ABSTRACT
The European Union, as it came to exist over the 1990s and 2000s, perhaps unwittingly but certainly willingly came to negate all Listian principles as neo-classical economics came to totally dominate the economic discourse. Eastern European and in particular Baltic export companies exhibit the same pattern of being isolated economic enclaves, which was considered a sign of underdevelopment already in the 1930s. In addition, since the financial systems in the Eastern economies are dominated by subsidiaries of foreign universal banks, these financial sectors remain locked into financing predominantly consumption, potentially fuelling more current account deficits and new boom-bust cycles. The result of both processes is that during downturns public finances deteriorate – also because under the Maastricht criteria, public finances behave pro-cyclically – and without a clear lender of last resort, economies in the South and in the East are prone to recurring systemic crisis and without actual significant convergence in livings standards with the core economies.
