Sudip Bandyopadhyay’s Blog

During my travels to the Baltic republics-Estonia, Latvia and Lithuania, I found that the aspirations, emotions and the attachment they have for the European Union is probably unmatched and definitely  stronger then the Nordic countries (Finland, Sweden, Norway, etc). Now the Baltic countries are going through their most severe economic crisis since the disintegration of Soviet Union.  Their troubles matter beyond their own borders and can trigger a new wave to financial disruptions across Europe with politically perilous consequences.

The Baltic republics have become victim of their own success.  Eager to join the European Union, the governments restrained deficits when they could have borrowed with abandon and when now it needs to borrow, they are getting the cold shoulder.  The suggested solution of abandoning their currency peg to Euros to boost exports, will be disastrous.  The problem will spread through those countries’ creditors such as Swedish Banks and create havoc in the lender countries. The destabilisation of the Baltic countries and consequently the continental Europe will be unfortunate.  The highest stakes are political and the greatest casualty of the  collapse would be the European unity.