Estonian Prime Minister Edgar Savisaar resigned yesterday after failing to win parliament's support for his strategy to tackle the country's economic crisis.
The faction-ridden parliament, which has 103 members, has begun debating formation of a new government.
Estonia, with a population of 1.6 million, is the northernmost and smallest of the three Baltic republics, which won independence last September.
The fall of the government cast doubt on the first meeting of the Baltic Assembly scheduled for today in the Latvian capital, Riga. Delegates from Estonia, Latvia, and Lithuania are to set up a forum to handle common concerns.
All three republics are still in the "ruble zone" and face the same hyperinflation and shortages as other former Soviet republics.