Forget the Celtic tiger: SNP looks to the booming Baltics for a model

Published on Monday 28 June 2010 20:03

SCOTLAND could learn a lot from the success of Lithuania, according to the Baltic state's prime minister, who believes that there are huge advantages in being a small state.

• Gediminas Avenue, the main street of Vilnius, bustles with activity. Lithuania's leaders say the country's small size has many advantages. Picture: Complimentary

Andrius Kubilis told The Scotsman that being a smaller country allowed for a smoother handling of deficit reductions and made the country's economy more dynamic and appealing to foreign investors.

While he did not want to get involved in Scotland's constitutional debate, he pointed out that Lithuania this year celebrated the 20th anniversary of its independence from the former Soviet Union and was now enjoying the benefits of going it alone.

Lithuania, he said, was in the top 25 countries for attracting investment from multi-national companies and had high hopes of reaching the top 20.

The Baltic state, which broke away from the Soviet Union with Latvia and Estonia in the early 1990s, is one of Scotland's key competitors in bringing in new industries, such as biosciences. Mr Kubilis sees it as one of his prime roles to travel the world and encourage more investment in his country.

He spoke to The Scotsman ahead of a conference on innovation and investment in London, which he was attending with his finance minister, Dainius Kreivys.

The two spoke of how in recent years their government had managed to overhaul the university system to focus it on the industries they want to attract.

They also said being a small country had helped them make massive savings in cutting the public sector, to the value of 4 per cent of GDP, which will soon increase to 12 per cent.

This included tackling the cost of public sector pensions, an issue that is dominating UK and Scottish expenditure decisions and could lead to strikes.

"I would say that as a small country we have the benefit of being dynamic," said Mr Kubilis.

"We are very dynamic, very open and very flexible. This gives us a very important advantage."

He argued that this had allowed the country to change its tax system to provide incentives for foreign investors, including bringing down corporation tax.

The country's size had also helped it avoid the problems of Greece, where severe cuts by the government led to riots.

"We had nothing compared to Greece," he said. "We managed to find agreement in the country for what needed to be done. It is true that not everybody is happy with what has happened but we were able to work well with our social partners."

The SNP has in the past looked to Scandinavia and the Baltics for inspiration.

The Lithuanian model is one the SNP would like for Scotland, and yesterday finance secretary John Swinney said Mr Kubilis had shown why Scotland should at least aim for fiscal autonomy if not full independence.

He said: "Smaller independent nations have economic advantages in terms of the ability to respond rapidly, build a national consensus for key objectives, and therefore deliver an effective growth strategy. That is what Scotland can do."

But Labour insisted last night independence or fiscal autonomy would just give Scotland crippling debt of 17 billion a year, plus 125bn from the Treasury.