The Baltic Economies after Independence

Abstract

The rapid accession of the Baltic states to the EU and the transition to euro had an ambiguous impact on their economies. The financial crisis was much more painful for Estonia, Latvia and Lithuania than for other EU members, which, however, did not prevent them from being called “Baltic tigers. High growth rates of GDP and per capita income had, however, no sufficiently firm basis: investment activity was financed not by internal sources but by foreign capital inflows. The latter was largely directed to the financial and commercial sectors. Real investment was insufficient, and the Baltics still do not have a reliable potential for a full-scale presence in high-tech markets. The degree of success in economic modernization was the best in Estonia, followed by Latvia, and Lithuania was the last. The social policies of the Baltic states also do not show that Baltic governments seriously care about their citizens and non-citizens. Unemployment, poverty, poor social security, and other woes remain a serious problem – almost the worst in the European Union. Not surprisingly, people are rapidly and inevitably emigrating from Latvia and Lithuania. Fortunately, this is not the case in Estonia, which is reliable evidence of the relatively good success of this country.