Analytics, Economics, EU – Baltic States, Good for Business, Investments, Markets and Companies

Allan Martinson.

The Baltics' ability to tolerate economic pain has been praised in recent months by German Chancellor Angela Merkel and Klaus Regling, chief of the European Financial Stability Facility. Latvia's gross domestic product fell 18% in 2009 and Estonia's fell 14%. That’s what it will take to get Greece, Portugal, Ireland and Spain through their current crisis, Martinson says.

"I would be very surprised if the southern European countries would be able to go through with necessary measures on their own," Martinson, 44, said in a phone interview in Tallinn. "I think it will take very strong coercion to get them to do that. Perhaps Europe needs financial police."

He has been investing in the Baltic region since the countries emerged from the collapse of the Soviet Union in the early 1990s, when a computer cost seven times his monthly wage, writes LETA with reference to Bloomberg.

After suffering through the worst drop in economic output in the world, the Baltic countries have been growing on a quarterly basis since the beginning of 2010. Estonian stocks were the world's third-best performers last year.

Latvia’s credit rating was raised to the lowest investment grade from junk status by Fitch Ratings yesterday; the country also has investment-grade ratings from Moody's Investor's Service. Standard & Poor's rates Latvia BB+, its highest speculative grade, with a positive outlook.

Credit default swaps, which investors use to protect against default or speculate on creditworthiness, in the three countries are below those for Greece, Ireland, and Portugal. Greece is only slightly less risky than Pakistan while Estonia is ranked almost as safe as France, according to CDS prices.

Lithuania's Apranga AB, the biggest Baltic clothing retailer, returned to profit last year and now plans to open as many as eight new shops this year. The company had cut its workforce by 16% in 2009 and trimmed wages by 30% to cope with tumbling consumer spending. Shares rose 160% last year.

Estonia, which adopted the euro in January, saw its OMX Tallinn Index rise 72.6% last year. Latvia and Lithuania were among the top 10 performers. Greek stocks fell 41%.