Historical background

The name "Latvia" originates from the ancient Latgalians, one of four eastern Baltic tribes that formed the ethnic core of the Latvian people (ca. 8th-12th centuries A.D.). The region subsequently came under the control of Germans, Poles, Swedes, and finally, Russians. A Latvian republic emerged following World War I, but it was annexed by the USSR in 1940 - an action never recognized by the US and many other countries. Latvia reestablished its independence in 1991 following the breakup of the Soviet Union. Although the last Russian troops left in 1994, the status of the Russian minority (some 30% of the population) remains of concern to Moscow. Latvia joined both NATO and the EU in the spring of 2004.

Economic overview

Latvia's economy experienced GDP growth of more than 10% per year during 2006-07; but entered a severe recession in 2008 as a result of an unsustainable current account deficit and large debt exposure amid the softening world economy. The IMF, EU, and other donors provided assistance to Latvia as part of an agreement to defend the currency's peg to the euro and reduce the fiscal deficit to about 5% of GDP. The majority of companies, banks, and real estate have been privatized, although the state still holds sizable stakes in a few large enterprises. Latvia officially joined the World Trade Organization in February 1999. EU membership, a top foreign policy goal, came in May 2004. The current account deficit and inflation remain major concerns.