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Plus, Central Europe’s economy shows more signs of growth while Lithuania suggests it could blockade Kaliningrad.by Erik N. Nelson, Ioana Caloianu, Alexander Silady, and Martha Tesema 3 October 2013
1. Latvians smarting at the prospect of euro prices
Latvia is firmly in the euro camp, having campaigned throughout the eurozone crisis for membership in a club that until recently looked a mite shabby to other potential inductees to the single currency.
The first day of October was the deadline for shopkeepers to begin showing price tags in euros, as well as lats, and when so-called “Honesty Day” dawned, prices didn’t look pretty.
From a psychological perspective, it doesn’t help that the lat is worth 1.42 euros, which means the prices for everything look higher when converted to the common currency.
Unlimited pre-paid mobile phone service, for example, went from 2.81 lats per month to 3.99 euros, the Journal writes. Ten rides on Riga’s public transit system go from 5 lats to 7.10 euros. To help its riders navigate through this brave new world, the Rīgas satiksme system now features a lat-to-euro calculator on its website.
While it is mostly “sticker shock,” as the Journal calls it, euro conversions have often irritated consumers adopting the currency. And while some businesses use the opportunity to offer discounts, rounding up can be a tempting alternative when the market will bear it.
Latvia is unusual in having a currency under which one unit is worth more than one euro, so the euro values on paper, online, or on digital cash registers will always be higher.
Likely adding to the Latvians’ frustrations is the experience of living in the EU’s third poorest economy and going through a crushing economic downturn only a few years ago, though that is now being left behind by one of Europe’s most surprising economic recoveries.
2. Lithuania threatens Russia with exclave blockade
It could be called “The Mouse That Roared.” Much as in the 1950s film of that title, Lithuania this week threatened one of the most powerful nations on earth.
But unlike the fictional Duchy of Grand Fenwick, Lithuania is a real country and it now holds the reins of the European Union presidency. And it does, in fact, have the ability to carry out its threat to blockade Russian land transport into its Baltic exclave of Kaliningrad.
Were it to do so, it might force Russia to recreate something like the Berlin Airlift, a very real Cold War invention that brought cargo to West Berlin when the Soviet Union – which both Russia and Lithuania were part of – blockaded that enclave of then-West Germany.
"We could also apply the same measures … As you know, the Kaliningrad region is isolated, geographically isolated, so we could apply some measures also to cut something,” said Linas Linkevicius, quoted by Reuters. “We could cut off trains, but not only trains, also the supply of goods, whatever.”
Lithuania will host the upcoming EU Eastern Partnership summit this November in Vilnius. At this conference, Ukraine, Moldova, and Georgia all plan to enter association and free-trade agreements with Brussels – moves that Russia bitterly opposes. EU officials have said Armenia may be unable to do so owing to its decision to join the Russian-led Customs Union (see next item).
Russia banned Moldovan wines in September. This summer, chocolates from Ukraine were stopped at the Russian border on a health complaint that was soon followed by Russian officials’ threat that more such issues would crop up if Ukraine got too cozy with the EU.
But perhaps it was just a roaring mouse. Linkevicius went on to clarify that his threat was somewhat rhetorical. “It is theoretically possible. It was not discussed, it's not our way of thinking, it's not our methods."
3. Armenia signs cooperation agreement with Russia
Armenia and Russia have signed a bilateral cooperation agreement extending to 2020. According to a press release from the Armenian government, the agreement was signed 1 October by Armenian Prime Minister Tigran Sargsyan and Russian Transport Minister Maxim Sokolov.
In September, Armenia announced that it will join the Russian-led Customs Union, an economic bloc which also includes Kazakhstan and Belarus and has been competing with the European Union for influence over former Soviet republics.
Observers of Armenia’s tilt toward Russia – in spite of its officials’ desire to curry favor with the EU – have said the decision was a result of Russian threats of massive increases in the price of energy as well as the prospect that Russia might step up arms sales to Armenia’s arch-enemy, Azerbaijan.
The press release notes that one of the main hurdles regarding the country's integration into the union has been its absence of common borders with other member countries. However, Sargsyan and the president of the Eurasian Economic Commission, which governs the union, established a working group to “significantly reduce the transactional costs conditioned by the lack of common borders” and ease the country's integration into the Customs Union.
ArmeniaNow writes that the country is also trying to maintain a close relationship with the EU. When the cooperation agreement was signed, Armenian President Serzh Sargsyan was paying a diplomatic visit to French President Francois Hollande, who said that the EU will continue to promote a European agenda and reforms in Armenia. ArmeniaNow notes that analysts have seen Armenia's EU agenda as an attempt to secure financial assistance.
4. Gun salute for slain Ukrainian mayor
That’s exactly what was held as a memorial to Bartenev, and to add another element of questionable taste, organizers – employees of the very town that Feodosiya ran – gave away a bicycle as a prize, RIA Novosti reports. That was the type of escape vehicle used by the killer of another Crimean mayor in February.
Local police said Bartenev was robbed by someone with a shotgun on 27 July. A decorated, Russian-born former naval engineer and businessman, the mayor was shot in the back but fought back against his unidentified assailant, who escaped with Bartenev's bag. He died that evening in the hospital of his wounds after three rounds of surgery.
The Crimean Prosecutor's Office reclassified the crime from robbery to premeditated murder two days later, according to Ukrinform, which called the attack on Bartenev an “assassination attempt.”
The bicycle prize was a dark reminder of the killing of Kyrylo Kostenko, the mayor of the village of Simiez, also in the Crimea. He was murdered by an unknown assailant in February who then escaped by bicycle, Interfax reports.
Both Bartenev and Kostenko were members of the ruling Party of Regions, but none of the available reports attempt to explain whether the macabre tribute was a coincidence, a rough joke, or a warning to other local officials.
5. Central Europe’s economic growth picks up
Central European economies grew faster in September with one indicator showing expanding manufacturing in the Czech Republic, Poland, and Hungary, The Wall Street Journal’s Emerging Europe blog reports.
Evidence of the improvement came in the form of the Purchasing Managers Index, which registered 53.4 in September, the highest reading since April 2011. The index pivots between 100 and zero and is based on the percentage of purchasing managers seeing growth or decline. Any number above 50 indicates a positive outlook.
“The data released [2 October] are generally consistent with continued recovery,” said Jaromir Sindel, an economist with the global banking group, Citi.
The strongest performance came from Poland, which had a better quarterly average index figure than any time since the spring of 2011. The Czech Republic, however, showed slower growth in September, the same month that neighboring economic powerhouse Germany saw a slowdown.
Jobs were also showing improvement in the region, with Poland registering more employment than it had seen in six years, the Journal reports. The Czech Republic continued its streak of five months of increasing job tallies.
In Hungary, the former governor of the central bank, Zsigmond Jarai, gave a rosy assessment of recent economic indicators. Portfolio.hu reports however that the 2014 budget proposal sent to parliament by Economy Minister Mihaly Varga employs overoptimistic growth projections and would lead to a budget deficit that is slightly higher than the government’s target of 2.9 percent of gross domestic product, concluded Janos Samu, analyst at Concorde Securities in Budapest.