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Economic experts gathered in Rīga on November 24 to attend the conference “Economic Crossroads: From Recovery to Sustainable Development in the Baltic and the EU,” and they predicted that despite ongoing events in the financial world, the expected “second wave” of the crisis will have a considerably lesser effect on the Baltic States than the economic crisis which we experienced quite recently. Speaking at the opening of the conference, Estonian Finance Minister Jürgen Ligi said that since the previous crisis, our countries have done enormous work and demonstrated considerable will in terms of learning from their mistakes, as well as of ensuring substantial achievements in practical terms. Thus, said Mr Ligi, we are more inured against future problems than are other member states of the European Union.
Also appearing at the start of the conference was Latvian Prime Minister Valdis Dombrovskis. He discussed the active things which countries in the Baltic region have done during the past two years and, in terms of the lessons learned by Latvia and its neighbouring countries during the crisis, he cited two primary factors. First, said the prime minister, countries should never experience a crisis by making sure that even during “normal” circumstances, they consistently pursue strict and far-sighted macroeconomic and fiscal policies. Second, if these attempts have not been successful and a crisis has occurred, the main thing is to act quickly and purposefully so as to restore financial stability and to return to growth. Mr Dombrovskis particularly praised businesspeople in Latvia who managed to continue their work during the crisis and to seek out new opportunities and solutions, adding that this certainly helped our country to recover more quickly than it might otherwise have done. For that reason, the prime minister argued, one of the most essential priorities for the government has been support for business.
The head of the European Union’s financial aid mission to Latvia, Gabriele Giudice, in turn, said that although steps that have been taken in the Baltic States in recent years have been quite harsh, the fact is that Mr Dombrovskis returned to the post of prime minister after the last election – something which, said Mr Giudice, shows that the difficult steps taken in terms of balancing the national budget were correct and continue to be correct. Mr Giudice also said that the European Commission has currently identified five key priorities in terms of restoring economic stability in the European Union and its various member states – implementation of differentiated fiscal consolidation which facilitates growth, restoring stable lending opportunities, promoting growth and competitiveness in the economy, dealing with unemployment and the social consequences of the crisis, as well as modernising national governance systems and making them more effective.
True, Mr Giudice also admitted that a hindrance in this process is that several member states have opposed the plans and rejected any “external” controls. He insisted, however, that clear and strict plans and their implementation must be the prerequisites for overcoming the crisis as successfully as possible, adding that Latvia has set a good example for other countries in this regard.
Two representatives of the group which organised the “Economic Crossroads” conference – the head of the European Commission’s mission in Latvia, Inna Šteinbuka, and the president of the DNB Bank, Andris Ozoliņš – also pointed to the successful example which Latvia has set in terms of allowing the many regions which have been affected by the crisis to learn from mistakes made in the past by others, to discuss those mistakes, and to seek out the best solutions therein.
The president of the Bank of Latvia, Ilmārs Rimšēvičs, also discussed the things that have been achieved, saying that in Latvia’s case, the most effect approach could be described with the words “less is more” – greater budget limitations in specific cases, in other words, ensure greater opportunities for the future. Mr Rimšēvičs also expressed the hope that our country will manage to join the euro zone in the next few years. He said that the implementation of the European common currency would ensure substantial economic benefits in terms of more advantageous loan opportunities at the state and the business level. Estonian Finance Minister Ligi agreed, saying that the euro has benefitted his country’s economy and helped it to restore growth.
Economist Raivo Vare, who heads the oversight committee of the Estonian Development Fund, told participants at the country that small countries, including the Baltic States, have certain advantages when it comes to the crisis. “Size is important,” said the expert. “Small countries can react to changes in the external environment and adapt to them effectively far more quickly than others.” Mr Vare added that this is precisely what has allowed the Baltic States to overcome the existing crisis in a comparatively successful way, also enabling hope that future crises will not affect our countries as seriously as the previous one did do.
And yet Mr Vare and other experts also said that much remains to be done before there will be reason to talk about substantial development and economic growth. A regional representative for the International Monetary Fund, Mark Allen, said that the Baltic States at this time are experiencing rapid growth in comparison to the most difficult period of the crisis, but at the same time, domestic consumption has not recovered, and although unemployment rates have declined a bit, they remain quite high. Mr Allen added, moreover, that economic recovery in the world has not been as successful as might have been hoped, which is why people are currently talking about the possibility of a second wave of the recession. In any event, he argued, no major growth in the international economy is expected in 2012.
Mr Allen also spoke about export growth as one of the most important factors in overcoming a recession – something that has very much been present in Latvia. The same issue was emphasised by DNB Bank economic expert Pēteris Strautiņš, who told the audience that according to statistics, exports in Latvia have increased year by year ever since 2000, with the only decline being experienced in 2009. In terms of the future of Latvia’s export sectors ten years from now, however, Mr Strautiņš suggested that there will be changes in the proportions among those sectors – the role of those sectors which dominate exports at this time (wood processing, transport services, etc.) will decline, while the role of sectors such as food products, chemicals, pharmaceutics, business services, and IT will increase.
Mr Strautiņš also expressed the hope that foreign companies will appreciate Latvia’s intellectual potential, labour quality and commensurate prices, thus deciding to move their enterprises to Latvia or to engage in substantial business processes here. Agreeing with this hope was Karsten Vandrup – a Danish businessman who once served as the head for research and development at the Nokia Corporation and is an expert in the field of high technologies. Mr Vandrup said that he has been pleasantly surprised at the level of education and knowledge among the people of Latvia – something which opens up major opportunities for the development of businesses with a high level of added value. True, he added, this will require a more favourable environment for investors, including comparatively low income taxes and targeted investments in young and talented people, including those who cannot afford to pay for their own education.
Latvian Education Minister Roberts Ķīlis, for his part, also spoke about the education of new and modern experts, saying that the “old” education system with its traditional and fixed educational methods is no longer sustainable given that young people today are flexible and live in a digital environment.
All of the presentations from the conference can be found here: