Baltic cubs

July 12, 2013

A month ago I wrote about the Commission’s assessment of Latvia’s readiness to adopt the euro. This week, the finance ministers took formal decisions enabling euro area enlargement next year. On 1 January 2014 Latvia will become the eighteenth member of the eurozone.

The recent history of the Baltics is inspiring. I first travelled to that part of Europe in the early eighties, less than a decade after the historical Helsinki Accords were signed in summer of 1975. Obviously, the Baltics have come a long way since then, and the European perspective has been a key supporting element for their democratic and economic transformation.

In mid-1990s, free trade agreements with the EU entered into force in all three Baltic states, triggering an unprecedented economic restructuring and convergence. More comprehensive Europe Agreements soon followed, granting additional access for Baltic products to the EU’s single market and securing the free movement of services and capital. Beyond economic liberalisation, the Europe Agreements facilitated the movement of workers and cooperation in the areas of science, education, tourism, intellectual property rights, transport, telecommunications, energy, nuclear safety, environment, financial services, public procurement, customs, judicial cooperation, culture, and so on. By the end of 1990s, fully-fledged EU accession negotiations were well on the way.

Today, the Baltic states are either part of the economic and political core of Europe or well on their way to it, and that is indeed great news. Latvia and Lithuania are expected to be the fastest-growing economies in the EU this year. Latvia will soon join Estonia in the eurozone. Lithuania, currently the first Baltic state to hold the Council Presidency, aims to introduce the euro in 2015. All three countries have a credible record of sound economic and budgetary policies, and their deficits and public sector debt are among the lowest in the EU. 

This is a tribute not only to the determined policy action that all three took in the wake of the financial crisis, but also to their remarkable transition since regaining independence in that dramatic summer of 1991. The experience of the Baltics is an encouraging demonstration that prudent macro-economic policies and bold economic reforms are part of the virtuous cycle that brings growth and prosperity.

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