Baltic Rim Economies Quarterly Review ISSUE NO. 1, 28 FEBRUARY 2011 EXPERT ARTICLES: Solvita Āboltiņa: Stability, partnership, responsibility – Latvia’s way out of the global financial crisis Page 1 Olli Rehn: Working for revival of the European economy Page 2 Riikka Manner: Regional policy ensures an intact future for the European Union Page 3 Ulla-Maj Wideroos: Nordic cooperation – as important as ever Page 4 Arja Karhuvaara: The many faces of natural gas Page 5 Krista Kiuru and Vera Lindman: Arctic – the world’s new playground Page 6 James Zhan and Astrit Sulstarova: Foreign direct investments in Baltic States – lessons learned and prospects for the future Page 7 Maria Gaidar: Health care reform in the Russian Federation Page 8 Volker Schlotmann: Mecklenburg-Vorpommern as logistics hub for Baltic Sea transport Page 9 Knud Andersen: Baltic Sea organisations put budgetary pressure on EU decision-makers Page 10 Hannu Halinen: Arctic challenges – a Finnish view Page 11 Valery Shlyamin: Modernisation of Russian economy in collaboration with Finnish partners Page 12 Olli Perheentupa: Finnish presence in St. Petersburg Page 13 Ramune Zabuliene: Lithuania – the adjustment process towards the euro Page 14 Maria Kaisa Aula: It pays to invest in the welfare of children and families Page 15 Tuula Teeri: Aalto University – think again Page 16 Tapio Reponen: The University of Turku has its roots far behind and a look into the future Page 17 Marja Makarow: The European Research Area needs to go global Page 18 Joseph Nye: Russia and reform Page 19 Fyodor Lukyanov: Russia at another cross-road Page 20 Seija Lainela: Russia, Belarus and Kazakhstan on way to closer economic co-operation Page 21 Sergei F. Sutyrin: Russia and World Trade Organization (WTO) – end of journey or endless one? Page 22 EXPERT ARTICLES CONTINUED ON NEXT PAGE To receive a free copy, print or register at www.tse.fi/pei Baltic Rim Economies Quarterly Review ISSUE NO. 1, 28 FEBRUARY 2011 EXPERT ARTICLES CONTINUED: Jukka Ruusunen: Baltic Sea electricity market needs a functioning grid infrastructure – EstLink 2 will be one of the main electricity highways in the region Page 23 Aloyzas Koryzna: Lithuanian Energy after the decommissioning of the Ignalina nuclear power plant Page 24 Sergei Pereslegin and Artiom Zheltov: A new nuclear race Page 26 Alan Riley: Whither Gazprom – can Gazprom survive in a shale gas world? Page 27 Jaanus Mutli: Tallinn 2011 invites the world to hear its sea and its people Page 28 Anne-Marget Niemi: Through great commitment a new tourist destination in the Baltic Sea is created! Page 30 Wolfgang Blank, Leonas Grinius and Peter Frank: Creation of a healthy and wealthy Baltic Sea Region (BSR) Page 31 Pirjo Karhu and Manfred Janoschka: New trends in business in Moscow–St. Petersburg Page 33 Markku Mylly: Port development in the Baltic Sea Area Page 34 Karl-Heinz Breitzmann: Impact of the recession on Baltic maritime transport Page 36 Natalia Ivanova: Russia’s innovation policy and modernization agenda Page 38 Marja-Liisa Tenhunen and Irja Leppisaari: The National Innovation Strategy’s impact on university of applied sciences learning environments Page 39 Leonid Polishchuk: “Modernization from above” in historical perspective Page 40 Markku Kangaspuro: Russia's search for modernizaton Page 41 Karri Hautanen: Baltic Region will be the Silicon Valley of Europe Page 42 Manfred Spiesberger: R&D and innovation – a window of opportunity for enhanced cooperation with Russia? Page 44 Jukka Pietiläinen: Russian modernisation – technological or socio-cultural one? Page 46 Félix Krawatzek: Modernisation of Russia – moving beyond rhetoric? Page 47 EXPERT ARTICLES CONTINUED ON NEXT PAGE To receive a free copy, print or register at www.tse.fi/pei Baltic Rim Economies Quarterly Review ISSUE NO. 1, 28 FEBRUARY 2011 EXPERT ARTICLES CONTINUED: Thorsten Posselt and Mathias Rauch: Internationalization activities of German cluster initiatives – the role of CEE Page 48 Sam Inkinen: Innovation and “innoflation” – challenges of creative processes, systemic innovations, and ubiquitous technologies Page 49 Alexey Ignatiev: The Kaliningrad Region as a modernization model of modern Russia Page 50 Jouko Grönholm: How to make the challenges of Kaliningrad to become true? Page 52 Tatiana Chekalina: Kaliningrad as an international tourism destination – still a challenge Page 53 Ivan Samson and Marina Krasilnikova: The middle class in Russia – emerging reality or old myth? Page 54 Andrey Pavlov: Russian military reform – what’s next? Page 55 Joachim Diec: The perspectives of Russian radical nationalism Page 56 Markku Jokisipilä: Kremlin takes its sport seriously Page 57 Thomas Lundén: Szczecin – center of a truncated border region with geopolitical dilemmas Page 58 Markku Ollikainen: Protecting the Baltic Sea – a challenge to the international environmental policy Page 59 Håkan Knutsson: Baltic Rim countries in pole position in the eco-efficiency race? Page 61 Juha Ruokonen: Carbon markets in transition – opportunities and challenges Page 62 Sigitas Brazinskas: Through the integration in the Nordic Europe to the global value chains Page 63 Andres Kasekamp: The Baltic States – moving together or apart? Page 64 Päivi Toivanen: ‘Focus on the Baltic’ book sums up the facts Page 65 Alexander Kulakov: Political and social stability in Ukraine after the first year of Yanukovych’s presidency Page 66 Markku Tuomola: From industrial structures to agile global service networks – a disruptive revolution or led transformation? Page 68 To receive a free copy, print or register at www.tse.fi/pei Expert article 680 Baltic Rim Economies, 28.2.2011 Quarterly Review 1ƒ2011 Stability, partnership, responsibility – Latvia’s way out of the global financial crisis* By Solvita Ɨboltiƽa Latvia has been increasingly praised in the international arena continued in the parliament in the form of cooperation with the as an example of how to successfully overcome the ordeals Speaker of the Saeima and with parliamentary committees. caused by the economic crisis. This experience undoubtedly Partnership should also characterise subsequent makes us feel proud of ourselves to a certain extent. However, development processes. Now that the 2011 budget has been it is more important for us to understand why Latvia suffered so adopted, the parliament has to involve social and cooperation severely from the global economic crisis. Likewise, we must partners in other discussions on the country’s strategic goals. understand what enabled our country to brace itself, stand up This makes it possible to achieve joint development goals more and avert insolvency. Understanding both of the aforementioned successfully and to narrow the gap between the government aspects is of great importance for Latvia and Europe. and society that is evident throughout Europe. The short answer to the question why Latvia suffered so heavily from the economic crisis is this: we found ourselves in a Responsible attitude deep crisis as a result of ignoring the basic laws of economics The decision making which accompanies the process of and following thoughtless politics. The key factors that have economic recovery should also be responsible. One can already turned Latvia into a success story include persistent work, along feel a tendency to give up austerity at the first positive signs. with adherence to the principles of stability, partnership and One can also see a revival of the illusion that after 2012 salaries responsibility while forming the state budget for 2011. in this country might reach the level of the boom years before the crisis. But they will not. I would even say that the real crisis Preserving Financial Stability occurred when all of Europe was living beyond its income; it This is the second government led by Valdis Dombrovskis, was a crisis of values and of moderation. Therefore, I am glad whose primary objective is to lead Latvia out of its deep that Latvia’s budget for 2011 was prepared by looking several economic and financial crisis. In beginning this work two years years ahead and by keeping in mind both immediate and future ago, one of the most urgent tasks of the government was to goals – primarily, adoption of the euro in 2014. At the same provide financial stability. The results of the elections held in time, this budget protects pensioners, people with children and October 2010 – the victory of the political union Unity and the people with low or medium low income. Therefore, this is also a repeated nomination of Valdis Dombrovskis for the post of socially responsible budget. Prime Minister by the President of Latvia – show that Latvian We expected the principle of responsibility to be evident in people appreciate what has been achieved so far. And once the proposals that MPs, social partners, parliament’s again, we feel proud of ourselves, but we are well aware that cooperation partners and other groups of society submitted the difficult path towards stabilisation is still ahead of us. regarding the 2011 budget. Successful partnership does not The state budget for 2011 that was drafted by the mean approving all proposals but rather detailed discussions government and adopted by the parliament at the very end of and well-considered decisions permeated by a sense of the previous year represents a clear turning point towards responsibility towards all groups in society. economic growth of Latvia. The previous two state budgets can be regarded as crisis budgets, whereas this is a stabilisation From stability to growth budget. I am truly gratified by the fact that in spite of cutting the Despite previous economic development forecasts according to government’s spending, we still have managed to allocate one- which the consolidation measures for 2011 budget amounted to fourth of the state budget specifically for development. more than LVL 400 million, the government of Valdis Now it is important for Latvia to balance its revenues and Dombrovskis managed to limit the necessary consolidation of expenditures in order to stop living on credit.