/Photo by Karolis Mackevicius/
By 2020 the economic and fiscal pressures on the EU countries were becoming acute. A concerted political push led to a major reallocation of budgets. The main casualties were the Common Agricultural Policy and the Regional Development Fund. Major cuts in these areas enabled national contributions to the EU coffers to be reduced. However, ever more restrictive rules on competition made it very difficult for national governments to sustain lagging regions, even if they wanted to. The break-down of the Eurozone was visible from the time of the Greek crisis in 2010. After the withdrawal of Italy and Spain following the 2018 financial crisis, the Euro unravelled and all federalist ambitions ended. The EU developed only as a trading club with less and less attempt to forge a common path – except for the maintenance of the rules on competition, and the free movement of labour and capital.
EU investment in the first 20 years of the century in trans-European highways and fast trains assisted the growth of Poland and the eventual recovery of the poorer Baltic Sea countries. However, the result was to favour west-east links which mean that the countries in the northern quarter of the continent saw their accessibility relatively decreased. Higher transport costs became a concern for businesses in those countries and especially in their more remote regions. The collapse of the budget airlines after the oil price hikes of 2019 and 2021 left many peripheral regions stranded with no links into main EU and international networks.
The result was that by 2025 the pattern of development in the Baltic Sea Region had become extremely complex, yet in other ways rather simple to describe: capital city growth and suburban spread, rural poverty and de-population. The capital cities had recovered most quickly from the 2008-2012 recession. The repatriation of spending from the EU saw a new phase of centralisation and investments in the public sector in the capitals. However, in other regions public sector jobs were severely reduced through “efficiency gains” and mergers of kommunes to create administrative units covering much larger areas. The intensification of global competition made the agglomeration economies and connections of the capitals more and more vital to business. The liberalisation of immigration policy after 2022, followed by the eventual accession of Turkey into EU membership in 2027, was another attempt to sustain Europe’s competitiveness by growing the labour force and reducing labour costs in the face of the continent’s aging population. However, China’s own “open door” policy had already creamed off the best talent in Asia, and though there was a strong movement from North Africa to southern Europe, the BSR gained few of the benefits of non-European immigration.
The net result was a widening divide between the capital cities in the Baltic Sea Region and the more peripheral rural regions in those countries. As the population of villages dwindled, agricultural jobs disappeared, and the population aged, “ghost settlements” became a familiar feature of the landscape. Of course, there were some who bucked the trend. The areas round the fringe of the capitals and other major cities attracted commuters. However, the small towns that had been the administrative and service hubs of rural regions were badly hit by the overall de-population and centralisation of services and government. They also suffered as tourism became less affordable and more local, and people spent almost their entire leisure time using electronic media and making “virtual trips” to the countryside.
A contrasting scenario might be built on the notion that of a rural revival. It could go something like this. The response to the long economic crisis of 2008-2012 was in the end as much cultural as economic. It came as a reaction against a number of factors - the greed of the bankers, oligarchs and crime syndicates, the failures of governments, the realisation that “business as usual” meant either unemployment or overwork with no time to socialise or build a family life. The zeitgeist of movies struck a new, raw note – “The extinction of the polar bear” or the portrayals of a European urban dystopia such as “Frontline Marseilles”. The result was a radical revaluation of the relative attractions of urban and rural living, and a reversal of what had seemed the irreversible trend towards the depopulation, aging and loss of skills amongst some of the more peripheral and rural regions in the Baltic. The attractions of a life of greater simplicity and self-sufficiency were felt by a generation who reacted to the shocks of energy shortages, food scares and the lack of employment opportunities in traditional male manufacturing roles.
Of course, it wasn’t just a case of culture. There were hard facts that left the Baltic exceptionally well placed to follow a new path. The region already had many strengths back in 2004 when the EU grew from 15 members to 25 members, or even further back when the old DDR once again became part of a united Germany. It just took time for the strengths to come through. So what were those strengths? Perhaps most important were the skills and high education levels of the people in this part of Europe. In addition, the natural trading connections around the Baltic Sea that had once sustained the Hanseatic League, were an enduring asset, as was the model of innovation and consensual governance that had underpinned the success of the Scandinavian countries and enabled them to ride out the recession with nothing like the damage that happened in Greece, Ireland, Spain, or even the UK. One of the keys to the “Baltic Miracle”, as it was being called by 2020, was the diffusion of know-how around the region. The retirement of a generation of administrators and politicians still stamped by their early upbringing in the old USSR speeded the process of change. A younger “European” generation brought new skills and new attitudes. They were products of the determination of the EU to practice “solidarity” and “cohesion”, and to reinvigorate its vision of a new Europe.
Perhaps some of this was predictable, but it took some time for the benefits to spread beyond the big cities. For a while the major urban centres still enjoyed all the economic advantages – big labour market, big market for products, administrative hub, home of the major universities, the place where the airports are and the big deals are done. However by 2020 the diseconomies of congestion were all too evident. The lack of a decent public transport system in Riga, for example, made commuting into and out of the city a costly nightmare. Housing costs had become prohibitive, while long distance commuting from anonymous suburban estates was increasingly imposing costs on businesses, with employees often arriving late and tired, and rates of absenteeism rising.
Small and medium-sized enterprises led the way in the decentralisation as businesses realised that they could get, and more important hold, the people they wanted to work for them by offering the chance to live in a decent sized house in a small town, and walk, cycle or take a community taxi to work. The air quality was better, the countryside was closer, and the schools were better – when it came to attracting young families, there was “no contest”.
The “Village Café” movement perhaps encapsulated the change more than anything else. The cafes sprang up in the most unlikely places, often run by volunteers working shifts to keep them open 24/7, they were meeting places but also training centres and points of exchange. Teenagers helped out and learned new skills, people bought and sold the produce from their gardens and small-holdings, they were social centres where the elderly met to swap stories of days gone by and pass on folklore or traditional recipes to the young. But they were also the hubs of the local IT networks, the “local café campus” for a host of training and higher education institutes that operated from sheds in farm fields, since electronic learning had undermined the traditional urban university campuses. It wasn’t long before entrepreneurs began producing designer villages with “Global Village Cafes” that enabled mangers of larger enterprises to work remotely from their company base, teleconferencing while looking over green fields or watching the deer outside in the forest. These migrants from the city transformed the traditional Baltic rural settlements. The migrants were able to connect the local resources and assets into external networks and markets.
The better climate also benefited the region. By 2025 the growing season was 2 weeks longer than it had been back in 2010. This boosted local farming and encouraged more small-holdings. The Baltic was ice-free for longer and significant developments took place in the north of Scandinavia as trade and energy corridors with Russia were opened up, and the value of energy assets increased due to shortages. The North Sea Grid, connecting Germany, Denmark, Sweden, Norway and the UK opened in 2022. This dramatically increased the development of renewable energy sources in rural regions. Variations in wind or water, sun or tides no longer posed a problem – by connecting different sources into one transnational grid a reliable and efficient supply could be achieved. The result was the emergence of some rural regions heavily specialised in renewable energy and its associated technologies.
So it was that by 2030 the rural parts of the Baltic Sea Region were thriving in many different ways. Were they still rural? Perhaps not, if “rural” still meant what it meant in the last Millennium, a place where people live who are mainly earning their living from farming. But it was the place – the relation to and respect for the land – that was essential to the changes that had taken place. It just took the visionaries from the Innovation Circle to see the possibilities.