“If the Baltics fall, the rest of the EU will follow!”. Based on the new edition of the FICIL Sentiment Index research, this stark warning has become a central message of the foreign investors, framing the Baltics, as Europe’s geopolitical bellwether. The Baltic States—Latvia, Estonia, and Lithuania—stand on the frontline of the EU’s eastern flank, facing both security and economic challenges in a rapidly shifting geopolitical landscape. Investors warn that Europe must not slumber through this wake-up call; the region’s stability and resilience are a bulwark for the whole Union, and a failure here would imperil EU unity in the face of external threats. Thus, the foreign investors call for a proactive support to the Baltics to keep this critical European frontier strong!
Since regaining independence in early 1990s, Estonia, Latvia, and Lithuania have been vocal about the threat that Russia poses, yet too few were willing to listen and to believe in it. Asseveral foreign investors pointed out, now the EU and national policymakers should “grow up quickly” to respond to the presented challenge, calling for a stronger, more competitive and collaborative Union. Given the EU complex and lengthy policymaking processes, many investors suggested for the Baltics to form other regional arrangements that would provide an additional support mechanism to the region.
While discussing concerns of the foreign investors, they emphasized that a heightened, even perceived, threat to the Baltics might undermine confidence of the investors and, like a tornado, trigger a sweeping and irreversible domino effect not only in the Baltics, but in the entire EU. Despite that the foreign investors believe in the resilience of the Baltics, they warn of the butterfly effect and call for bold actions by the EU and national policymakers.
Russia’s war against Ukraine has hit the Baltics in several ways, leading to the redirection of funding towards the defence needs and energy independence, changes in public and investor sentiment, which negatively affected economies of the countries. The current research revealed significant concerns about the Baltics’ key long-standing partner – the United States of America. As a result, the Baltics find themselves in a totally new geopolitical reality, which poses an important question – will Estonia, Latvia, and Lithuania be able to resist geopolitical pressures to safeguard Europe’s security and economic stability, and will the EU provide sufficient support for them to succeed?
In view of the disproportionately strong negative impact of the war in Ukraine on the Baltics and of the rapid geopolitical shifts that further increase their vulnerability, the foreign investors argue that additional support to the region is needed and absolutely justifiable. Throughout the years, the EU’s financial commitment to the Baltic States has been significant. To illustrate, between 2021 and 2027, Latvia might receive €4.6 billion, Estonia €3.5 billion, and Lithuania €6.4 billion through cohesion and recovery grants funds, designed to fuel progress toward climate goals, digital transformation, and inclusive growth. Additionally, the Recovery and Resilience Facility (RRF) adds further support—€1.97 billion for Latvia, €953 million for Estonia, and €2.2 billion for Lithuania—aiming to catalyze recovery and long-term economic sustainability. However, other, targeted support to the Baltics has not been envisioned by the EU until now.
The challenges in absorption of available EU funds are present across the three Baltic States, diminishing the potential utilisation of these resources. The EU red tape represents a key obstacle for unlocking available opportunities and direct funding to areas where it is critical. Valdis Dombrovskis, the European Commissioner for Economy and Productivity; Implementation and Simplification, is making important steps towards elimination of overlaps and contradictions in the EU rules and procedures, stating: “Security is the bedrock of stability and prosperity. The European Commission is working with the Baltic States to bolster defensive capabilities on our eastern border and unlock the region’s economic potential. Sustained investment is also essential. With the almost €7 billion in financing made available by the Recovery and Resilience Facility, an increasingly important role for cohesion funding in the years ahead, and by harnessing private investment through the Savings and Investment Union strategy, we are working to build a strong foundation for a secure and prosperous future in the Baltic States.”
Besides the EU-level challenges that prevent access to the EU funding, each Baltic State has additional bureaucratic hurdles that slow growth and development. In Latvia, outdated state-aid laws are acting as a bottleneck, obstructing access to critical EU investment support that could fuel its economic recovery. Estonia, despite its ambitious renewable energy goals, is grappling with permitting challenges that hinder progress toward its climate targets. Lithuania, on the other hand, is contending with a complex mix of legal disputes and governance issues that have delayed the absorption of Recovery and Resilience Facility (RRF) funds. Notably, a legal case over tax reforms led to a permanent loss of €8.7 million in funding—money that could have been pivotal in advancing the nation’s recovery.
These challenges underscore the need for the EU to adopt a more simplified and flexible EU funding procedures, including a “single rulebook” that could cut through the red tape and help projects roll out faster without compromising accountability. In addition, the EU could consider front-loading funds for strategic projects in the Baltics – in other words, delivering support more quickly rather than spreading it thinly over many years. Lastly, targeted technical assistance and sharing of best practices from other EU countries could help the Baltics build the capacity and expertise needed to better utilise available funding. The Baltics, in turn, should review their regulatory/institutional frameworks and build capacity for accessing critical financial resources.
The foreign investors argue that bureaucratic hurdles should not become a barrier in times of extraordinary pressures, when urgency is vital. The consequences of delays or inaction could be far-reaching, not only undermining the Baltics’ economic potential, but also jeopardizing the EU’s collective security and cohesion. Europe must awaken to the Baltic reality, but not with panic or grandiose statements, rather with practical solidarity. If Europe strengthens its northeastern flank – economically, infrastructurally, and militarily – the EU as a whole becomes stronger and more secure. The warning that “if the Baltics fall, the rest will follow” need not be a prophecy. With timely reforms and united effort, Europe can demonstrate that its frontier will not falter, and that the Union will not only stand with the Baltics, but stand because of them.
Additional sources:
1. Eitvydas Bajarūnas, “The Baltics Adapt to Trump,” CEPA – Europe’s Edge (May 2025)
2. FICIL (Foreign Investors’ Council in Latvia) Press Release, “Baltic foreign investor councils… join forces to strengthen the regional investment climate,” ficil.lv (April 8, 2025)
3. European Commission Daily News – Brussels, 22 Dec 2023: “Commission receives payment requests… Recovery and Resilience Facility” (via Cyprus News Agency)
4. European Commission Press Release, “Positive assessment of Estonia’s payment request under RRF,” (Jan 30, 2025) (via European Sting)
5. European Commission Press Release, “Commission endorses Lithuania’s €2.2 billion recovery plan,” (July 2, 2021)
6. Baltic News Network, “Foreign investors give Latvia’s investment climate the lowest score,” (Nov 28, 2023)
7. LRT (Lithuanian National Radio and Television), “Baltic states denied EU funding for ‘drone wall’ to protect border,” (Apr 7, 2025)
8. The Baltic Times / BNS, “State funds will be used… after Lithuania fails to get EU funding [for] ‘drone wall’,” (Apr 7, 2025)
9. LRT News, “EU recovery funds frozen due to unambitious Lithuanian tax reform – minister,” (July 9, 2024)