Professor Hilmar at the conference on Baltic Studies
Conference Riga: The Baltic States at 99 - Past, Present and Future
A conference entitled The Baltic states at 99: Past, Present and Future took place at the University of Latvia June 19 to 21. About 300 researchers participated in the conference.
Hilmar Þór Hilmarsson professor at the University of Akureyri, School of Business and Science, made a presentation entitled: Do as we say and not as we do: Crisis response and post crisis results in the Baltic States and the consequences of interlinkages with the Nordic countries. In his presentation Hilmar discussed trade, investment and banking interlinkages between the Baltic and Nordic countries and how those interlinkages along with the adoption of the euro affected the Baltic States. During the years before the 2008/9 crisis hit, i.e. from 2005 to 2007 GDP growth was on average around 10 percent a year in the Baltic States. At this rate the size of their economy doubles every 10 years. Today after euro adoption GDP growth in the Baltic States is similar to the growth rate in the Euro Area less than 2 percent a year. This means that their economy doubles in size in about 40 years. Finland that also adopted the euro and Denmark whose krona is pegged to the euro also is experiencing slow (well below 2 percent) growth rate a year. The continued fixed exchange rate policy along with fiscal discipline that euro adoption requires has proven difficult for the Baltic States and reduced their changes to catch up with the Nordic countries in a foreseeable future. Slow GDP growth, high unemployment along austerity programs with cuts in health and education has resulted in mass outward migration, especially among the young. The Baltics could not only be faced with an already lost decade in terms of GDP growth but a lost quarter of a century. Countries such as Sweden and Iceland with a more flexible exchange rates show better economic performance and stronger growth. Sweden insisted on fixed exchange policy (with EU support) in the Baltics during the 2008/9 crisis, primarily to rescue its banks in the Baltics, follows floating exchange rate policy at home shows no interest in fixing its exchange rate with euro adoption.
Hilmar initiated his research at the University of California Berkeley during the Fall 2016 and the Institute of European Studies at UC Berkeley recently interviewed him on the issue see attached page 8.