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Will survive the ex-Soviet Baltic States without EU money?

Выживет ли экс-советская Прибалтика без денег ЕС?

Lithuania, Latvia and Estonia, of course, can’t call themselves the driving forces of European business, but to complain about life it is not necessary.

In the Russian media there are several stereotypes about neighboring Russian countries who have very little in common with reality. In the first place, of course, Ukraine: “the impoverishment — winter freeze — hunger — default”. On the second — the Baltic States, where “all the young people went abroad to work there is nobody — a poor periphery of Europe — the EU supports money, that was the springboard for NATO.” However, the current economic reality of the countries of the “Baltic three” (Lithuania, Latvia, Estonia) are very far from the picture, which deliberately draw the Russian media.

Of course, each of the Baltic countries — its way, but they all have common problems and their solutions. The first is the loss of human potential. Yes, it’s true: from the Baltic States over the past two decades has left a huge number of people, primarily young people and those who are still far from retirement. But, first, these people send money home to their families. And secondly, surprisingly, the development of a modern economy is not so heavily dependent on workers.

“It’s up to the XIX century was relevant this question: the key to the economic success of the state — land + working on it people. Modern production — both industrial and agricultural — prevents person. I know of a farmer who for a subsidy, the EU has built a milk processing plant near Kaunas, — told “Rosbalt” Lithuanian economist Airas from the Abramavičius. — There are only five employees: Director, accountant, three technologist. All! That is, investments need a lot to a greater extent than men. Yes, a certain lack of clean hands is in Lithuania and in Latvia, mostly in agriculture and construction. But it safely fill Belarusians, mostly working illegally”.

Of the industry in the Baltic States is to talk separately. In Russia it is widely believed that, say, closed down the Soviet giant plants of the industry — and are left with nothing. Yes, closed down, — in fact, these plants were focused on the huge market of the USSR, and small independent States are simply useless. Work on the European market for Soviet equipment could not due to low quality of products at amazingly high energy and material intensity of production. (Today is a curse Belarus.)

Just in the Baltic States in the early 90’s realized that it is easier and cheaper to build a new, competitive production from scratch than trying to rebuild the old Soviet. 20 years ago in the Baltic States was exactly the same thing that is happening in Ukraine: coming to different European funds, which worked in conjunction with local authorities and banks. The model is simple: an entrepreneur proposes a business project (usually a small production), the European Fund finances his cheap Western money, local Bank serving the project and its funding, the state gives guarantees and preferential treatment.

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While the Baltic countries have received more of such funding — the task of the EU was how to more quickly and fully integrate the economy of Lithuania, Latvia and Estonia in the EU. And it happened: for two decades instead of a few dozen industrial giants of the Soviet model in the Baltic countries there were many thousands of small businesses, mainly using local raw materials aimed equally at both European and local markets. Outside of the industrial sector in all three countries were developing successfully of IT, FINTECH and tourism in the centre of Vilnius is very easy to feel somewhere in Venice because of the multilingual crowds around the medieval surroundings.

Remains agriculture. Here the undisputed leader in Lithuania, which received from the EU up to $10 billion for the development of the agricultural sector, supplied the raw material for the food industry. And with great abundance, thanks to which Lithuanian products (milk, cheese, meat products, fish products, honey, etc.) is sold throughout Europe.

After 1991, the farms they quickly disbanded, the land was distributed, so that the basis for the agricultural sector — family farms, of which there are more than 200 thousand (the average size of households is 7.6 ha). In private households of Lithuania grow 70% of the grain, 98% of potatoes contain 65% of a livestock of cattle and 52% of pigs. On the second place — agricultural enterprises, processing more than 4 million hectares of land. Their sphere of activity is dairy cattle breeding, poultry farming.

In Latvia the picture is about the same, only there APK less effective and not very well passed the period of reforms. For example, by the EU, completely destroyed the production of sugar. But now Latvian farmers quite successfully occupy a niche of organic products, very popular in Europe.

In Estonia, agriculture is not so important, but its essential contribution is making. Specialization AIC — dairy cattle breeding and bacon pigs. Under the arable land accounting for 25% of the territory Estonia: grow potatoes and other vegetables, grains (barley, rye, wheat), fodder and fruit.

The question of what will happen to the economies of the Baltic States, now is being raised more often is not accidental. In 2020, stop the flow of money from EU funds to reform their economies and support public institutions. That is, Lithuania, Latvia and Estonia will have to live for their money: it collected in taxes or sold for export from that budget and formed.

Do not expect that the next day the economy of the Baltic countries will collapse. A large number of small but efficient enterprises, is a system which is much better able to cope with the crisis than two dozen monstrous plants, tied to a single country market. Huge investment from the European development funds, to create an adequate business environment, so now in the Baltic countries will continue to go beyond private investment.

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For Western companies Lithuania and Latvia became the priority and it is natural expansion. Cheap labor, European security of property rights (which is not in the post-Soviet neighbors), — in fact, a small factory for the German market is easier to build in a peripheral EU country than to invest in Belarus or Ukraine, there is the risk of losing the property or to incur losses in cross-border trade.

Lithuania over the last decade on a par with Poland performs another important function — shows the residents of neighboring Belarus, what happens if you still to undertake to reform the economy. On the weekends in Vilnius visitors from Minsk at times, it seems, no less than local residents. Many go just to “drink coffee” and at the same time — purchase products and consumer goods, cheaper and better than in Belarus. (Sometimes in the refrigerator the author of these lines in Minsk more than 70% were the products imported from Lithuania.)

The Belarusians eventually provide about 40% of the turnover of retail trade Vilnius. Interestingly, the Belarusians themselves, abundantly producing ripening cheeses such as “sole”, I prefer to put them in Russia — and they can buy Lithuanian. Hard cheese Džiugas and Lithuanian products such as, for example, crab sticks Viči, galore populate grocery stores in Belarus, Poland and Ukraine.

Moreover, more and more Belarusians traveling to Lithuania to work (usually informally). Who could go with a night bus Vilnius-Borisov, he saw him as the whole team tired men of the proletarian view facing in Smorgon and Molodechno. This is a Belarusian worker who formally on a long-standing state-owned enterprises in their cities, but really — go to Lithuania to work on a two-week watch.

But compare the macroeconomic indicators of the three Baltic countries. Latvia nominal GDP per capita — $18 031, the purchasing power parity — $29 901. Lithuania: $19 748 and $36 997. Estonia: $23 514 and $35 717.

While Estonia is considered to be the country that most successfully implemented reforms and can always count on the Scandinavian countries and Finland. Lithuania — with the most prosperous real sector (agriculture and industry), Latvia — as the potentially disadvantaged, who survived after 1991 the most severe economic shocks.

It is difficult to say how the Baltic States will live on after 2020. After all, Lithuania, Latvia and Estonia remain a hostage of the geopolitical games of much more powerful neighbours, it has always been on the frontier between Europe and Russia. Today, however, the average salary in Latvia — 1100 Euro, in Lithuania — 800, in Estonia — 1419. And these countries have steadily settled in the European economy.

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