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News highlights from Lithuania, Latvia and Estonia.

News Highlights from June 1—June 8, 1998

• Marking his first 100 days in office, newspapers in Lithuania have widely praised the performance of the nation’s new president, former American citizen Valdas Adamkus. Lithuania’s main dailies said the former regulator at the U.S. Environmental Agency in Chicago had been an effective leader, who had helped smooth over political divisions in the country—while also maintaining his independence. "It is obvious that he is not becoming a pawn to be manipulated by more experienced politicians, something which many had feared," the Respublika newspaper wrote in a Thursday editorial. The Respublika and Lietuvos Rytas dailies also praised the 71-year-old president for winning the confidence of average Lithuanians-—many of whom initially expressed deep skepticism about him.     The tall, soft-spoken man from Illinois shocked observers in Lithuania and abroad by winning Lithuania’s presidential election in January, edging out his opponent by less than one percentage point. Adamkus fled the Soviet invasion of Lithuania as a teenager in 1944, and then later moved to the United States. Before taking Lithuania’s presidential oath in February, he renounced his American citizenship. After spending five decades outside Lithuania, many observers doubted Adamkus could grasp the country’s problems, or develop a rapport with average Lithuanians. Many predicted that his popularity would quickly plummet. But the Respublika paper said Adamkus was now consistently topping opinion polls as the most popular politician in the country.     The Lithuanian president is not involved in the day-to-day running of the country, though he plays a key role forming new governments and in brokering political disputes in parliament. He is also considered the nation’s No. 1 foreign envoy.

• German treasure hunters have begun combing a beach in Lithuania to uncover Czarist treasure supposedly buried in the area by Nazi forces at the close of World War II. The treasure hunters say the cache of riches they believe to be hidden in the area could include the panels from Czar Peter the Great’s famed Amber Room, which was dismantled from a Russian palace by Nazi forces—but then lost. The search is focused amid the dunes of the Neringa peninsula, a wind-swept sliver of land that runs parallel to Lithuania’s Baltic Sea coast for more than 100 kilometers. The German team is following leads provided by an 80-year-old former resident of the peninsula who says he saw a Nazi officers carry mysterious boxes off a warship in 1944 and then bury them along the shore near his home. The fate of the Russian Czar’s Amber Room—which was covered by some 50 sq. meters of priceless amber panels and once known as the Eighth Wonder of the World—has long been a mystery, and a source of speculation by historians. The German government has said the amber panels were destroyed during the 1945 Soviet invasion of nearby Konigsberg—now Kaliningrad, Russia. But Moscow has long insisted that Nazi Germany hid the treasure, and that it still exists somewhere.

• Latvia’s government on June 5 hailed parliament’s decision to approve changes to the country’s controversial citizenship law, saying it was a step towards improved relations with Russia. After nine hours of sometimes heated debate, Latvia’s parliament voted by 57 to 16 the day before to ease the former Soviet republic’s tough citizenship rules-—apparently heeding warnings about dire consequences if they voted the amendments down. Latvia’s foreign ministry said the legal changes--which include granting citizenship to stateless children and ending a much-criticized quota system--met recommendations by the Organization for Security and Cooperation in Europe (OSCE). "This vote was pivotal...and we believe the decision to change the law will improve our relations with Russia," said ministry press chief Andrejs Pildegovics. "We believe these changes are also important for our integration into the European Union." While a third and final reading of the bill is still required, officials said Thursday’s vote was critical-—demonstrating that legislative support for the politically sensitive amendments is there. The status of some 700,000 stateless Russian-speakers in Latvia has been a source of major tension with neighboring Russia. Moscow has accused the Baltic nation of discrimination and bilateral relations have lately sunk to their lowest point since the Soviet collapse over the issue. Many Latvians oppose softening citizenship requirements for Russian-speakers, most of whom came to Latvia during 50 years of Soviet rule. Many Latvians argue the Soviet-era immigrants entered the country illegally. Parliamentary elections are slated for this October, and many deputies have come under heavy pressure from their Latvian constituents not to change the country’s restrictive naturalization procedures, which include difficult language and history tests. A small group of angry Latvian demonstrators stood outside parliament during Thursday’s vote denouncing the proposed changes as a concession to Western pressure, the Baltic News Service reported. One protester held a placard reading, "The West is Driving Latvians to Suicide!" But the country’s top political leaders have said improved relations with both Russia and the West hinges on integrating Latvia’s huge Russian-speaking minority, and making it easier for them to win citizenship. Latvia’s president and foreign minister lobbied intensively in the lead up to the vote, painting a bleak picture of Latvia being ostracized by many in the world community if deputies didn’t vote in favor of the proposed amendments.

• Police in Estonia charged two elderly Russian women on June 5 with trying to whip up inter-ethnic hatred in the country. Estonian police spokesman Hannes Kont said the women--Esja Shur, 64, and Lidija Kashnova, 63--had "expressed ideas meant to incite hatred between Russians and Estonians" during a protest rally last year. "People can’t call for hatred among different ethnic groups," he said. "It is against Estonian law." The spokesman said the two suspects lived in Estonia but held Russian citizenship. He said a representative of the Russian Embassy in Tallinn was present when charges were read out to the women. Shur and Kashnova were well-known hardline activists in Estonia’s Russian-speaking community, Kont said. The police official conceded some might question the need to charge pension-aged women, but said prosecutors felt they had no choice after investigators concluded the law had been violated. "We have no precedent for a case like this in Estonia, and so it will be an interesting case," he said. "We are a young country and still trying to find where the boundaries of free speech are."

• While statistics indicate Estonia’s economy is still one of the most dynamic in Europe, there is increasing anxiety about the overall state of the economy. Estonia’s economy grew by over 8 percent in the first quarter of this year, according to figures released this week by the Statistics Department. In 1997, growth topped 11 percent—-among the highest growth rates in Europe. But many analysts greeted the numbers without enthusiasm, saying they belied serious shortcoming in the economy, including slacking corporate profits, a yawning trade deficit and a rapidly expanding current accounts deficit. "Our growth figures look good but don’t necessarily reflect overall economic health," said Katre Kelder, head of market research at Estonia’s Uhispank. "We think there are plenty of reasons to be concerned about the Estonian economy." Kelder pointed in particular to the country’s unusually high current accounts deficit—-an indicator of short-term foreign credit—which in Estonia hovers around 13 percent gross domestic product (GDP). "Such a high current accounts deficit along with very fast growth is certainly not a good sign," said Kelder. "It could indicate the economy is overheating. It makes people nervous." High current accounts deficits, as observers here caution, proceeded the financial crises in Asia, and also earlier in Mexico. In an attempt to reign in growth and bring the current accounts deficit down, the government has sucked cash out of the economy and forced interest rates up. But there is no sign yet that the measures are working, with consumer demand remaining strong. Analysts say Estonians still seem to be on a post-communist buying binge, rushing to purchase new homes and cars. Corporations have also been spending lavishly—-illustrated by several new skyscrapers now going up around Estonia’s bustling capital. Heikki Kallu, an analysts at the Tallinn-based Hansapank, said the concern is that unchecked growth can lead to hasty, reckless investment decisions, which can come back to haunt an economy later. More moderate growth is generally seen as more sustainable, he said. "To slow growth a bit, economists here would like to see a drop in consumption and demand," he said. "But now, as the higher growth figures might indicate, that doesn’t look like it’s happening." Wariness about the economy has also been reflected on the Estonian stock market, where share prices have been plunging for most of the year.

• Estonia’s Prime Minister launched a public debate on European Union membership on June 4, saying that while it had its drawbacks, the country should not turn away from its long-standing goal of joining the powerful trading bloc. Speaking to parliament, Prime Minsiter Siimann said membership would mean some loss of sovereignty. But he said that wasn’t reason enough to oppose EU entry. "If we weigh all pros and cons of joining the European Union, we find the pros outweigh the cons," he said. "Accession to the EU promises a better standard of living for our people." Siimann said the process of qualifying for the EU would itself quicken the pace of legal and structural reforms. And he said the process would speed up integration of the country’s 500,000 Russian-speaking minority. Discussions about the EU have become more heated after Estonia started formal membership talks with the EU in March. It was the only former Soviet republic pegged by Brussels to start negotiations on membership. Most Estonians say security concerns vis-a-vis Russia is the main reason for seeking EU membership, with hopes that being part of a huge regional bloc will dissuade Moscow from ever threatening their Baltic-coast nation. While polls have indicated majority support for EU membership, anti-EU sentiment has been growing. EU opponents argue that tiny Estonia (pop. 1.5 mil.) will be dictated to by larger nations in the bloc. They have also likened the EU to the Soviet Union, with centralized decision-making and an unwieldy, heavily-politicized bureaucracy. Even the business community, while generally supportive of EU membership, has expressed concerns that thousands of new, EU-mandated laws and regulation will undermine Estonia’s liberal economic regime—-which includes zero import tariffs. The Estonian premier said Estonians needed to be better informed about the consequences of membership, saying new EU info centers will be set up around the country to explain both the pluses and minuses of membership. "We have not told the people in plain Estonian what entry into the European Union involves and this may cause misunderstanding and fears," he told legislators. While there is no referendum scheduled, many of the country’s leaders, both pro- and anti-EU, have said they would like to hold one. Estonia says it hopes to win full EU membership before 2005.

News highlights from May 25—June 1, 1998

• A surveillance scandal, dubbed the Lithuanian Watergate, raised political tensions in Lithuania this past week and prompted calls for an investigation. Lithuanian President Valdas Adamkus on May 25 called for a probe into allegations the Interior Ministry illegally spied on political leaders, including on the president himself. The allegations first appeared in a May 23 article in the Lietuvos Rytas daily, which said a special unit of the Interior Ministry, normally assigned to fighting organized crime and providing presidential security, had been used to carry out surveillance of the country’s top leaders. That paper alleged that the intelligence gathered had been passed on to then-Interior Minister Vidmantas Ziemelis, and also to parliamentary speaker and independence hero Vytautas Landsbergis. Landsbergis has denied any wrongdoing.... Later in the week, Landsbergis also admitted that his relations with Prime Minister Gediminas Vagnorius had been strained. Both leaders are ranking members of the ruling Conservative party, but stories have circulated for weeks that the two were not getting along. Landsbergis told Lithuanian TV that Vagnorius had failed to consult him on several key policy decisions, including the recent dismissal of the Interior Minister. Said Landsbergis: "Many people have observed that this was a genuine manifestation of arrogance, that important political decisions were made without me or even without a business-like discussion in our political council. For this reason, when I see that the premier does not want to collaborate with me all the time, to seek my advice and make joint decisions, I see that this is not good for our state." 

• Estonia’s stock market, once a star performer in the region, has continued to take a beating-—the main index falling to a new low for the year on Friday. Amid financial turmoil in Russia and unease about slacking corporate profits in Estonia itself, selling pressure on the Tallinn Stock Exchange was heavy all week, with average share prices plummeting 15 percent from Monday to Friday. Heikki Kallu, an equity analysts at Estonia’s Hansapank, said some investors seemed to be in a near panic. "The mood among investors on the Estonian market is just generally negative, so any bad news at all seems to set investors off, and they start selling," he said. While Estonia’s economy is no longer closely tied to Russia’s, analysts pointed out that price’s on Estonia’s exchange have tended to correlate to rises and falls on the Russian exchange—which also tumbled during the week. The main stock exchange index in Estonia, the TALSE, lost 4 percent on Friday to hit 164.97, down from 268.05 at the start of the year. In May alone, the exchange has lost 29 percent of its value. After opening for business in 1996, the Tallinn Stock Exchange boomed for more than a year, with many blue-chip shares soaring by 300 percent or more. But a liquidity crisis and nervousness worldwide about all emerging-market economies, triggered a crash on Tallinn’s exchange in late 1997, and it never bounced back. Confidence in banking stocks, which have long dominated trading, has also waned after a leading Estonian bank, Hoiupank, announced this month that it may have lost some 15 million dollars in a legal dispute over the repurchase of Houipank shares. "This has all lead to a serious loss of trust among investors," said Heikki Kallu of Hansapank. "Quality corporate management seems to be a problem in Estonia and investors are starting to realize that." Estonia’s economy is regarded as one of the strongest performers in the former communist bloc, with growth last year exceeding 10 percent—one of the highest growth rates in Europe. But investors have been alarmed by rising trade deficits and a yawning current accounts deficit, which now stands at around 13 percent and could be a sign that the economy is overheating. "We could almost set a Guinness World Book record with a current account deficit that high," said Kallu. "It makes investors nervous." Kallu said share prices could now stabilize or even rise, with many brokers reporting an equal number of buy and sell orders after the close of trading Friday. But he said there was little reason to expect a steady rise in prices any time soon. "I think it will take more like six months to see a real upturn in the market," he said. Latvia’s stock exchange has also been hitting record lows in recent weeks, while Lithuania’s market has also been flat.

• A flamboyant, former U.S. colonel who first came to Estonia to the lead the nation’s fledgling armed forces says he is now gearing up to take on the Estonian government. Aleksander Einseln told the Estonia’s Parnu Postimees this past week that he had decided to run for parliament in upcoming elections, saying he would campaign against what he says is rampant, government-wide corruption. "Our country’s leadership is totally corrupt," said the 66-year-old Einseln, once a staffer with the U.S. Joint Chiefs of Staff and NATO. "When I get to parliament, and we will surely get there, I will wage a war against the present government." Einseln, who fled Estonia as a boy in advance of invading Soviet troops, came back in 1993 to become commander of the Baltic nation’s military—then only a rag-tag band of a few thousand men. But he was dismissed just two years after his triumphant return, criticized for his frequent anti-Communist tirades and for bickering with the defense minister, who Einslen at one point threatened to throw out of a window, according to reports at the time. A number of Americans of Baltic descent have returned to the region to take leading roles in government, including Lithuanian-American Valdas Adamkus, who was recently elected president of Lithuania.

• Britain’s Prince Andrew arrived in Estonia on May 27—-the first leg of a week-long tour that also took him to Russia. The Prince’s visit was the first this century to Estonia by such a high-ranking member of the British royal family. The Duke of York met with Estonia’s president, and also opened a golf tournament. He also unveiled a memorial to the British navy, which played a pivotal role 80 years in Estonia’s successful battle for independence against Russia. Prince Andrew flew on to St. Petersburg on May 29. He returns to the Baltics this week to visit Latvia and Lithuania.