The Supreme Council elected in the parliamentary elections of March and April 1990 already had two groups of political parties. One of them advocated the independence of Latvia and market reforms and was centred around the faction of the Popular Front of Latvia (134 members out of 201), the second group was led by the Equal Rights faction (57 members) and defended socialism and membership in the USSR.
On 4 May 1990, during the first session of the Supreme Council, the vote was held on the adoption of the Declaration “On the Restoration of Independence of the Republic of Latvia” proposed by the Popular Front of Latvia faction. A majority of two thirds or 132 votes was required for the legislators to support the declaration. 138 members voted for the adoption of the declaration, one abstained, and the declaration was adopted. Although the adoption of the declaration did not mean yet that the Republic of Latvia was an independent state, it was the first step to the restoration of an independent state.
On 7 May 1990, a few days after the adoption of the Declaration “On the Restoration of Independence of the Republic of Latvia”, the Supreme Council elected one of the leaders of the Popular Front of Latvia, Ivars Godmanis, prime minister and tasked him with forming the government. Due to the continuing economic dependence on the USSR, the general economic situation in the Republic of Latvia continued to worsen and the standard of living also decreased.
In the second half of the1990s economic reforms were initiated in Latvia. Among the first measures of strategic reforms was the agrarian reform launched by the decision of the Supreme Council of Latvian SSR “On the Agrarian Reform in the Republic of Latvia”. Soon afterwards the Supreme Council made the decision to found an independent Bank of Latvia, but on 3 August 1990 the decision was made to adopt the national economic development programme. However, until the spring of 1992, while the ruble was still in use, inflation in the country remained very high.
In January 1991 an attempt was made using military force to restore the Soviet authority in the Baltic states that had declared independence. On 20 January the building of the Ministry of Internal Affairs was taken. Two police officers fell protecting it, several employees of the ministry were wounded, two cinema operators and a bystander lost their lives too.
The last attempt of the USSR to subjugate Latvia by military force took place during the 1991 Soviet coup d’état attempt in Moscow. Armoured vehicles of the Soviet Army patrolled the streets of Riga, but on 21 August the Supreme Council of the Republic of Latvia adopted the Constitutional Law of the Republic of Latvia on the Statehood of the Republic of Latvia that restored the 1920 Constitution of the Republic of Latvia in its entirety.
On 22 August 1991 the Government of Iceland recognised the restoration of the independence of Latvia, but on 24 August Denmark officially announced its intention to restore diplomatic relations with Latvia. On 27 August the member states of the European Communities adopted the Declaration on the Baltic States, highlighting the fact that the member states of the EC consistently regard the democratically elected parliament of Latvia as well as its government as the lawful representation of the people of Latvia. On 24 August Russia signed the Decree “On the Recognition of Independence of the Republic of Latvia”, on 2 September the USA announced its readiness to restore diplomatic relations with Latvia. On 17 September Latvia became a full-fledged member of the United Nations.