Baltic countries are on the verge of state bankruptcy

02.05.2020 - The Baltic Word

This post is also available in: German

Baltic countries are on the verge of state bankruptcy

BY LUKAS RAMONAS

The coronavirus pandemic spreads throughout the world. And its victims are not only people, but also the economies of states.

As it is known, the number of patients diagnosed with COVID-19 daily increases by 100-130 people in the Baltic countries. At the same time, the International Monetary Fund has predicted GDP decline in these states.

According to the IMF forecast, the biggest recession is expected in Latvia. The fund forecasts GDP growth for Latvia by 8.3% in 2021 (it was 8.6% in 2020). By the way, the growth of 2.8% was projected for Latvia before the economic crisis.

Lithuania awaits the second largest economic downturn among the Baltic republics. It will be 8.1% in 2020, and the IMF predicts an increase of 8.2% in 2021. Before the crisis, an economic growth of 2.7% was projected.

The highest unemployment rate in the Baltics is expected in Lithuania – it will rise up to 8.9% (8% in Latvia).

In other words, the situation in the Baltic countries is close to an economic catastrophe. Trying to escape this situation, Lithuania has borrowed a record amount of 2 billion euro in international markets. The Ministry of Finance called the loan as a part of the financial strategy of the state. However, such measures prove a desperate situation.

The fact is that the Baltic States are focused exclusively on the European Union now. But the money allocated by the European Union to save the Baltics is not enough. At the same time, new negotiations to help the most affected by crisis EU member states fail and cause serious conflicts within the community.

Against this background, wrong strategy chosen once by the governments of the Baltic countries in foreign and domestic politics is clearly visible. Destroying all ties with Russia and constantly advocating for tightening of economic sanctions, Lithuania and Latvia put themselves in a difficult situation.

It is no secret that the Baltic countries had “to pay” for membership in the European Union by destroying their own industry and the banking system.

Now, the leading countries of the European Union are thinking about themselves in the context of the economic crisis. At the same time, the opportunity to be the East-West transport link was lost due to the aggressive anti-Russian position of the Baltic authorities.

At the end, the authorities of the Baltic countries relied solely on the European Union. However, the global economic crisis caused by the spread of coronavirus has shown that every man for himself while in trouble.

Unfortunately, it is too late for Vilnius, Tallinn, and Riga to realize that interaction both with the West and the East would be especially beneficial. And now the Baltic countries are on the verge of actual state bankruptcy.

Categories: Economics, Europe, Health
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