwing eggs at the building. Local police arrived only after each of the two incidents. Russian law enforcement officials claim they lack human and financial resources to guard the consulate even on Latvia's National Day. Latvia has hinted that it may revise its round-the-clock protection of Russian representations in Latvia if better protection is not provided to its representations in Russia. There have been at least eight such incidents at Latvia's consulates and its embassy in Russia this year.

LATVIA WANTS ALL THREE BALTIC STATES NAMED IN NATO RESOLUTIONS.
Latvian lawmakers who participated at the NATO Parliamentary Assembly meeting in Berlin on 21 November supported the effort to have all three Baltic states named in the proposed resolution on NATO enlargement, BNS and LETA reported on 23 November. The delegation did not support a draft resolution approved in the body's political committee which called for NATO to invite Slovenia, Slovakia, and Lithuania as the most prepared candidates for membership at the organization's summit in 2002. Aleksandrs Kirsteins said that he recognized the wish to mention at least one Baltic state in the resolution because "such efforts are taken to lessen Russia's objection's to the alliance's enlargement." Citing the agreement in Vilnius several months ago that all nine NATO candidates move towards NATO together, Latvian Foreign Ministry State Secretary Maris Riekstins, however, told BNS on 22 November that Latvia does not see sufficient grounds to advance one Baltic state over the others for NATO membership.
* The municipal heating enterprise "Jelgavas siltumtikli" has only enough money to provide heating to residents of Jelgava through November, LETA reported on 13 November. The insolvent utility has liabilities, including a World Bank loan for 13 million lats guaranteed by the Jelgava City Council, totaling more than 18 million lats ($29.8 million).
* Latvian Prosecutor-General Janis Maizitis ordered an investigation to determine whether the office held by Economics Minister Aigars Kalvitis in a private company constitutes a violation of the country's anti-corruption law, BNS reported on 13 November. The daily "Neatkariga Rita Avize" disclosed earlier that Kalvitis has been in the taxpayer register of the Baltic Dairies company without specifying his exact duties since 12 September 1997. Kalvitis was elected to the Latvian parliament in October 1998 and later served in turn as agriculture and economics minister. Kalvitis denies any ties to Baltic Dairies and says he had not received any payments from the company since terminating relations with it in 1998.
* Prime Minister Andris Berzins urged Latvia's residents to utilize their privatization vouchers for the purchase of state-owned property or shares before they expire, LETA reported on 16 November. The parliament extended the deadline for use of the vouchers to 31 December 2001. Economists in Latvia are divided over the decision to extend the validity of the vouchers since the state has not complied with its promise in privatizing state property, according to Raita Karnite, director of the Economics Institute of the Latvian Academy of Sciences.
* During her second annual address on Latvia's National Day, President Vaira Vike-Freiberga called on her countrymen to work to improve life in Latvia, BNS reported on 18 November. Vike-Freiberga said that "we ourselves or our weaknesses, apathy, cynicism, indifference, and depression are the greatest threats to Latvia," adding that "there is no easier victim for the enemy of a nation than a demoralized people sunken in hopelessness."
* A Latvian Defense Ministry task force concluded that the naval vessel "Spulga" sank off the Swedish coast because of failure to comply with relevant watch regulations, BNS reported on 20 November. The report also cited a "negligent attitude of certain officers on the ship's crew to their responsibilities." The "Spulga" ran aground in early November on her way to Sweden. The Prosecutor-General's Office will assess the responsibility of the officials for the ship's sinking on the basis of the military investigation.
* The Economics Ministry has proposed regulations for the privatization of the state-owned Latvian Shipping Company (LASCO), BNS reported on 20 November. Under the regulations, 68 percent of the shares are to be sold to a strategic investor, 17 percent at a public auction for privatization vouchers, while 10 percent are to be transferred to the special national pension fund and 1 percent set aside as a privatization reserve.
* The Riga Zemgale District Court rejected a lawsuit by parliament deputy Janis Adamsons against the Prosecutor-General's office, LETA reported on 21 November. The court, however, did satisfy part of Adamsons's claim that the newspaper "Diena" had libeled him. The court ordered the daily to retract part of the information against Adamsons, who had charged various members of the Skele government with pedophilia. The Latvian parliament refused to strip Adamsons of his immunity earlier this year when the Prosecutor-General sought to bring criminal charges against him for bearing false witness.
* Defense Minister Girts Valdis Kristovskis told BNS on 21 November that Latvia could contribute a sufficiently professional and well-trained unit to the European Union's rapid reaction force by the planned deadline of 2003. Foreign Minister Indulis Berzins had said earlier that the EU was not NATO and did not need to establish armed forces fully able to protect the organization, but military units for peacekeeping.
* Latvian and European Union negotiators closed four additional chapters in pre-accession talks, BNS reported on 21 November. The chapters dealt with economic and monetary union, industrial policy, consumer and health protection, and foreign relations. Latvia hopes to open negotiations on all of the remaining 31 chapters required for membership during Sweden's chairmanship of the EU which begins on 1 January.
* After reviewing the latest census data, the Latvian parliamentary commission for implementation of the citizenship law announced that 102,000 Latvian residents of non-Latvian ethnic origin have integrated into Latvian society so far as to consider themselves as Latvians, BNS reported on 21 November. Parliamentary deputy Janis Lagzdins, a member of the commission, said that the number of residents who claim Russian as their mother tongue has also declined dramatically. Lagzdins also pointed out that Belarusians and Poles residing in Latvia increasingly view themselves as a distinct minority and no longer as part of a Russian-speaking population. Commission chairperson Anta Rugate believes that the system of Belarusian and Polish ethnic schools in Latvia has helped foster this awareness.
* Latvian Prosecutor-General Janis Maizitis has asked Finance Minister Gundars Berzins to allow his office to inspect cases under investigation by the financial police to improve the efficiency of the office, BNS reported on 22 November. The probe is being conducted to find out why tax evasion cases registered by the finance police fail to be reported to the prosecutor's office. In the last year only 8 percent of the 226 tax evasion cases were given to the prosecutor's office.
* President Vaira Vike-Freiberga met with Latvian Evangelical Lutheran Church Archbishop Janis Vanags to discuss their differences concerning events surrounding the ecumenical church service on Latvia's National Day, LETA and BNS reported on 23 November. Vanags had refused to head the traditional service protesting that insufficient efforts are being made to combat corruption and the sexual abuse of children. Vanags and leaders of other traditional denominations came to the service at the Dome Cathedral, but did not officiate. Vike-Freiberga said that she would evaluate the necessity of such services in the future and noted that it was inappropriate for religious leaders to protest on Latvia's National Day.
* The Latvian parliament on 23 November amended the law on corporate income tax to encourage large investment projects, BNS reported. Those investing more than 10 million lats ($15.97 million) in less than three years will be entitled to a 40 percent corporate income tax reduction for 10 years after that investment. The break, however, does not apply to investments in industries where there is a monopoly or to investments enjoying tax benefits under the law on foreign direct investment.
* Even thought it received nearly 4 million lats ($6.6 million) in state subsidies, state-owned Latvian State Television ended 1999 with a deficit of 585,842 lats, LETA reported on 23 November.
* The U.S. Embassy in Latvia praised the final version of the Latvian government regulations implementing the state language law, particularly the requirements for private business, LETA and BNS reported on 24 November. Foreign and domestic businesses had feared that the regulations would impose onerous procedures in their daily work. Private companies will have to comply with the regulations when "legitimate and precisely defined interests of society are concerned" according to the embassy.
* The Prosecutor-General's Office has received from Liechtenstein a request for the materials in the criminal case against the former managers of the state-owned electricity monopoly Latvenergo, which reportedly lost over 3 million lats ($4.7 million), BNS reported on 24 November. The evidence was first requested in 1998 in the case against former Latvenergo President Edgars Birkans and lawyer Armants Capkevics for large-scale misappropriation of property. Latvenergo's former vice president, Karlis Purnis, and Finance Director Ivars Liuzniks are also charged with abuse of their positions.
* The Save the Children Organization released information on 24 November about what it called the gross violation of children's rights at the Aleksandrova orphanage in eastern Latvia, BNS reported. Latvian President Vaira Vike-Freiberga and the Ministry of Education called for a full investigation of the charges. The orphans have complained that they were beaten both by teachers and other students while at the orphanage, forced to work in a farm owned by school Director Kazimirs Kutjuns, and that the bread meant for the orphanage was used to feed the cattle at the farm. Two 14-year old girls have also complained of sexual harassment at the orphanage. Kutjuns submitted a letter of resignation to the Kraslava District Education Administration on 24 November, LETA reported.
* Egils Levits, a Latvian judge serving on the European Court of Human Rights, speaking at a conference in Riga about the role and responsibility of the media, proposed the adoption of legislation that would protect the public from wrong information, but without restricting press freedom, BNS reported on 24 November. Levits said that criminal charges should be possible against corrupt practices by the press.
* Ten days after the event, Latvia's Young Communists claimed responsibility for blowing up a portion of a branch railway in Riga, BNS reported on 25 November. The group sent a letter to the daily "Diena" pledging to continue the explosions until the Latvian authorities release former Soviet security official Mikhail Farbtukh and former Soviet partisan Vassili Kononov. The letter said the explosives would damage property, but there would be no victims.
* The National Harmony Party re-elected Janis Jurkans as the party's chairman at its annual convention, LETA reported on 25 November. Jurkans was the only candidate for the post. The party also approved a new program which sets a priority on social integration and human rights issues. The program endorses EU membership for Latvia and prefers that its proposed military structures guarantee Latvia's security rather than NATO membership.


LITHUANIA
PARLIAMENT COMMITTEE PROPOSES CUTS IN DEFENSE SPENDING.
The parliamentary Budget and Finance Committee on 14 November recommended that the government reduce next year's defense spending from 1.9 percent of GDP, which the previous Conservative government had approved, BNS reported. Committee chairman Centrist Kestutis Glaveckas did not give a figure for the reduction but said that Lithuania, in its current financial situation, can afford to spend 1.83-1.85 percent of GDP on defense. Noting that neither the foreign or defense ministries were consulted on the matter, former Premier Andrius Kubilius declared that the cuts would force the Lithuanian government to revise the national NATO Integration Program recently presented to Brussels. He voted against the cuts. Seven committee members supported the cuts, while another former premier, Gediminas Vagnorius, abstained.

LITHUANIAN, RUSSIAN BORDER GUARDS SIGN PROTOCOL.
The commissioner of the Lithuanian Border Police, Algimantas Songaila, and the deputy director of the Federal Border Service of the Russian Federation, Aleksei Kozhevnikov, signed a working protocol on cooperation between their services at a meeting on 15 November in Vilnius, BNS reported. Songaila told journalists that the two border services are cooperating smoothly and the large number of vehicles crossing the Lithuanian-Kaliningrad border poses the greatest problems.

NEW VILNIUS MAYOR ELECTED.
The Vilnius City Council on 15 November voted 27 to 18 to elect Liberal Union Deputy Chairman Arturas Zuokas as Vilnius mayor, ELTA reported. The 32-year-old Zuokas replaces Rolandas Paksas, who resigned after becoming prime minister. After starting work as a journalist, Zuokas became a successful businessman and an active member of the Vilnius City Council, serving as its urban services committee chairman. He was the only candidate nominated, and his election was assured after councilors from the allied Liberal Union, Conservatives, and Election Action of Lithuania's Poles announced that they would support his candidacy.

NATO TO WATCH LITHUANIAN PROGRESS.
NATO Secretary-General Lord Robertson told Lithuanian Defense Minister Linas Linkevicius in Brussels on 16 November that the alliance will closely watch Lithuania's further progress, defense spending, and its fulfillment of commitments as part of its membership bid, ELTA reported. Robertson emphasized that 2001 will be significant for candidate states because as early as next spring the alliance will begin assessing how ready they are to become members. He praised Lithuania's active participation in the Membership Action Plan, particularly its contribution to NATO missions in the Balkans. Linkevicius said that the talks focused on Lithuania's financial commitments in getting ready for NATO, and he quoted Robertson as saying that "ships swimming slowly will simply sink."

LITHUANIAN CHRISTIAN DEMOCRATIC PARTY CHAIRMAN RESIGNS.
In protest at the possible merger of his Lithuanian Christian Democratic Party (LKDP) with the Lithuanian Christian Democratic Union (LKDS), Zigmas Zinkevicius announced on 17 November that he is resigning as chairman of the LKDP, ELTA and BNS reported. He complained that party board chairman Algirdas Saudargas has been conducting merger talks with LKDS Chairman Kazys Bobelis behind his back. The Rev. Alfonsas Svarinskas, the head of the ethics commission, also offered his resignation, noting that Bobelis is not an acceptable choice since by forming a coalition with the Peasant Party, he had "helped chairmen of Soviet collective farms win the local elections." Zinkevicius's and Svarinskas's resignations still have to be approved by the party conference, which will be held early next year.

NATO PARLIAMENTARY ASSEMBLY COMMITTEE SUGGESTS ADMITTING LITHUANIA IN 2002.
The political committee of the NATO Parliamentary Assembly on 19 November approved a draft resolution, drawn up by U.S. Senator William Roth, suggesting that Lithuania, Slovenia, and Slovakia be invited to join the alliance no later than in 2002, BNS reported. Lithuanian Deputy Foreign Minister Vygaudas Usackas hailed the decision, noting that "the train has finally moved." The resolution was put forward for adoption at the assembly's 46th session in Berlin on 21 November. The NATO politicians, however, preferred not to mention separately any country seeking membership in the alliance, and decided that the final decision about expansion will be adopted by the NATO council at the 2002 summit.

IMF CALLS ON LITHUANIA TO CONTINUE TIGHT FISCAL POLICIES.
Patricia Alonso-Gamo, the head of an IMF mission to Lithuania, wrapped up a week-long visit by holding talks with Prime Minister Rolandas Paksas and other officials, BNS and ELTA reported on 21 November. Alonso-Gamo called on the new Lithuanian government to ensure continuity in fiscal policies, carry on structural reforms and privatization, deal with problems at the state-run social insurance fund SoDra, and take decisive actions to improve the business environment both for domestic and foreign investors. She urged the government to keep the 1.4 percent fiscal deficit for 2001 and consider cutting expenditures in various spheres. Finance Minister Jonas Lionginas expressed satisfaction that the IMF forecasts that Lithuania's GDP will grow by 3.4 percent next year are more optimistic than those of his officials.

LITHUANIAN PRESIDENT VISITS GERMANY.
Valdas Adamkus began a five-day working visit to Germany on 23 November by meeting with Brandenburg Prime Minister Manfred Stolpe, who expressed support for Lithuania's accession to the EU. The next day, Adamkus met in Berlin with German Bundestag President Wolfgang Thierse and the European commissioner in charge of EU enlargement, Guenter Verheugen, BNS reported. Verheugen praised the reform measures taken by former Premier Audrius Kubilius and noted that Lithuania's EU membership talks are progressing at a good pace. In a speech at the European Forum, organized by the Herbert Quandt Foundation, Adamkus urged that EU candidate states also be allowed to express their opinions about the future structure of the EU. He also met with Finnish President Tarja Halonen on 25 November and flew to Munich the following day for meetings with Bavarian business and local government representatives.
* In a meeting with Lithuanian Deputy Foreign Minister Vygaudas Usackas in Washington on 13 November, U.S. Deputy Secretary of State Strobe Talbott praised Lithuania's progress in the promotion of democracy, implementation of economic reforms, and creation of its armed forces, BNS reported. Talbott said that Lithuania has presented a strong plan for further preparation for NATO entry, noting the country's good cooperation with its neighbors including Russia and its Kaliningrad region. He said he thinks that the next expansion of NATO was not possible without inviting at least one Baltic state.
* In the first 10 months of this year, the volume of cargo through the port of Klaipeda reached 16.558 million tons, a 34.22 percent increase over the same period in 1999, BNS reported on 13 November. A total of 5,517 vessels were loaded and unloaded at the port, an increase of 18 percent.
* The Finance Ministry announced on 13 November that during the first 10 months of this year the government had collected 208 million litas ($52 million) less than the 10-month target of 4.986 billion litas in budget revenues, BNS reported. The main shortfalls were in the collection of valued added tax (186.1 million litas) and corporate tax (135.3 million litas). In October, the central government , however, gathered 553.3 million litas or 58.1 million litas above planned levels. The January-October revenues to the national budget, which also includes municipalities, totaled 7.144 million litas, or only 79.7 percent of the annual target.
* Officials of the Lithuanian armed forces denied a report quoting undisclosed sources at the Belarusian Defense Ministry that four NATO electronic intelligence units were in operation on the Lithuanian-Belarusian border, BNS reported on 14 November. The commander of the Lithuanian Army headquarters, Colonel Antanas Jurgaitis, said that there were no electronic bugging posts -- Lithuanian or NATO -- operating in the country and that the radio communications tower at the border with Belarus had nothing to do with the alleged intelligence activities.
* Lithuanian Defense Minister Linas Linkevicius and Deputy Foreign Minister Oskaras Jusys attended the meeting in France of foreign and defense ministers of the West European Union, BNS reported on 14 November. Such meetings are held twice a year to discuss the latest trends in WEU policy. Linkevicius expressed Lithuania's political support of efforts by European countries to strengthen common defense and crises control capacities and said that in the future individual subunits of the Lithuanian army should be drawn into the common European military force.
* Lithuanian Foreign Minister Antanas Valionis said after a 14 November meeting with his Polish counterpart, Wladyslaw Bartoszewski, that the two countries will be linked by a 140-kilometer "power bridge," PAP reported. Valionis told journalists that Lithuania has no links with Poland's power grid and has to send its energy to Poland via Belarus. According to Valionis, the construction of such a link can be completed within a year. Valionis added that both countries will seek EU assistance to finance the project.
* A Lithuanian Navy delegation departed for Kiel on 14 November to sign an agreement on the takeover of the mine sweeper "Marburg," ELTA reported. The minesweeper is scheduled to reach Lithuania only in March 2001 after undergoing an overhaul in Germany costing 1.9 million German marks ($800,000), of which Germany will pay all but 100,000 marks, with that sum to come from the Lithuanian state budget. Currently, the Lithuanian Navy has one minesweeper, the "Suduvis," which Germany also donated.
* In the first nine months of the year, Lithuania's imports to Russia soared by 52.3 percent compared to the same period in 1999, to 4.412 billion litas ($1.103 billion), while exports increased by 23.8 percent to 742.5 million litas, ELTA reported on 14 November. Russia was the most important source of Lithuania's imports (28 percent share), but only the fourth-largest export partner (6.5 percent share) after Latvia, Germany, and Great Britain.
* The consortium of the Polish bank Pekao SA and the Italian bank UniCredito Italiano terminated negotiations with the State Property Fund over the acquisition of the Lithuanian Agriculture Bank (LZUB) on 15 November, ELTA reported. They had been the only bidder for the acquisition of the state-owned 76.01 percent stake in LZUB and had begun negotiations on 10 July. The consortium carried out an additional audit that revealed that LZUB had formed insufficient special provisions last year.
* The Fire Prevention Department stated that although the number of reported fires in the first 10 months of the year decreased to 10,304, a 19.2 percent drop compared to the same period last year, the number of fatalities had risen by 11 to 164, of whom 12 were children, ELTA reported on 16 November. The number of fires in urban areas (5,385) was only slightly greater than in rural areas (4,919).
* The board of the State Property Fund on 16 November appointed Povilas Milasauskas as the fund's director general, replacing Stasys Vaitkevicius, who resigned from the post a week earlier, ELTA reported. Vaitkevicius had been criticized for the lack of transparency in privatizing Lithuanian companies, particularly the Lithuanian shipping company Lisco. Milasauskas, 42, had been the investment and business development department director of the Lithuanian Savings Bank from March 2000, having served as the bank's deputy chairman for the previous three years.
* President Valdas Adamkus on 17 November appointed former ambassador to Spain Giedrius Cekuolis, 41, as the chief coordinator of the country's integration into NATO, BNS reported.
* Surveys by the Vilmorus research center indicated that support for Lithuania becoming a member of the European Union rose from 67.9 percent in October to 76.5 percent in November, ELTA reported on 21 November. Many EU-backers said they favored early entry with 19.6 percent supporting an as early of a date as possible, and 22.4 percent in the period 2002-2005.
* Eleven deputies of the Lithuanian parliament on 21 November expressed a desire to take part in a parliamentary group for relations with Chechnya, ELTA reported. Established in 1992, the group has sought to bring peace to Chechnya.
* The director of the Lithuanian AIDS Center, Saulius Caplinskas, announced on 21 November that the rate in Lithuania of 6.5 cases of HIV virus infection per 100,000 population was the lowest in Europe, BNS reported. This figure is 33.8 in Latvia, 26.1 in Estonia, 7.9 in Slovenia, 9 in Hungary, 15.2 in Poland, and 350 in Kaliningrad. According to the latest figures, there are 257 cases of HIV infection in this country, 33 of them women. The highest number of cases are in the port of Klaipeda (109) and Vilnius (87). Some 146 persons became infected through the use of narcotics. The number of people in Lithuania who have died of AIDS is 28, and an additional 36 have developed it.
* The state-owned utility Lietuvos Dujos (Lithuanian Gas) announced a net profit of 22.2 million litas ($5.55 million) for the first 10 months of 2000, compared to a loss of 10.4 million litas in the same period last year, BNS reported on 22 November. Gas consumption increased by 20 percent over last year to 1.964 billion cubic meters.
* In its first meeting attended by the new government ministers on 23 November, the National Defense Council proposed that the government grant 1.95 percent of the GDP for defense next year, BNS reported. Prime Minister Rolandas Paksas noted that "the 1.95 percent covers the expenditure of the Defense Ministry, as well as [defense-related] education, studies, and scientific programs." This year, 1.75 percent of GDP has been earmarked for defense, but due to poor budget collection, the actual funding was considerably lower.
* The parliament on 23 November voted 64 to 10 with 2 abstentions to continue the participation of Lithuanian soldiers in the NATO-led peacekeeping mission in Kosova, BNS reported. The participation of 35 soldiers in the mission until July 2001 is estimated to cost the Lithuanian state budget about 1.34 million litas ($335,000).
* On 24 November Lithuania opened a new border checkpoint with the Kaliningrad region at Nida. The new checkpoint, whose construction cost 9 million litas ($2.25 million), will speed up crossing time and reduce lines, which develop especially during the summer when about 500 vehicles cross through the post each day.
* A popularity poll by the Vilmorus research center on 16-19 November indicated that Prime Minister Rolandas Paksas was elected as the best representative of the people's interests, "Lietuvos Rytas" reported on 25 November. Since September the share of people who supporter him rose 12.2 percent to 25.5 percent. Former President Algirdas Brazauskas was second with a 24 percent share (an increase of 2.4 percent), followed by parliament chairman Arturas Paulauskas with an 18.3 percent share (a drop of 5.7 percent), and President Valdas Adamkus, whose support fell 5.5 percent to 12.1 percent.
* The Congress of the Lithuanian Center Union in Vilnius on 25 November elected parliament deputy Kestutis Glaveckas as party chairman by a vote of 299 to 15, Radio Lithuania reported. Vidas Mikalauskas, the mayor of the southern Lithuanian town of Varena, and parliament deputy Gintaras Sileikis, were elected his deputies. The former leader of the party, Romualdas Ozolas, had resigned after the party's catastrophic failure in the October parliament elections. The Congress reformed the party's internal framework and introduced a 12-person board to broaden and simplify decision-making.


END NOTE
CHALLENGES AHEAD FOR NEW LITHUANIAN GOVERNMENT

By Saulius A. Girnius

The new Lithuanian government faces a myriad of difficult challenges. The economy has not yet fully recovered from the recession of 1999, public confidence and trust in politicians are near all-time lows, and the resurgence of the left will limit the government's freedom of action. But the greatest challenge will come from within the government itself. The new ruling coalition encompasses parties from the moderate right (Liberal Union -- LS) to the populist left (New Union/Social Liberals -- NS/SL), and there are serious doubts that Prime Minister Rolandas Paksas will be able to maintain cohesion within the coalition.

The parliamentary elections of 8 October ended inconclusively. The leftist Social Democratic coalition -- Lithuanian Democratic Labor Party (LDDP), Social Democratic Party, and two minor partners -- received the most votes and won 51 mandates in the 141-seat parliament, but these parties were unable to convince other political forces to join them in forming a ruling coalition. President Valdas Adamkus entrusted the formation of the government to the four parties committed to the so-called "New Politics" -- the LS, NS/SL, the Center Union, and the Modern Christian Democrats -- which had won 67 seats. In accordance with a pre-election agreement that the party that won the most seats would head the government, the post of prime minister was given to the Liberal Union, whose chairman, Paksas, had held the office as a Conservative from June through October 1999. The leader of the NS/SL, Arturas Paulauskas, was elected chairman of the parliament on 19 October with 76 votes.

On 24 October, Adamkus designated Paksas as his candidate for prime minister. Parliament confirmed him in this position two days later by a vote of 79 to 51. Since the Center Union and Modern Christian Democrats had won only three seats each, the two major coalition partners relegated them to the sidelines and decided to divide the 13 minister posts among themselves: seven to the LS and six to NS/SL. Because both are relatively new creations, finding suitable candidates from these parties became a major undertaking. This was particularly the case for the NS/SL, a party centered on its leader Paulauskas and lacking both a clear program and experienced political leaders.

Only one party member, the dean of the faculty of Social Sciences at Siauliai University, Algirdas Monkevicius, was offered a portfolio -- that of education and science. Vytautas Markevicius and Vilija Blinkeviciute were promoted to head the interior and social security and labor ministries in which they were serving as deputy ministers. The ambassador to Poland, Antanas Valionis, became foreign minister. The decision to appoint non-party career professionals as ministers could eventually weaken the coalition. These ministers will not have the political clout needed to convince recalcitrant deputies to back controversial ministerial decisions.

The LS was in a better position. As expected, Paksas invited Eugenijus Maldeikis and Jonas Lionginas to return to the posts of economy and finance ministers from which they held in his Conservative Government. Lithuania's ambassador to NATO, Linas Linkevicius, regained the post of defense minister that he had held in the LDDP governments from 1993-1996. The new cabinet is quite young. Most of the ministers are between 34 and 50 years of age. The 44-year old Paksas is older than most of his ministerial colleagues.

By a vote of 72 to 48 with 16 abstentions, the parliament on 9 November approved the program and cabinet presented by Paksas. The four deputies from the leftist Peasant Union, who had supported Paulauskas, abstained in an apparent effort to show their potential influence. That this government is the 11th after the restoration of independence in 1990 is a reminder of the volatility of Lithuanian politics. The LS clearly dominated the discussions concerning the government's program and managed to push through its positions.

Paksas has declared that the priorities of his program would be: education and the creation of an information society; second, reform of the economy, pension, and health systems; and third, integration into NATO and the EU, while retaining pragmatic relations with neighboring countries.

But grumbling among the coalition has already started. Deputies of the Peasant Union have openly voiced their disappointment of what they consider inadequate financing of the agricultural sector. The NS/SL urged the government to reduce expenditures on defense and to spend less than 1.95 percent of GDP on it, as projected in the budget. Paksas seemed willing to do so, but after President Adamkus objected, arguing that a cut in expenditures would be a violation of Lithuania's commitments to NATO, a compromise was reached. The government will allocate the required sum, but part of the funds would be used for defense-related education, outreach, and scientific programs. Paksas's vacillations did not go unnoticed.

The next challenge will be the passing of the budget for 2001. One of the more outspoken NS/SL deputies, chairman of the Education, Science, and Culture Committee, Rolandas Pavilionis, is firmly insisting that at least 6.5 percent of GDP be spent on education and 1.5 percent on science. Despite the request by the government to delay the vote on the bill for the long-term funding of science and education that included these demands until it could present its draft budget, many NS/SL deputies demurred and joined the Social Democratic coalition in approving the bill on 28 November. This vote is not final since the parliament will still have to approve the whole 2001 budget. But the mini-revolt of the NS/SL deputies is a clear warning to the LS that they expect their voices to be heard.

But the budget battle has only begun. Requests for expenditures greatly exceed projected income, and the government will find it difficult to comply with its program point that the deficit should not exceed 2-3 percent. What is more, the LS is advocating reducing the VAT for heating from 18 to 9 percent after 1 January. Its previous plans to reduce the personal income tax rate from 33 to 24 percent and raise the monthly untaxed minimum from 214 to 320 litas in an effort to create a more favorable climate for business and economic growth will likely be postponed for at least a year. The NS/SL, however, is calling for greater government financing of education, agriculture, and health. A pick-up in the economy might help to overcome some of the disputes, but eventually real leadership will be needed. Whether it is available is another matter.

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