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Want to live in Europe? Money talks

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[May 13, 2014]  By Andrius Sytas and Aija Krutaine

VILNIUS/AMATCIEMS (Reuters) The dirt track that wends through a Lithuanian forest should, according to records, open onto a vibrant business hub with 99 firms under one roof.

The reality is a deserted grey, two-storey building daubed with graffiti and surrounded by rubbish; the only sound, that of birdsong.

"The first time I saw this building ... I was shocked," said Valentina Siliuk, an officer with Vilnius police, standing outside next to an abandoned rain-soaked sofa. "We've never been inside. It's always been locked when we've come here."

The building and several others are used by thousands of non-EU citizens as the registering address for businesses set up in the country of three million. With 10,000 litas ($4,000) in starting capital, investors get temporary residency in Lithuania and permission to travel across most of Europe.

It is an easier and safer way to move to the region than the journeys undertaken by poor immigrants risking their lives in the hands of ruthless people-traffickers.

Immigration is a hot topic in Europe as the continent recovers slowly from years of economic hardship. Fringe parties are likely to score strongly in elections to the EU parliament next week, many demanding borders be shut to new migrants or numbers strictly rationed.

Yet EU rules mean people are free to move from the poorer east to the richer west of the bloc and thousands from Africa and Asia continue to undertake perilous routes across the Mediterranean sea.
 


Much less focus is given to the rich.

The European Commission and the European Parliament are concerned that ways of buying residency, widespread across the 28-member bloc, open the door to organized crime and money laundering.

"Citizenship must not be up for sale," Vivienne Reding, vice-president of the European Commission, declared in a speech in January.

WIDESPREAD PRACTICE

The European Parliament adopted a resolution in January calling on member states not to do precisely that.

The trigger was a plan by Malta to sell citizenship for 650,000 euros to non-European applicants to ease the country's debts by attracting 30 million euros yearly into state coffers.

The proposal did not require applicants to live in the country or have any links to it. Citizenship papers would have been granted after just six months. The plan has now been rolled back after howls of protests from the EU.

But Malta is far from alone. Countries with schemes granting residency or citizenship in exchange for cash - a way of boosting state revenues and attracting foreign investment - include Britain, Cyprus, Greece, Austria, Bulgaria, Portugal, Spain, Hungary, Latvia and Lithuania.

"It is a very sensitive issue," said Yves Pascouau, a senior policy analyst specializing in migration at the European Policy Centre think tank in Brussels.

"Granting residency and nationality is a country's right, but the question is whether they should, given that these individuals get access to the rest of Europe," he told Reuters.

In the former Soviet republic of Lithuania, police say abuse is widespread.

"No less than half of business owners who get permits are fakes," Irena Dvilaitiene, head of foreigners' affairs at Vilnius police, told Reuters. "These people are mocking the state.

"We see airport registration data and it shows that some people only come here to pick up the residency permit, leave the same day and come back after a year to renew it."
 


Lithuania issued some 13,000 such permits in 2013, mostly to Belarussians, Russians and Ukrainians. That is up to three times the number before 2007 when it joined the Schengen Area of 26 EU nations that ended ID controls between their borders.

Dvilaitiene told the story of an Iraqi businessman who successfully applied for a permit. "At the Lithuanian embassy where he wanted to get the visa, he could not state the name of Lithuania, he was repeating 'Schengen, Schengen' instead."

Attempts to tighten the system have been fruitless so far, partly because of worries within government that a clampdown would hit genuine businessmen who want to invest in Lithuania.

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GOLDEN VISAS

Last year Hungary began issuing a special bond to non-EU citizens. In exchange for 250,000 euros, a buyer gets a residency permit. The debt agency has so far sold 565 such bonds. It plans to raise 400 million euros this year.

Another country is Portugal, where citizens of non-EU nations get a residency permit by making a real estate purchase of at least 500,000 euros, capital investment worth 1 million euros, or setting up a business that creates at least 10 jobs.

Nearly 800 "golden visas", as the special residence permits are known, have been issued since late 2012, attracting investment close to 500 million euros. The Chinese top the list with over 620 permits, followed by Russia, Brazil and Angola.
 

Some opposition politicians have suggested the scheme may open loopholes for criminals to enter the EU. The government insists its checks of the applicants meet all EU standards.

The tide may be turning in some countries. In Latvia, politicians have hardened the rules.

Until recently a non-EU citizen got a five-year residency in the Baltic nation of 2 million by buying a property worth 71,150 euros in the countryside or for over 140,000 euros in cities.

But last week parliament increased the threshold to 250,000. Most real estate is bought by foreigners, often Russians, a sensitive issue in a country where over a quarter of the population has Russian origins. The new rule is effective from September.

"It is important for us to regulate this situation so it would create less competition for ... Latvian residents," Dzintars Zakis, parliamentary leader of the ruling Unity party, told Reuters before the law was passed.

Others disagreed. "We want to have investments in the countryside because people leave for the cities and don't come back," said Andrejs Klementjevs of the Harmony party.

He has in mind people like Oksana Shapovalova, a 47-year-old Belarussian businesswoman who opened a spa hotel last year in the eco-village of Amatciems, some 80 km (50 miles) northeast of Latvia's capital, Riga.

She and her husband have invested 2 million euros and employ 30 people, most of them Latvians.

"As we want to live and work here, we need to have a residency permit," Shapovalova told Reuters before giving a tour of the hotel where guests can enjoy the Turkish sauna or an ayurvedic massage.



The couple still run a business in Minsk and travel back and forth. But they are thinking about moving permanently. "Latvia is very convenient because it is close to Belarus, there is no language barrier. When we come here, I feel very free."

Police officer Siliuk suspects the remote forest building, one of 20 such sites around Vilnius, served some shadowy state body in Soviet times. Lithuania has moved from communism to Western style democracy, but here at least, the aura of secrecy lingers.

(Additional reporting by David Mardiste in Tallinn, Sarah Morris in Madrid, Andrei Khalip in Lisbon, Gwladys Fouche in Oslo, Krisztina Than in Budapest, Writing by Gwladys Fouche. Editing by Alistair Scrutton/Mike Peacock)

[ 2014 Thomson Reuters. All rights reserved.]

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