The interwar period of independence gave birth to the development of Lithuanian press, literature, music, arts, and theater as well as a comprehensive system of education with Lithuanian as the language of instruction. However, territorial disputes with Poland (over the Vilnius region and the Suvalkai region) and with Germany (over the Klaipėda region) preoccupied the foreign policy of the new state. During the interwar period, the constitutional capital was Vilnius, although the city itself was annexed by Poland from 1920 to 1939. During this period the Lithuanian Government was relocated to Kaunas, which officially held the status of temporary capital.
The [[German-Soviet Nonaggression Pact ]] of 1939 first pulled Lithuania into the German sphere of influence and then brought it under Soviet domination. Soviet pressure and a complicated international situation forced Lithuania to sign an agreement with the U.S.S.R. on October 10, 1939. By means of this agreement, Lithuania was given back the city of Vilnius and the part of the Vilnius region seized by the Red Army during the Soviet-Polish war; in return, some 20,000 Soviet soldiers were deployed in Lithuania. On August 3, 1940, Lithuania was proclaimed a Soviet Socialist Republic. Totalitarian rule was established, Sovietization of the economy and culture began, and Lithuanian state employees and public figures were arrested and exiled to Russia. During the mass deportation campaign of June 14–18, 1941, about 12,600 people were deported to Siberia without investigation or trial, 3,600 people were imprisoned, and more than 1,000 were killed.
Between 1940 and 1954, under the Nazi and then Soviet occupations, Lithuania lost over 780,000 residents. In World War II, German occupiers sent Lithuanians to forced labor camps in Germany. Almost 200,000, or 91%, of Lithuanian Jews were killed, one of the worst death rates of the Holocaust. After the retreat of the Wehrmacht in 1944, Lithuania was re-occupied by the Soviet Union, and an estimated 120,000 to 300,000 Lithuanians were either killed or deported to Siberia and other remote parts of the Soviet Union. Conversely, Soviet authorities encouraged the immigration to Lithuania of other Soviet workers, especially Russians, as a way of integrating Lithuania into the Soviet Union.
Similarly, Lithuania is a strong supporter of U.S. objectives in the area of democracy promotion. Making this a high priority for its foreign policy, Lithuania has provided development assistance and advice to Ukraine, Moldova, Georgia, and the Caucasus. Lithuania also actively supports democratization efforts in Belarus.
The Lithuanian economy has shown strong growth in recent years, as Lithuania has actively pursued economic reforms. In 2006, Lithuania's GDP increased by 7.5%, and by 8% in the second quarter of 2007. Large growth rates driven by domestic consumption have made analysts talk about the potential for overheating of the economy.
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