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The Baltic economies were severely hit by the global financial crisis. Gross Domestic Product has contracted considerably. Naturally, it asked what went wrong with the "Baltic economic model". This paper surveys the programme of comprehensive economic reforms in the Baltic countries (the case of Estonia serves as the "lead story") post independence. It gives particular weight to reforms of the macro economy and trade policy, and to the privatisation programme. It concludes, firstly, that the Baltic countries opted for the right set of institutional economic structures at the time of independence. It was also a good economic strategy to speed up reforms. In contrast to many other transition countries in Europe, the Baltic countries had been part of the Soviet Union and had to go through a much tougher reform period. They had to quickly leave the rouble zone and the structure of economic planning inside the Soviet Union. Other transition countries, like Poland, had in this respect a much easier task. Secondly, as the Baltic economies matured and entered the European Union, the passion for continued economic reforms slowed down markedly. Too many people believed they could keep climbing in wealth without the pain of economic and behavioural change. Accession to the European Union was the crowning of the past reform period. Some thought it to be the end of the reform period. Thirdly, as the economies matured, there should ideally have been a shift in some macroeconomic policies to help cool economies that were overheating and building up asset bubbles. Lastly, the proper economic policy strategy for the Baltic countries now is to entrench its economic policy integration with Europe.

SMEs are often praised by politicians and economists alike as the backbone of the economy and an essential factor for employment. They represent the vast majority of the enterprises in Europe and the largest source of employment. Differently from large enterprises, small and medium enterprises enjoyed better image vis-à-vis the great public, and overtime managed to ensure governmental support in times of crisis. This article analyses both the role of SMEs for economic growth and employment and the extent to which they were affected by the financial crisis.

The G20 summit in London offers an opportunity for world leaders to prevent a continued slide towards protectionism. Yet the summit is already at risk of ending in failure as expectations run too high. The agenda is already far too wide and cover areas characterized by sharp differences of opinion rather than an emerging consensus. Individual members have also thrown in additional wishes for what the summit should achieve. Furthermore, G20 rhetoric is ingrained in global governance romanticism, but the naive hopes of building a new Bretton Woods system will meet the hard realities of global economic co-operation. This Policy Brief is concerned with what should be the relevant trade agenda for the G20. At the summit in Washington, D.C. last autumn, the G20 agreed that no country should impose new barriers to trade. G20 leaders also instructed their trade ministers to agree on a headline deal for Doha Round before the end of 2008. However, nothing has happened in the Doha Round since the last G20 summit, and it took only a few days until a G20 country had imposed new trade barriers. Since November last year, 17 of the G20 members have imposed protectionist measures. Governments have not responded to the economic crisis with massive protectionist measures. It is rather creeping protectionism that has characterized recent trade policies. However, as the crisis deepens countries are likely to increase protectionism. The chief task now is to prevent such a development, in particular the risk of escalating tit-for-tat protectionism. This Policy Brief sets out a six-point agenda to contain protectionist threats.

Few countries have reformed their economies as swiftly and decisively as Estonia in 1992-94. The economic reform program started during the Perestroika, and intensified in the first year of independence. Yet it was in 1992, amid the collapsing economy and under new political leadership, that the comprehensive reform program started. The establishment of a currency board arrangement, a swift move to zero tariffs, and a solid and transparent privatization program were key parts of this reform era. Fredrik Erixon documents these reforms in a new paper The Baltic Tiger.

Europe is dependent on Russia for its energy supply and finds itself at odds with designing a policy that addresses its rising number of concerns over Russia while not putting its energy imports at risk. Russia's new assertiveness, in energy and as well as in other external relations, has repeatedly led it to bully its trading partners, including the EU. Foreign investors increasingly find Russia an unstable destination for investments, where commercial rule of law still widely remains an alien concept. Trade and investment policies are unclear and subject to unannounced and arbitrary amendments. With power being increasingly concentrated in the Kremlin and around the former President, Vladimir Putin, Russian politics has slithered towards authoritarianism. In this new paper, Fredrik Erixon takes stock of past and future development in Russia and discusses how Europe should design a policy which accommodates its energy supply as well as the interests of European investors in Russia.