Baltic sea top brass meets for a chat during troubled times.

The Baltic Development Forum is an annual talking shop for leaders from the Baltic Sea region.

The economic crisis gave this year's event additional gravitas, as Philip Birzulis reports.

Earlier this year, thousands of Latvians signed a petition calling on Sweden to occupy their country to rescue it from economic turmoil. While most would say this is going a bit far, Baltic Sea Region heavyweights met recently in Stockholm to talk about getting closer to each other.

Billed as an attempt to "boost the top of Europe," politicians, entrepreneurs, academics and environmentalists used the gathering to discuss solutions for the worst economic crisis in decades. And with one speaker quipping that "a crisis is a terrible thing to waste," they tried to see the bright side of the situation.

"The Baltic Sea Region has seen a remarkable transition over the last 20 years," said Swedish Prime Minister Fredrik Reinfeldt. "After decades of separating us, this body of water now unites us."

Unsurprisingly, he proposes more of the same. Trade barriers must be removed to create a common home market for the region. Plans for Baltic energy interconnectors should be advanced to improve energy security and ecological sustainability. As the current holders of the rotating EU presidency, the Swedes plan to push for a Baltic Sea Region Strategy at the European level to coordinate it all.

According to Finnish Prime Minister Matti Vanhanen, the challenge of the crisis is to balance fiscal consolidation and preserve the social safety net without killing the drivers of economic growth. Beyond that, the region's renewable resources, high-tech industries and small, flexible countries have enormous potential. He believes the 11 countries around the Baltic should develop a tight network between their numerous medium sized cities, rather than looking for a highly centralized model.

The conference coincided with the Irish "yes" vote on the Lisbon treaty, highlighting the fact that recessions are not the times when countries want to go it alone anywhere on the continent. However, there are also serious questions about the limits of integration for states at different levels of development. Back in 2006, the EU rejected Lithuania's bid to join the euro zone because its inflation rate was a fraction of a percent higher than the stipulated entry level. Lithuanian officials reflected ruefully on how they would be in better shape in the current crisis had the decision gone the other way. They also questioned the fairness of applying such strict criteria to potential new members when France and Germany go unpunished for running deficits which seriously breach the Maastricht criteria.

Conversely, others think that too much integration can also be harmful.

Latvian Prime Minister Valdis Dombrovskis described the vicious circle encountered by the Baltics since joining the EU in 2004. Ireland, Sweden and the UK immediately opened their doors to labor from the new member states, luring many workers abroad and causing labor shortages and wage inflation back home. During the current crisis, wages in Latvia have fallen by up to 40 percent, and as Western Europe recovers more quickly, another wave of departures may trigger the same cycle.

The answer would seem to lie in more innovation and adding value to exports. However, locked in tough negotiations with international lenders pushing for even harsher budget cuts, Latvia faces more immediate difficulties and is clearly the weakest of the Baltic trio. Much of the Latvian press coverage of the BDF focused on a public spat between Dombrovskis and Swedish Finance Minister Anders Borg, who has urged the Latvians to get tough on their budget deficit. A bumbling interview given to a foreign TV network by Latvian Economy Minister Artis Kampars also got cringe-worthy airtime. Kampars certainly needs to improve his English, and Dombrovskis could also use some elocution lessons. But besides presentation, they also need to focus on content by formulating a clear vision. And parties in the ruling coalition must stop rocking the boat for short-term political gain.

The Latvians can learn a lot from their southern neighbors. Lithuanian Prime Minister Andrius Kublius and Foreign Minister Vygaudas Usackas come across as confident leaders, and more importantly they have a bold yet realistic vision of where they want their country to go. Tying together the rich Nordic countries, an integrated Baltic market and the huge territories to the east, Lithuania aims to become the services hub of the Baltic Sea region, said Kublius. The UK's Barclays Bank recently announced it will open an IT center in Lithuania employing 250 people. Kublius said that the need to close the Ignalina nuclear power plant had opened the door to a wider common energy market.

"We don't need to persuade our people about integration, we need to persuade our institutions," he said. "It is better to speak about a market of 8 million Baltic consumers than a market of 3 million Lithuanians."

Estonia was less prominently represented at the conference. However, Juhan Parts, Estonian Minister for Economic Affairs and Communication, expressed confidence that with the lowest level of public debt in the EU and a deficit within the Maastricht criteria limits, his country is on track for adopting the euro in 2011. And he put present problems into historical perspective with the conference's best one liner.

"The Soviet Union lasted for 50 years--now that was a real economic crisis!"

The Baltic Times thanks the Baltic Development Forum for sponsoring our reporter's attendance at the event.