The Baltics are rapidly becoming a cauldron of EU growth when other parts of Europe are stagnating

Irish Times

07-06-2025

It's not every day you find yourself in the Orthodox church where
Alexander Pushkin
's great-grandfather was baptised. There is something calming about these dark, ornate and often windowless churches. The great-grandfather of Pushkin – the man whom many regard as the epitome of Slavic genius – was from central Africa (modern day Cameroon), a fact that adds to Pushkin's image as a romantic outsider. His great-grandfather, captured as a child by the Ottomans and gifted to the
Russian
emperor, rose to the position of general in Peter the Great's all-conquering army and was baptised in an Orthodox church in the centre of Vilnius,
Lithuania
's very Catholic capital city.
As befits a country at the crossroads of Europe, through which Napoleon, Charles X of Sweden, Hitler's Wehrmacht and, of course, Stalin's Red Army trampled, Vilnius is a city of ghosts. Before the second World War, it was known as the Jerusalem of the North, home to 60,000 Jews, of whom fewer than 2,000 survived. Today it is the bustling capital of Lithuania, a country that was once the largest state in Europe when it was the Polish-Lithuanian commonwealth. Those halcyon days are evident in the baroque, rococo and the later neoclassical architecture beloved of the Imperial Russians. After all, if you name your top man the Tsar, a Russified version of Caesar, it's not surprising that you'd have a weakness for Roman columns.
The Russians were in Lithuania for a long time and, but for a brief period of independence from 1920 to 1941 and Nazi occupation during the war, the Russification of Lithuania continued uninterrupted from 1790 until independence in 1990. Hence Pushkin senior being baptised in Vilnius, where Orthodox churches are common and, for the older generation brought up in the Soviet Union, Russian is the default language.
Somehow the Lithuanian language survived; today it is thriving. Yet Russia's presence is palpable, and with the
invasion of Ukraine
the sense of insecurity is heightened – as it is all throughout the three Baltic Republics of Lithuania and its two northern neighbours,
Latvia
and
Estonia
.
READ MORE
These three small maritime countries face the sea and have been connected with western Europe for centuries. In contrast, Russia is a land power. The Hanseatic influence, tied to Lubeck, Hamburg, London and Amsterdam by the Baltic and North Seas, give the Baltic Republics their Scandinavian feel, not to mention their Catholic and Protestant religion, which distinguishes them from the Orthodox Russians.
Economically, these three countries are by far the most successful of post-Soviet Republics, anchoring themselves politically, commercially and militarily to the West, via the EU and
Nato
. I've yet to meet a person here who doesn't see Nato as a positive. The average person appears to see Nato as an necessary insurance policy, a shield from Russian aggression that the invasion of Ukraine evidenced so dramatically.
There is little sympathy for the Kremlin, even or maybe particularly in Latvia which has the largest ethnic Russian minority of the three republics. The war in Ukraine makes their orientation to the West appear – to those I have spoken to at least – all the more logical.
What does this shift to western Europe mean for this region economically?
There seems to be a different attitude to tech, as I observed on an airBaltic flight between Riga and Vilnius this week:
Elon Musk
's Starlink internet was free to all throughout the flight. If there is a technological solution, the Baltics use it and Musk's Starlink is an obvious network. Their view is that if it is good enough for the military, it is good enough for their citizens. Over the past two decades, the standout success of the Baltics has been this embracing of technological possibilities, leading to the creation and fostering of tech companies.
Ireland has become home to a significant Baltic diaspora since the early 2000s. These neighbours are not from some backward former Soviet region, but from one of the most dynamic parts of modern Europe
Since the founding of Skype in Estonia nearly 20 years ago, the Baltics have been punching far above their weight in tech and entrepreneurship. Dubbed the
Silicon Valley of Europe
, Estonia now has 10 tech unicorns (including Wise, Bolt, Pipedrive, Playtech, ID.me, Zego, Veriff and others)
in a nation of just 1.3 million
. Estonia alone has the highest per capita concentration of billion-dollar tech companies in Europe (and among the highest in the world).
Latvia and Lithuania are also nurturing big start-ups. Latvia produced its first unicorn, Printful (print-on-demand ecommerce), in 2021, and has other notable start-ups like airBaltic (an innovation-oriented airline) and fintech platforms. Lithuania, as well as being home to the banking multinational disrupter Revolut, is now home to two unicorns: Vinted (Europe's largest online used-fashion marketplace) and Nord Security (creator of NordVPN). Vilnius has become a fintech hub (hosting the EU's second-largest fintech cluster) and a centre for laser technology and life sciences.
[
ECB cuts interest rates by quarter percentage point
Opens in new window
]
Estonia leads Europe in startups per capita,
with 1,100 per million people
(4–5 times the European average), and Baltic tech founders are celebrated for their global impact. The World Bank and the OECD often cite the Baltics as models for digital innovation and ease of doing business.
As of 2023, ICT contributes around 6 per cent of Estonia's GDP, up from 3 per cent in 2012, and about 7 per cent of its workforce are ICT professionals, the highest share in the EU. Latvia and Lithuania follow close behind and well above the EU average. Around half of all private R&D in Estonia and Latvia is tech-related. As a percentage of European population, the Baltics should have about 1 per cent of EU tech unicorn start-ups; instead they have 12 per cent. Meanwhile, Lithuania leads the EU in the number of fintech licences issued and has thriving tech parks in Vilnius and Kaunas. Lithuania's ICT sector grew 50 per cent in employment over the past decade.
They are not only deploying tech to create new companies, the way the government does business here is quite seamless because of mass digitalisation. The problems caused by one Irish hospital not having the medical details of a patient who is being treated in another Irish hospital would never happen here; the entire public sector is paperless.
Every government computer speaks to every other one, and to your own laptop. The result of this world-leading e-governance ecosystem is that Estonians can start a company online in minutes and 99 per cent of government services are accessible from home. No queues, no forms, no 'missing in the post' appointments, because one ID card has all the information in one place. Consequently the cost of government bureaucracy has collapsed. This is the future. And yet the region is still captured by the past, most notably the threat of Moscow.
[
What does the latest ECB cut mean for borrowers, savers and the broader economy?
Opens in new window
]
Ireland has become home to a significant Baltic diaspora since the early 2000s, with people from Estonia, Latvia and Lithuania now making up roughly 1 per cent of the population (based on the 2022 census and a population of 5.15 million). These neighbours are not from some backward former Soviet region, but from one of the most dynamic parts of modern Europe, the Baltic Sea, home to Poland, Europe's most vibrant large economy, Finland and of course Sweden, as well as the industrial north of Germany.
Ireland should learn to use the skills, networks and languages of our new residents to cement relations with this part of the world because this is rapidly becoming a cauldron of EU growth at a time when other parts of Europe are stagnating.