Financial Strategy Experimentation in the Baltic States: Leveraging Policy Legacies and EU Constraints

Abstract The literature depicts the economies of the small Baltic states as extreme cases of post‐socialist financialisation within the European Union (EU), where domestic policy space has been constrained by dominant Western banks and the EU's macroeconomic straitjacket. We show that post‐Global Financial Crisis developments challenge the notion of hollowed‐out domestic agency under external constraints, as small and peripheral ‘rule‐taking’ states can carve out new specialist niches, tweaking established growth legacies and creatively leveraging external constraints. Based on structured and focused case studies, the article maps three country‐specific financial adjustment strategies, (i) attraction of non‐resident flows in Latvia, (ii) crypto and broader fintech development in Estonia and Lithuania and (iii) taxation of foreign banks' windfall profits in Lithuania, and argues that they are shaped by past legacies as well as creative uses of EU macroeconomic conditionalities. We show that financial and geopolitical crises have exposed the limitations of the established model of foreign banks, whilst opening space for policy experimentation.