Europeanisation as a driver of dependent financialisation in East-Central Europe: insights from the Baltic states

The aim of this paper is to contribute to advancing the academic debate on dependent financialisation through a focus on East-Central Europe. In doing so, the paper identifies the role of Europeanisation as a driver of dependent financialisation using the Baltic States of Estonia, Latvia and Lithuania as case studies. The paper makes two main contributions to the literature on dependent financialisation. First, it argues that, through the establishment of ‘financial chains’, dependent financialisation creates asymmetric co-dependencies and bilateral risks between the ‘dependent’ economies in the (semi-)periphery and the financial actors in core countries. While the (semi-)peripheral economies become dependent on capital flows from the core countries, the profits of financial actors in the core become increasingly dependent on their operations in the (semi-)periphery. In turn, the growing instability created by the process of dependent financialisation in the (semi-)periphery creates a source of risk for financial actors in core countries, which can spread to the rest of the economy. Second, the paper suggests that dependent financialisation is a dynamic phenomenon that displays strong pro-cyclical features. Thus, the cycles of expansion and retreat of dependent financialisation in (semi-)peripheral countries are linked to their economic performance, as well as to the conditions in international financial markets.