No financial immunity

Up until the current global economic crisis, the Baltics were considered a boom region. The economic upswing began when the countries in the region - Estonia, Latvia and Lithuania - joined the European Union in 2004.

Over 11 billion euros were pumped into the economies of the former Soviet states via Scandinavian banks, but, thanks to the international finance crisis, the flow of funds has been cut off.

"The crisis is really hard on us," said Tatjana Tresenko, director of the Lithuanian garment maker Roze. Despite hefty price reductions on her colorful summer clothes, she hasn't been able to draw many customers this season.

"No sooner had we put the new collection on the market, than we had to mark things down," she said. "All the boutiques here are competing with dumping prices. How am I supposed to cover my costs?"

The upside of being slow

Unlike neighboring Latvia, the Lithuanian government is not yet on the brink of bankruptcy, said Raimondas Kuodis from the Lithuanian Central Bank.

"Lithuania was a bit behind in its legislation and allowed the banks to generously give out loans a year after Latvia did," he said. "That's why our real estate bubble wasn't so big and not as many people are heavily indebted."

Nevertheless, Lithuania's economy is reliant on loans from the World Bank, and all of its reserves have already been spent on wage and pension increases, explained Kuodis.

Seeing the silver lining

One of the first victims of the economic crisis was the Lithuanian airline Flylal, which filed for bankruptcy in February 2009. As a result, hardly any flights were available between Vilnius and other major European cities.

When the government nearly quadrupled the hotel tax, Lithuanians began to protest. Over the following weeks, hotels shut of all their lights for two hours at night and candles were used at the reception desks.

"More than 10,000 employees in the tourism industry have been fired," said 23-year-old porter Linnas Baranauskas. "We're really afraid."

Everyday, more business in Lithuanian file insolvency and more workers lose their jobs. The government is just now starting to talk about cutting wages and pensions. Still, many Lithuanians are still optimistic.

"Of course it's sad that we, as culture capital, are experiencing an economic downturn instead of growth," said passer-by in Vilnius. "But we want to show the whole world that we're not just worried, but can be happy too."

Author: Birgit Johannsmeier (kjb)

Editor: Trinity Hartman