IN RECENT years one of the most divisive issues in economics has been whether or not you see the Baltics as a success. When the financial crisis hit they decided to pursue what the IMF called "unprecedented fiscal and nominal-wage adjustment", in an attempt to preserve their currency pegs with the euro. A long debate has ensued as to whether the Baltics were right to do what they did, and whether countries like Greece, Portugal and Spain have anything to learn from them. Cue reams of graphs about output gaps, exchange-rate competitiveness and nominal-wage rigidity. I have been in Lithuania reporting on another story. Happily, Lithuania's economic and financial elite are now willing to talk about what they did during the crisis. The arguments they put forward are fairly convincing. The first concerns naked economics. When the crisis hit all the Baltics were "euroised", i.e. banking-system liabilities were heavily denominated in euros. The IMF has data on the proportion of private-sector loans denominated in foreign currency. The figures for Estonia, Latvia and Lithuania in 2010 were 90%, 90% and 80% respectively (i.e., high).

Some economists say that the Baltics should have let their currencies devalue. Economists in Vilnius counter that had they allowed the currency to devalue, a banking-system crisis would have ensued (because the cost in litas of serving euro debt would have jumped). As it was, two big banks failed. Being a small, open economy, they also fretted about the ensuing high inflation (which would have quickly eroded any competitiveness gains, they say). At the height of the crisis the Lithuanian central bank considered explaining all this in a document; but it was never published for fear that it would be interpreted as paving the way for a devaluation.

The second argument is not really about economics, and is the more powerful one. As they see it, the question is not whether austerity "works" or "doesn't work". Rather, it is question of being an active member of Europe.

People in the Baltic states are generally very keen to get away from Russian influence and join the West. Joining the euro is a big part of that. Allowing their currencies to float, though, would have thrown their economies off course (for instance, inflation would have jumped), meaning that they would not have been allowed to join the euro. (Lithuania, painfully, was rejected from euro membership in 2006 because inflation was 0.1% too high.) So yes, wonks in Vilnius say, devaluation might, maybe, have helped a bit; but then we would not have been able to join the euro (Estonia joined in 2011; Latvia in 2014 and Lithuania last year). The Lithuanian argument is endorsed wholly in the other two countries.

The point of this piece is not to argue in favour of austerity. Instead it is an argument in favour of viewing the Baltics in the proper political context; by that reading, during the crisis they might have been right to do what they did.

By the way, this all links in to the Brexit debate, which plenty of people in Vilnius have asked me about. Lithuanians simply cannot fathom why Britain would vote to leave the EU, which they see as a force for real good. People in Lithuania have made big sacrifices to be part of the West; they see Britain as willingly deciding to give away such privileges.