VilNews section 17: BUSINESS – ECONOMY – INVESTMENTS
Electric car made in Kaunas!
THE VOICE OF INTERNATIONAL LITHUANIA
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By Kestutis Eidukonis, VilNews CEO
At the beginning of this month, I had the great privilege of representing the PLB (World Lithuanian Community) in its bi-annual meeting with members of the Seimas (Parliament). This joint commission meets twice a year and consists of ten members elected by the World Lithuanian Community and ten members of the Seimas, one from each party. The commission has two co-chairs one from the PLB and one from the Seimas. The co-chair from the PLB was Dr. Jonas Prunskis and the co-chair from the Seimas was Ona Valiukevičiūte.
The areas of debate and concern for the commission were:
Brussels, Belgium — Over the past three years the share of European Union (EU) citizens who want to be self-employed has fallen from 45% to 37%, reports European Commission (EC). This year EC highlighted the need for more entrepreneurs in order to return the EU to economic growth and higher levels of employment.
However, historical, cultural and economic background of diverse European countries has significant effects on attitudes towards entrepreneurs in European countries. Lack of in-depth knowledge might determine future revival of entrepreneurship in Europe, reveals the study by Lithuanian Free Market Institute (LFMI) today presented in Brussels.
“It is a positive trend in Europe to turn to entrepreneurs and acknowledge their role in creating economic growth. Yet, without knowing the mistakes of the past, there is no future. This is especially important then considering New Member States, such as Lithuania or Bulgaria, which still carry a burden of post-communist past. Therefore, only full understanding of entrepreneurial situation per country can guarantee that necessary measures will be taken and they actually will give wanted results”, says Zilvinas Silenas, President of LFMI.
In line with the acknowledged need to revive entrepreneurial spirit of Europe, LFMI conducted an international in-depth study in two New EU Member States, Lithuania and Bulgaria, and for comparative reasons in two non-EU countries – Georgia and Kyrgyzstan. The aim of the current study was to determine attitudes towards entrepreneurs in countries sharing the same post-communist past and underlying historical, cultural and economic reasons of such attitudes.
How to get rid of the “exploiter” image of the entrepreneurs?
Kinze Manufacturing Inc., the second largest planting and seeding equipment manufacturer in the United States, will open a production facility in Vilnius District along the highway to Druskininkai. The facility will manufacture the company’s agricultural machinery product line, planters/seeders, to support its growing market in neighbouring countries including Russia, Ukraine, Czech Republic, Bulgaria and Hungary. It will open in autumn 2013 and start with 10 employees. In a few years the manufacturer will eventually employ 250 welders, mechanics, CNC operators and other specialists in its Lithuanian operations.
“This is our first plant abroad geared to increasing sales in Russia, Ukraine and the whole of the European Union,” commented Susanne Kinzenbaw Veatch, Vice President and Chief Marketing Officer of Kinze Manufacturing, Inc. “We were looking to expand in Eastern Europe and were considering Slovakia, Poland or Lithuania. We chose Lithuania because the local workforce is undoubtedly productive and cost-effective. Also we were very impressed by the country’s long-standing manufacturing traditions and the degree to which public institutions were attentive to our business needs.”
The Icelandic government failed to convince its own citizens in the elections this weekend, and the conservative opposition claimed poll win as voters returned parties that ruled over 2008 financial collapse back to power.
But the present Icelandic government has, nevertheless, something important to teach the eurozone, according to an Icelandic economics professor.
While droves of businesses have had to close its doors in Euro cities like Rome and Athens, the business community in Reykjavik avoided mass death. But it could have gone differently, says economics professor Thórólfur Matthíasson at the University of Iceland.
He has called the crisis that hit Iceland in 2008, the perfect storm. A financial sector ten times larger than Iceland’s GDP collapsed. The Icelandic krona lost over half the value. Inflation rose far and fast.
Up to 90 percent of Icelandic companies were in danger of getting bankrupt, but many of them could point to future, long term opportunities. The solution Iceland chose, and Matthíasson participated in, was to facilitate the corporate debts.
Both government, banks and individuals went into talks about impairment. The result was win-win, says Matthíasson.
Banks got customers who could handle their debts. Businesses avoided extensive closures. Icelanders avoided unemployment and social deprivation.
- The banks could have pushed for bankruptcy in many companies, but have instead really done their very best to look for common sense in the matter, says the economics professor.
Lithuania’s former prime minister, Andrius Kubilius is a staunch advocate for those who want to cut spending to reduce deficits and “restore confidence.”
“Stimulus” spending, Paul Krugman argues, would help reduce unemployment and prop up economic growth until the private sector heals itself and begins to spend again.
For the past five years, a fierce war of words and policies has been fought in America and other economically challenged countries around the world.
On one side were economists and politicians who wanted to increase government spending to offset weakness in the private sector. This “stimulus” spending, economists like Paul Krugman argued, would help reduce unemployment and prop up economic growth until the private sector healed itself and began to spend again.
On the other side were economists and politicians who wanted to cut spending to reduce deficits and “restore confidence.”
Government stimulus, these folks argued, would only increase debt loads, which were already alarmingly high. If governments did not cut spending, countries would soon cross a deadly debt-to-GDP threshold, after which economic growth would be permanently impaired. The countries would also be beset by hyper-inflation, as bond investors suddenly freaked out and demanded higher interest rates. Once government spending was cut, this theory went, deficits would shrink and “confidence” would return.
This debate has not just been academic.
Those in favor of economic stimulus won a brief victory in the depths of the financial crisis, with countries like the U.S. implementing stimulus packages. But the so-called “Austerians” fought back. And in the past several years, government policies in Europe and the U.S. have been shaped by the belief that governments had to cut spending or risk collapsing under the weight of staggering debts.
Over the course of this debate, evidence has gradually piled up that, however well-intentioned they might be, the “Austerians” were wrong. Japan, for example, has continued to increase its debt-to-GDP ratio well beyond the supposed collapse threshold, and its interest rates have remained stubbornly low. More notably, in Europe, countries that embraced (or were forced to adopt) austerity, like the U.K. and Greece, have endured multiple recessions (and, in the case of Greece, a depression). Moreover, because smaller economies produced less tax revenue, the countries’ deficits also remained strikingly high.
So the empirical evidence increasingly favored the Nobel-prize winning Paul Krugman and the other economists and politicians arguing that governments could continue to spend aggressively until economic health was restored.
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