German businesses back Baltic economic recovery

Apr 28, 2010, 11:47 GMT

Riga - German companies operating in the Baltic states of Estonia, Latvia and Lithuania said Wednesday they had 'cautiously optimistic' hopes that the recession-hit region was over the worst of the economic crisis.

Presenting the German-Baltic Chamber of Commerce's annual business survey in the Latvian capital Riga, the organization's CEO Maren Diale-Schellschmidt said expectations of German companies in the Baltic States 'are definitely showing a clear upswing even though the economic crisis has not yet been overcome.'

The economies of Estonia, Lithuania and Latvia contracted by 14, 15 and 18 per cent respectively in 2009 but only 2 per cent of German companies operating in the region expected the situation to worsen in 2010, Diale-Schellschmidt said.

German companies also gave their overwhelming backing to Estonia's hopes to join the eurozone in 2011, including 100 per cent support from companies operating in Estonia itself.

'We see euro adoption as a very positive thing and a sign to the rest of Europe that the whole Baltic region is on the way to the euro,' Diale-Schelschmidt said.

Estonia remains on track to become the 17th EU member state to adopt the euro as its currency on January 1, 2011, having met the Maastricht criteria that govern entry to the eurozone by keeping government debt, deficits and inflation within strict limits.

Estonian officials remain adamant that they have earned the right to the euro, but some eurozone politicians say that there should be a moratorium on further enlargement until the effects of Greece's fiscal crisis have been resolved.

The European Commission, the EU's executive, is set to publish an analysis of Estonia's recent economic performance on May 12. On the basis of that study, the Brussels-based body is to recommend to euro members whether the Baltic state is fit to join their club.

The improving outlook of German businesses was reinforced by a new economic policy statement released Wednesday by the Estonian central bank, Eesti Pank.

'The economy has started to recover,' Eesti Pank said. 'Adjustment is almost over in many companies and this has contributed to the improvement of confidence.'

The Estonian economy would grow by 1 per cent in 2010, Eesti Pank predicted, while warning that unemployment would continue to grow in coming months to around 16 per cent for the year as a whole.