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The Baltic States: Keeping the Faith in Turbulent Times
Abstract
As the Baltic states commemorated the centenary of their first appearance as independent states in 2018, their celebrations were mixed with feelings of ambiguity about the road travelled since then. Although today we often see Estonia, Latvia, and Lithuania as 'post-communist' countries, their experience with communism was actually much harsher than in Central Europe, since, for nearly fifty years, the three countries were forcibly a part of the Soviet Union. This has made their journey back into the European community all that more remarkable, and it has also served to keep these countries somewhat more resistant to the dangers of democratic backsliding. After all, their continued independence and well-being are intricately dependent on keeping the European liberal order intact. Nevertheless, the winds of populism have also begun to buffet these three countries, meaning that they have been struggling to keep their balancing act going. This article reviews the development of the Baltic states over the last 20 years, both in terms of domestic politics and EU accession and membership. It profiles the way in which the three countries have been trying to keep their faith in democracy and liberalism alive amidst ever more turbulent political and economic times.
... This relative success may be a result of the Baltic states' security interests in maintaining close ties with the EU. The Baltics' ongoing commitment to good governance is reflected in the relatively high trust in elites and good governance indicators for these states when compared to other post-communist EU members (Ágh, 2017;Pettai, 2019). ...
Although the European Union (EU) is considered unrivaled in its democracy promoting abilities, democracy is being challenged within its borders. Over the last decade, Hungary’s ruling party has debilitated or eliminated liberal democratic institutions; similar trends have emerged in Poland and other new democracies in the EU. What explains these surprising cases of democratic backsliding? Researchers have identified the limits of conditionality and the EU’s inability to counteract backsliding. However, given the EU’s extensive role in democracy building in its member states, it is critical to also consider the EU as an initial source of backsliding. This paper argues that the EU’s post-Maastricht policy structure, accession process, and membership requirements have made democratic backsliding more likely in new democracies by simultaneously increasing executive power and limiting states’ domestic policy space, which stunts institutional development. This combination of factors creates opportunities for executives to manipulate already weak institutions to increase their power, and democratic backsliding becomes more likely. A comparative analysis that combines typical and control cases provides support for this argument. These findings extend beyond the EU to contribute to emerging research on the limits of international democracy promotion and the related long-term effects that international organizations have on domestic democratic institutional development.
... Fears of political disruption from the 30% Russian minority, most of whom were denied citizenship, did not materialize. Vello Pettai (2019Pettai ( , 2021 explains that rather than dwell exclusively on the injustices of the past, Estonian governments focused on looking to the future, pursuing EU entry, and embracing e-government and high-tech industries. The proportion of residents without Estonian citizenship has fallen below 15% and will continue to decline as the older generation dies off. ...
This introduction to the special issue looks back at 30 years of nation-building in the post-Soviet states. Initial hopes that national self-determination would reinforce democratization proved misplaced. While that synergy worked well in the Baltic states, elsewhere authoritarian leaders embraced nationalism, while democracies like Georgia, Moldova, and Ukraine lost control of parts of their territory to secessionist movements backed by Russia. Each of the post-Soviet states promoted a national language (except for Belarus) and forged a new historical narrative for their “imagined community,” but in most cases they remained multi-ethnic and multi-lingual communities. In recognition of this persisting ethnic diversity, nation-building was accompanied by policies of ethnicity management. The international economic environment was rapidly changing due to globalization, posing new challenges for nation-builders. The gender dimension is important to the new national identities being forged in the post-Soviet space: the categories of race and class, less so. The article concludes with a review of the salient features of each of the newly-independent states.
... Thirty years after regaining their sovereignty, Estonia, Latvia, and Lithuania have become politically stable and economically prosperous members of the European community of nations (Mole 2012). Their success has been remarkable: few would have predicted such a turn of events back in 1985 (Pettai 2019). The prospect of a 'return to Europe' provided a focal point for economic and political institutionbuilding, around which elites and societies in the Baltic states could rally. ...
During the last decade, it has become apparent that the European Union (EU) Commission is failing to halt rule of law decline in Poland and Hungary. However, has the Commission learnt from its experience in handling rule of law decline in these countries? This article suggests that not only has the EU Commission failed to learn the importance of swift action in the face of burgeoning rule of law crises but has actively ignored similar systemic issues altogether in Lithuania, a country that has historically been an exemplary Member State. This article will analyse the status of the rule of law and judicial independence in Lithuania in light of the EU Commission’s first two Rule of Law Reports published in September 2020 and July 2021. These reports were designed to act as a preventative measure to protect the rule of law in each Member State through documenting and raising awareness for rule of law developments in the Union. Lithuania has largely slipped under the radar of constitutional democracy scholars; however, in the past two years, Lithuania has endured a series of attacks on judicial independence and suffered an attempted siege of its national broadcaster. There has been an intense deadlock recently over the election of Constitutional Court justices, which has raised concerns over the executive’s persistent attempts to politicise Lithuania’s highest court. Worryingly the recent Rule of Law Reports, published by the EU Commission, fail to reflect the severity of these recent developments. The reports’ silence on these issues leads this article to conclude that the EU Commission is turning a blind eye to Lithuania’s precarious rule of law situation by failing to truthfully document significant negative developments around the rule of law. By doing so, the Commission not only exacerbates rule of law issues domestically but also undermines the fight against rule of law backsliding in the Union.
Since regaining independence in 1991, Estonia has been largely successful with its process of democratic consolidation and economic transformation. Yet, following the global financial crisis of 2008–2009, the country began to face a number of new challenges, including a novel streak of populist politics as well as heightened angst vis-à-vis Russia. Although neither of these developments served to undermine Estonian democracy or sovereignty in any meaningful way, they did show that the small Baltic country remained in an uncertain environment.
In international relations, conditionality is a variable phenomenon, with its forms and effectiveness differing, depending on the political strength players bring to the dispute at hand. Often, the country being conditioned will show its opposition to such efforts by foot-dragging or citing countervailing political principles such as state sovereignty.
Estonia represents a case where conditionality has been resisted on the basis of an elaborate international legal doctrine, which pre-determined a number of basic parameters of the minority situation before conditionality could even be applied. In this chapter we will show how at a preliminary point in time (in 1989–91), Estonia applied a special doctrine of ‘legal restorationism’ in terms of how it interpreted the very nature of its statehood. This in turn pre-defined a number of fundamental conditions relating to the country’s large Russian-speaking minority, including citizenship and possible collective political recognition. As a consequence, later conditionality, be it from the Organization for Security and Co-operation in Europe (OSCE), the Council of Europe, or the European Union (EU), was confronted with a legal straightjacket, which ultimately limited much of its effectiveness. International conditionality did succeed in altering certain details of minority policy, but in relation to major questions, such as citizenship rights and the political recognition of minorities, it was severely constrained by the legal doctrine already in place. The resulting minority rights regime has been one of ethnic control and the predominance of an ethnically understood Estonian nation-state.
and Keywords Integration with the European Union has been far less distressing for the three Baltic States than for numerous other accessing countries owing to their strong societal impetus to (re)join Western political, economic, and legal culture after they regained their independence from the Soviet Union in 1990. However, the accession of these states-Estonia, Latvia, and Lithuania-had several distinctive features related to constitutional background and settings, which heavily influenced problem solving between government and the EU institutions. In general, the controversial issues regarding how to solve the problems with supranational power have never been dramatic with regard to the Baltic States, which leads to the assumption that often the governments have taken rather compliant positions. The latest cases, such as the European Stabilization Mechanism, indicate the change in paradigm: the three Baltic States are more aware of the margin of appreciation and actual borderlines between policy making-and decision making. Today, in setting up an EU-related agenda, more skills than previously are needed in finding allies and choosing partners. The road the Baltic States took in joining the EU was a difficult one, nor has their role in the EU been easy. Should a small state with a big initiative be allowed to mentor other member states regarding that initiative, meaning in particular Estonia and its digital development? Another peculiar aspect of the Baltic States is their (inter)relationship with Russia. Considering themselves a bridge between East and West, the Baltics have been active in Eastern Partnership and Development Aid initiatives and have also spoken out strongly against intervention in Georgia and Ukraine. This position sometimes complicates any EU attempt to achieve consensus on foreign policy.
The paper focuses on the variation of institutional confidence in the Baltic countries. Within of framework of qualitative comparative framework, it employs a historical approach to detect causes of divergence of trust in rule of law institutions between Estonia vis-à-vis other two Baltic states. While it observes a range of variables that could affect the differences, it emphasises the role of political leadership during critical junctures, which might explain both why Estonia forged ahead at the outset of the post-communist transformation and most recent positive developments in the Baltic countries since the financial crisis in 2008–2010.
This article addresses intersections of migration and economic development as one of the most topical contemporary challenges inthe Baltic states. It uses empirical approach to compare governmental responses to recent economic crisis starting in 2008. Articleanalyses, how these responses were reflected in statistics revealing socio economic dynamics within years of crisis and beyond.Methods of comparing statistical and analysing secondary data are applied. All three states have similar future challenges of agingand declining population and see return migration as one of possible solutions to address this challenge. However, the processesin Estonia provide a better ground for its government to claim that the country makes effort to ensure more stable development.Also, the results demonstrate that Estonia displays more different trends, while Lithuania and Latvia are closer to each other in outmigrationtrends. KEYWORDS: Baltic states, migration, crisis, development. DOI: http://dx.doi.org/ 10.15181/rfds.v11i3.616
The paper deals with the characterization of the main demographic processes in the Baltics. After the re-establishment of statehood in Estonia, Latvia and Lithuania, the population dynamics clearly have been decreasing. This is evidenced both by the negative results of natural movement and the dominance of emigration in international migration proc-esses. Population decline (depopulation) is a characteristic feature also for the titular ethnicities. Under-replacement fertility, relatively high mortality, especially for men, a high intensity of emigration and an ageing population are observed in all three Baltic countries, particularly after accession to the European Union in 2004. Latvia and Lithuania since 1990 have had among the highest population loss indicators in Europe. The scenarios of depopulation still prevail in the coming decades.
The aim of the research presented in this article is to highlight differences in inter-ethnic political relations on minority issues in Latvia and Estonia, and how the varied structures of their political party competitions have affected the ethno-political landscapes of the two countries. Though Estonia and Latvia had similar starting points with their respective minority questions, the political elites in both republics have demonstrated different responses to this issue, and inter-ethnic political relations in Latvia and Estonia have demonstrated divergent paths. While the citizenship and language laws of Latvia adopted or amended by majority parties are still restrictive, those of Estonia are relatively less so. The Russophone minorities in Latvia have intensified their support for ethnic parties, while in Estonia no ethnic party currently has any seats in the national parliament. Moreover, Russophone residents in Latvia organize political rallies or movements more often than in Estonia.
The party systems of Latvia and Estonia are significantly important as an explanatory factor for this variance. Under the fragmented party system in Latvia, ethnic majorities’ political elites exploit ethnic issues to mobilize support from Latvian voters and to win popularity over political rivals. This has generated spiralling dynamics of restrictive policies and political protests by Russian-speakers. In contrast, Estonian political elites function under a relatively consolidated party system and, instead, seek to incorporate Russophone voters to win elections. This has resulted in relatively few protests by minorities and ethnic entrepreneurs failing to mobilize within the political sphere.
This essay explores how the Baltic republics responded to the crisis of 2008–2011. We argue that while there are significant differences in how the Baltic economies responded to the crisis, these responses not only remain within the neo-liberal policy paradigm characteristic of the region from the early 1990s, but that the crisis radicalised Baltic economies and particularly their fiscal stance. We show that there are a number of unique features in all three Baltic republics' political economies that made such a radicalisation possible. However, these unique features make it almost impossible for the Baltic experience to be replicable anywhere else in Europe.
This paper describes the impact of European Union accession negotiations on language ideological debates regarding minority (language) and citizenship rights in the Baltic Republics. It explores issues pertaining to the transferability of standards developed for established democracies in the West to the situation of democratising countries in Central and Eastern Europe, where the demographic legacy of the Soviet past has left its imprint on the structure and outlook of society. Finally, it considers a range of factors which need to be taken into account in Western discourses on diversity and integration, or sameness and difference, when applied to post-communist or post-imperialist contexts.
This chapter, as with others in this book, considers and empirically tests a range of competing explanations of the bases of public support for European integration. But it does so in the particular context of the Baltic States, whose recent histories, national composition, and geographical location suggest the possibility that a distinctive set of factors may be at play shaping attitudes and political mobilization on European issues.
Is cohesion policy effective? Does it contribute to the reduction of development disparities and strengthen competitiveness in the European Union? These are the questions that have inspired a growing body of research on cohesion policy evaluation, and which has come to varied and inconclusive results. There has been significant variation with regards to the established (in)effectiveness of cohesion policy among different methodological approaches, which all have serious methodological shortcomings. In order to circumvent these, the authors have not only continued to rely on rigorous econometric methods but also focused on the potential benefits through an indirect estimation approach. They have confirmed that cohesion policy is de facto additional, i.e. that it effectively increases the structural expenditures of the recipient Member States, which, given the evidence on fiscal multiplier, should lead to stronger growth performance.
This article contributes to the growing debate on democratic backsliding in Central and Eastern Europe (CEE), by expanding on Béla Greskovits’s distinction between backsliding and hollowness, suggesting ways to broaden and specify the concept of hollowness, and discussing the relationship between hollowness and backsliding. Estonia and Latvia provide illustrations of two stable democracies, which nevertheless have consolidated tendencies for an elite-driven and ethnic-majority-driven democratic process hollowed out of its democratic contestation. This is what I call “technocratic” and “ethnic” hollowness. This double hollowness consolidated during EU accession, which created a favourable context for well-positioned ethnic majority elites to push forward ethnocentric and neoliberal agendas while restricting the space for debating them. However, far from a symptom of backsliding in the sense of a regression into authoritarianism, double hollowness is in fact central to these democracies’ stability. Such stability will have to be destabilised in order to improve their democratic quality.
This article focuses on the evolution of Polish minority responses to Lithuanian minority policies in the post-EU-accession period. State-minority conflicts in Lithuania have not generated violence or minority radicalization, despite continuing discontent among members of the state’s Polish minority (which constitutes Lithuania’s largest ethnic minority population) and the failure of the Lithuanian state to resolve the causes of discontent. Employing Smooha’s concept of ethnic democracy, the article addresses this puzzle through an ethnographic exploration of the views held by members of the Polish minority about the Lithuanian state’s policies of nation-building. The findings reveal a diverse set of critical perceptions among Poles in Lithuania, which emphasize the ineffectiveness of state policies in addressing minority needs. However, a shared perception of threat from Russia, generated after the Russian annexation of Crimea in 2014, helps to sustain the regime’s stability and its strategy of stalling the resolution of minority concerns.
It has long been assumed that the historical legacy of Soviet Communism would have an important effect on post-communist states. However, prior research has focused primarily on the institutional legacy of communism. Communism’s Shadow instead turns the focus to the individuals who inhabit post-communist countries, presenting a rigorous assessment of the legacy of communism on political attitudes. Post-communist citizens hold political, economic, and social opinions that consistently differ from individuals in other countries. Grigore Pop-Eleches and Joshua Tucker introduce two distinct frameworks to explain these differences, the first of which focuses on the effects of living in a post-communist country, and the second on living through communism. Drawing on large-scale research encompassing post-communist states and other countries around the globe, the authors demonstrate that living through communism has a clear, consistent influence on why citizens in post-communist countries are, on average, less supportive of democracy and markets and more supportive of state-provided social welfare. The longer citizens have lived through communism, especially as adults, the greater their support for beliefs associated with communist ideology-the one exception being opinions regarding gender equality. A thorough and nuanced examination of communist legacies’ lasting influence on public opinion, Communism’s Shadow highlights the ways in which political beliefs can outlast institutional regimes.
Focusing on individual-level determinants of public support for EU membership, this paper brings the literature on Western European integration to bear on the Eastern and Central European accession. Existing theories have focused on utilitarian expectations, political values, and domestic politics as determinants of public attitudes toward European integration. The paper discusses the applicability of the proposed theories and measures in the Eastern European context and develops a model that identifies micro-level economicexpectations, support for democratic norms, trust in the national government, and perceptions of ethnic tension as possible determinants of public support for EU membership. These propositions are tested with survey data from Estonia, Latvia, and Lithuania, using logistic regression. The results lend strong support to the expected gains and domestic politics hypotheses but suggest that individual competitiveness, a frequently used proxy for economic expectations, may be a poor predictor of attitudes toward the EU in the CEE context. Perceptions of increased ethnic tensions were found to decrease minority supportfor EU membership in Latvia, the Baltic country that has pursued particularly stringent citizenship and minority policies. Identification with democratic norms did not influence opinions in Latvia and Estonia, while having an unexpected negative effect on the attitudes of the Lithuanian public.
The countries of east-Central europe (eCe) embarked on a democratic transition in 1989 were proclaimed consolidated democracies when they joined the european Union (eU) in 2004. Today most of the new democracies are experiencing "democratic fatigue" and some seem vulnerable to an authoritarian turn. The eU, seen as the guarantor of the post-1989 democratic changes, is experiencing an unprecedented economic, financial, and democratic crisis with the combined challenges of technocracy and populism. The article explores the different approaches to the study of democracies in eCe, their specific features and vulnerabilities, and tries to provide an interpretation of the premature crisis of democracy in eCe in a broader transeuropean context.
This paper explores the conditions under which democratic elections encourage citizens to identify with ethnicity. We argue that there are two mechanisms through which elections strengthen ethnic identification. First, the stronger ethnic parties are, the more intensive, ethnically exclusive political campaigns they carry out as an election approaches, resulting in strengthening citizens’ ethnic identity. Second, ethnic party mobilization drives members of other ethnic groups to develop stronger identity to their own ethnicity because such mobilization poses a serious political threat to the out-group members. Data analysis of approximately 18,000 respondents in five waves of the New Baltic Barometer supports the hypotheses. A case study of Latvia follows to illustrate that ethnic party mobilization for elections creates ethnic cleavages among the public.
This book explores how the Baltic States have adapted to, and been embedded in, a wider European environment and how they have become modern European states. It focuses on changes in the policies, politics and administrative practices that have taken place after 1991 in Estonia, Latvia and Lithuania, and on the influence of rules and ideas in the European Union. The authors investigate the meeting between national traditions, rule-making and practices - on the one hand; and traditions, rule-making and practices connected to the European Union - on the other. Drawing on organization theory, and the image of states as complex and fragmented organizations, this book discusses: The forms of governance that are directed towards states, differentiating between regulative, inquisitive and meditative activities. The logic of appropriateness and the scriptedness of states. To what extent do the states have to follow the rules, and to what extent are they able to do what they want themselves?. Adaptation processes in the state organizations. This book examines how European integration prompts and accelerates new forms of governance in Europe; it will be of interest to students and scholars of politics, the European Union and the Baltic states. © 2010 Bengt Jacobsson for selection and editorial matter. All rights reserved.
The political representation of ethnic minorities in the party systems of Central and Eastern European states remains understudied despite the consolidation of democracy in these countries following their accession to the EU. This paper asks what institutional factors influence the way ethnic minorities are represented in the party systems of Central and Eastern European states. It does so based on a comparison of ethnic minorities in two paired cases (Slovakia/Romania and Estonia/Latvia), each of which shows similarities in some regards but have different outcomes in terms of party representation. The paper specifically examines explanations for the diverse forms through which minorities are represented in these four countries with a focus on three distinct types: ethnic particularist minority parties, integrationist minority parties, and accommodative majority parties. We examine two institutional/political factors that influence specific minority party types: (1) electoral systems and (2) political strategies of the dominant ethnic elite. We argue that while electoral systems do play a role in explaining differences in the party representation of minorities, they become particularly important in the broader political institutional context that emerged in the first decade following the collapse of communism. The manner in which dominant ethnic political-elites approached minority representation in the early years of democratization is critical in explaining different types of party representation that ensued.
The essay identifies two main dangers to East Central Europe's young democracies: ‘hollowing,’ or declining popular involvement in democracy, and ‘backsliding,’ or destabilization and reverting to semi-authoritarian practices. It traces the malaise of some but not all postsocialist democracies to varied combinations of hollowing and backsliding. The main finding is an intricate pattern: in some cases the two syndromes coincide, in others they do not. There is also significant cross-country variation in the gravity of syndromes. The region's pure neoliberal capitalist regimes are likelier to undermine popular political participation than those, which try to balance marketization with relatively generous social protection for its losers. At the same time, the article finds that while the hollowing of democracy before the global financial crisis has not necessarily been a curse, the massive participation of citizenry prior to the crisis has not been a generalized blessing from the viewpoint of democracy's resilience. This is substantiated by a comparative case study of Hungary and Latvia with lessons for activists of democracy promotion and civil society development.
The European Union (EU) has a splendid record concerning enlargement. Judging by the increasing number of EU member countries, enlargement has been the most successful EU policy ever. The economic side of its eastern enlargement is, however, a hybrid bag of effects for the EU's eastern countries because membership in the EU is not a tide that lifts all boats. This article, as a statistical primer, provides consistent data for the period 2000~2012. Majority of data is from Eurostat, where the data on eastern EU member countries are scattered around in various parts of Eurostat database. In the effort to present the data in a consolidated and straightfoward way to reveal the real economic effects on enlargement on the new EU member countries, we took the task to cherry-pick the relevant data. It shows that economic growth, expansion of trade, and increase in foreign direct investment to the east of the EU are obvious gains for the new eastern EU countries. That said, it entails costs. The size of domestic and foreign debts have been accelerated to finance their successes. Our concern is that this debt burden stands a chance of suffocating the newly acquired economic vigour especially at a time when one is anxious about the future of the eurozone and the EU. © 2014-Center for Economic Integration, Sejong Institution, Sejong University, All Rights Reserved.
The Baltic states were arguably the countries most severely affected by the global financial crisis. This article discusses the boom preceding the crisis, the ensuing austerity policies and the economic effects of these policies. All three countries maintained fixed exchange rates, but the degree of fiscal austerity varied across the countries, with Estonia undertaking the strongest fiscal consolidation in 2009. The downturn was so swift and deep that expansionary policies were unlikely to affect short-term outcomes. Growth returned towards the end of 2009, largely driven by exports. The export performance cannot be directly linked to the austerity policies. The main lesson from the Baltics is that increased macroeconomic stability must be attained by avoiding overheating and unsustainable financial exposure. The challenge for the future is to ensure that austerity policies are implemented during economic booms.
There are two salient features of the referendums on EU membership in Estonia and Latvia. Firstly, the results with decisive pro-EU majorities went easily beyond expectations based on previous opinion poll trends, where these two Baltic states had shown less public enthusiasm for integration than other Central and East European countries. This fact owed much to convincing arguments about abandoning international isolation and about geopolitical choice, with strong historical overtones. The anti-accession cause in both countries suffered from various weaknesses even though, in Estonia though not in Latvia, Eurosceptical attitudes were in evidence. Secondly, there was much less support for EU entry among the strong Russian minorities in both countries. This difference was partly due to the higher incidence of economic circumstances in determining voting behaviour but also to the fact that pro-EU (hence, pro-West) arguments were implicitly and sometimes explicitly unfriendly to Russia. In turn, this also showed that the Soviet legacy was particular to these Baltic countries compared with other accession states from CEE.
This paper examines the effect of the recent European Union (EU) enlargement on minority language policies in the Baltic states, and in particular in Latvia and Estonia. I first look at the so-called Copenhagen political criteria conditioning EU accession and at the European Commission's monitoring system for assessing applicant countries' compliance with such criteria. Focusing on changing language policies in Latvia and Estonia in the post-Soviet era, I then investigate whether accession negotiations between these countries and the Commission have resulted in defining new thresholds of minority language protection both domestically and in the EU. If so, have such minority rights standards become an acquis communautaire and could they then be applied to ‘older’ member states in retrospect?
After more than a decade of post-socialist political and economic transformation one can distinguish two groups of transition countries–‘successful’ (with a consolidated liberal democracy and working market economy) and ‘unsuccessful’ cases. The first group is represented by the countries of Central Europe and the Baltic states, and the second by the Balkan countries and most of the former Soviet republics. Today, all three Baltic countries belong to the first group. However, in 1994 Estonia was praised by foreign analysts as ‘a shining star from the Baltics’, whereas the economic performance and reputation of Lithuania was rather low. What was it that enabled Estonia to perform best during the first decade of market transition: was it better initial economic conditions, peculiarities in the political process (e.g. the exclusion of a significant part of the ‘non-ethnic’ Estonian population who could have been the potential electorate for a post-communist party like the Lithuanian ‘Laborists’), a Protestant cultural legacy, or perhaps even better public relations? This article discusses alternative answers and elaborates on a Weberian explanation.
During 2000–2007, Estonia was among the fastest growing emerging market economies, but in late-2008 entered a deep recession. This paper examines shocks, institutions, and policies that have made Estonia's boom–bust cycle so severe. It finds that an open capital account, the prospect for EU entry, and the currency board facilitated massive capital inflows, which led to credit and real estate booms. In late-2008 a domestic slowdown was greatly amplified by the global financial and economic crisis. To resume sustainable growth, the country will need to regain competitiveness and rebalance resources to exports. Estonia's experience underscores the importance for other emerging market economies to retain some flexibility in their macroeconomic frameworks and approach capital account liberalization cautiously.
Hirschman's model of 'exit' envisages that mass migration can communicate feedback to a state and elicit modifying policy behaviour. The regimes of discrimination against Russophones in Estonia and Latvia are examined to demonstrate that in certain conditions of inter-ethnic conflict, the model does not work as predicted. In deeply divided societies the mass migration of a minority can be intentionally promoted by a majority regime of discrimination. In such conditions, migration may operate as a safety valve to release the build-up of minority antagonisms. Given the limitations of international conditionality and the poor prospects for integration or assimilation, this article predicts a significant out-migration by Russophones to other EU Member States when restrictions on freedom of movement are eased after the transitional period. Copyright 2005 Blackwell Publishing Ltd.
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