If you think the economic news is grim in the US, the UK or Germany, spare a thought for the small Baltic states of Estonia, Latvia and Lithuania. All face the prospect that their gross domestic product will collapse this year by 10 to 12 per cent. Moreover, all operate a so-called currency board regime, or peg, which restricts the movement of their currencies against the euro and prevents them from stimulating economic recovery by means of exchange rate depreciation.

One answer, as the International Monetary Fund pointed out a few weeks ago, would be for the European Union to relax its rules and let the Baltic states swap their currencies for the euro without formally joining the eurozone. This would in principle ease their foreign debt problems and restore confidence among foreign investors. The alternative - severe government austerity programmes, followed by a sharp drop in living standards, social unrest and political instability - seems far too harsh and risky a solution.

But the EU’s authorities, especially the European Central Bank, are dead against unilateral adoption of the euro by any EU member-state. One can see why. If the experiment went wrong, there would be a danger of contagion spreading to the 16-nation eurozone itself. The guardians of European monetary union, a project only 10 years old and one that is central to the notion of ever closer European integration, are simply not prepared to take the risk.

Across central and eastern Europe, however, the voices speaking up in favour of a rapid, unorthodox switch to the euro are getting louder. Today it’s the turn of Ludek Niedermayer, a former deputy governor of the Czech central bank, who writes: “Unilateral adoption of the euro would be extraordinary. But so too is the economic crisis. Tolerating such a move would not reduce, but rather boost, the EU’s credibility.”

What almost no one has bothered to mention so far in this debate is that two places in central and eastern Europe already use the euro without being formal eurozone or even EU members. They are Montenegro and Kosovo, which unilaterally adopted the euro on January 1, 2002, at the same time as France, Germany and other founder-members of the eurozone. This has given Montenegro and Kosovo some protection against the whirlwinds whipped up by the world economic crisis.

Amazingly, though, Montenegro’s authorities - or, at least, the chief economist at its central bank - do not recommend unilateral adoption of the euro by the Baltic states and others. Such a step would risk incurring the wrath of EU policymakers and even the denial of various EU funds and grants, the Montenegrins caution.

To summarise: a country that is outside the EU and outside the eurozone, but uses the euro, is telling countries that are inside the EU but outside the eurozone not to use the euro, while the EU and eurozone let countries that are outside themselves use the euro but won’t extend the privilege to countries inside the EU but outside the eurozone.

There are the makings of a good farce in this - if we weren’t all losing our money.

At long last, the message is getting across that, as far as the financial crisis is concerned, it makes no sense to view the ex-communist countries of central and eastern Europe as one homogenous bloc. European Union policymakers, both in Brussels and at national level, have been trying to make this point for some months. Only now, perhaps, is it really sinking home.

For example, a report by Moody’s credit ratings agency on Tuesday drew a clear distinction between various countries in the region. Some, such as Hungary, rashly allowed a huge expansion in credit in recent years, much in the form of foreign currency-denominated mortgage loans. Others, such as the Czech Republic, did not. The first group is more vulnerable, even if much will ultimately depend on the willingness of western European banks to continue supplying funds to the regional banks they own.

The erroneous idea that you can lump everyone in central and eastern Europe together in one pile comes, of course, from the communist era. But anyone familiar with the region in those times will tell you that even in the 1970s and 1980s there were big differences.

Poland, with its powerful Roman Catholic church and private agriculture, was nothing like Romania, with its megalomaniac dictator Nicolae Ceausescu and its discontented ethnic Hungarian minority. The three Baltic states, which were part of the Soviet Union and enjoyed not a shred of independence, were in still another category.

All the more disappointing, then, were the remarks of Hungarian Prime Minister Ferenc Gyurcsany at the March 1 informal summit of EU leaders in Brussels. Referring to what he saw as a lack of western European solidarity with the EU’s new member-states, he said: ”We should not allow a new Iron Curtain to divide Europe into two parts.”

This irresponsible soundbite went down nicely with many media organisations covering the summit. It simplified a difficult story into “selfish west” and “dumped-on east”. “Everyone at home will understand that,” you could hear them sighing with relief.

Gyurcsany picked his words for this very reason. He wanted to stir up criticism of the EU’s actions so far, and to generate support for his idea of an across-the-board rescue plan for central and eastern Europe.

In one sense, he succeeded. The phrase “new Iron Curtain” appeared on many of the next day’s front pages. But not in the Financial Times, because the FT understood that the real story was how the Czechs, Poles and others - including German chancellor Angela Merkel - had refused to take Gyurcsany’s bait and box the whole of central and eastern Europe into one group.

In another sense, Gyurcsany failed, because all he achieved was to confuse understanding of the true state of affairs in the region.

That is the problem with soundbites - you get a headline, but you mislead the world.

Jaap de Hoop Scheffer, Nato’s secretary-general, has just told a news conference that the alliance’s foreign ministers have agreed to resume high-level ministerial contacts with Russia. He made no mention of Lithuania’s objections, and no reporter managed to raise the matter in a question. 
 
But there was perhaps just a hint that US Secretary of State Hillary Clinton and her colleagues paid some attention to what the Lithuanians were saying. Because what the foreign ministers have agreed is that high-level contacts with Russia should restart “as soon as possible” after a Nato summit in early April in Strasbourg and Kehl, Germany.
 
That indeterminate timeframe could be interpreted as a concession to Lithuania’s demand that Nato leaders should discuss the issue at greater length before resuming the contacts with Russia.
 
Maybe we’ll know more when Clinton holds her own news conference in a couple of hours.
 
In the meantime, everyone is beavering away here in the press area at Nato headquarters under a big red sign that says: “No classified discussion in this area.” And when I say everyone, I don’t just mean “interested pencils”.

US Secretary of State Hillary Clinton’s inaugural working visit to Europe has run into its first setback. At Nato’s headquarters outside central Brussels, she and other alliance foreign ministers have been discussing how to start a new era in relations with Russia. Last night, according to US officials, it seemed a sure bet that everyone would agree to restore high-level ministerial contacts with Moscow - they were suspended after last August’s Russian-Georgian war.
 
But this afternoon it has become clear that Lithuania is raising objections. The Lithuanians want the issue to be debated at greater length at a summit of the 26 Nato countries’ leaders in Strasbourg and Kehl, Germany, on April 3-4. Other countries are impatient to get the process started sooner rather than later. 
 
The problem is that Nato works by consensus, rather than by majority voting. So at the moment the Lithuanians can block everything if they choose. Some will remember that they did something similar inside the European Union not long ago, resisting the appeals of other EU states to open talks on a long-term partnership agreement with Russia.
 
How this is sorted out will be the first serious test of Clinton’s diplomatic skills.

It was the late, great Frank Zappa who said you’re not a real country unless you have a beer and an airline.

Well, Lithuania certainly has the first - a rich, golden brew known as Svyturys. But since January 23, when the main national carrier, flyLAL, declared bankruptcy, it hasn’t had the second. The result, as I discovered last week, is that it is harder to travel to Lithuania than any of the European Union’s other 26 member-states.

To get to Lithuania, I flew with Finnair from Brussels to Helsinki and then on to Vilnius. Door to door, the journey took up an entire working day. On the way back, I flew with Czech Airlines from Vilnius to Prague and then back to Brussels. That was okay, except that my flight from Vilnius left at a ghost-eyed 05:55.

It seems strange, to put it mildly, that you cannot fly direct between the capital of an EU member-state and Brussels, where the bloc’s main institutions - the European Commission, the Council of Ministers and the European Parliament - are based. What message does that send to the rest of the world about EU integration, EU efficiency and EU solidarity at a time of crisis?

Meanwhile, in case you didn’t know, the EU has named Vilnius as this year’s European Capital of Culture. Nice idea - but not much use if you can’t get there, eh?

Buried in last Wednesday’s €200bn European Commission economic recovery plan for Europe was a proposal that sent waves of relief through Lithuanian policymaking circles. This was the idea of allocating €5bn for trans-European energy connections.

A large chunk of this money is destined for Lithuania, the aim being to reduce the dangers that face the country after the planned closure of its Ignalina nuclear power plant on December 31, 2009. Ignalina supplies 70 per cent of Lithuania’s electricity, and when the plant is shut down Lithuania will be almost entirely dependent on Russia for its energy.

For sure, Russia has no obvious interest in starving Lithuania of electricity. The lines that send Russian electricity to Lithuania also send it through Lithuania to Kaliningrad, the Russian territory to the west. Still, given it’s only 17 years since Lithuania gained independence from the Soviet Union, and given the icy relations between Russia and its tiny neighbour, any form of dependence is understandably an unnerving prospect from a Lithuanian point of view.

As officials in Vilnius point out, Lithuania relies for gas on a single Russian pipeline that passes through Belarus. As for oil, the Russians closed down the ironically named Druzhba (”Friendship”) pipeline in 2006 for repair work that mysteriously never seems to get finished.

Once Ignalina is closed, “the probability of disaster is not very high, but it is probable that there will be serious problems”, says Aleksandras Abisala, the government’s special representative on energy security.

The Lithuanians have been hammering away at their European Union colleagues on this subject for so long that, according to those in the know, French President Nicolas Sarkozy finally decided to raise the matter with Russian President Dmitry Medvedev at the recent EU-Russia summit in Nice. The response was very revealing of the present peppery mood in the Kremlin.

On the question of reopening the Druzhba pipeline, Medvedev committed himself to absolutely nothing. On the question of promising to maintain electricity deliveries to Lithuania from January 2010 onwards, Medvedev in effect said: “Nicolas, why are you talking to me about this? If the Lithuanians think they have a problem and want to talk about it, tell them to come and see me.”

In other words, Sarkozy’s efforts to speak up for Lithuania and give Medvedev a demonstration of what EU solidarity means in practice hit a big brick wall.

Lithuania had better receive some of that €5bn in EU funds quickly, or it will be a bitingly cold winter in 2010.