By Kieran Cooke In Chisinau, Moldova

Mr Balmus: "There are very few entrepreneurs in Moldova."

On the fourth floor of a crumbling 1950s Soviet style factory on the outskirts of Moldova's capital Chisinau, Gheorghe Balmus is struggling to build up his textiles business.

Moldova has the unhappy distinction of being Europe's poorest country, with per capita incomes of its 4.3m people less than $500 per year.

"There are very few entrepreneurs in Moldova," says Mr Balmus.

"There are great risks in investing in an economy which is so underdeveloped and full of regulations. It's a constant battle. No one supports us."

Leaving the country

In the decade following its independence from the old Soviet Union in 1991, Moldova - squeezed like a piece of salami between Romania to the west and Ukraine to the east - suffered serious economic collapse.

The textile firm is a family business

The old Soviet market for the country's wine and agricultural products contracted.

And the country lost territory which held most of its heavy industry following civil war and the declaration of the self styled Trans-Dniester republic by pro-Soviet dissidents in the east of the country in the early 1990s.

Various economic restructuring schemes failed.

Between 1991 and 2000, Moldova's economic output halved. Up to 700,000 people, mainly the young, have left the country in search of jobs. Most work illegally in EU countries.

Taxes and bureaucracy

Mr Balmus started his business, making pillows and bedspreads popular as wedding presents in Moldova, two years ago.

The proliferation of money exchanges shows the importance of cash from abroad

"I saw a niche in the market and used some small family savings we had to rent premises and buy materials," he says.

"The banks are supposed to help people like me but they have an old Soviet mentality and put up obstacles to business all along the way."

Wool or silicone to fill the pillows and bedspreads is imported from the west, mainly from Romania.

"I have to pay all sorts of import and sales taxes and there is still a lot of corruption," says Mr Balmus.

Last year he says his enterprise made $20,000 (�11,225)profit, nearly 40% of which had to be paid to the government in the form of various company taxes.

Large debts

In some respects, Moldova's economy has improved in recent years.

Mr Balmus: "It is important for people like my daughters to believe you can succeed in Moldova."

The streets of Chisinau are full of new cars and shops. The economy has experienced growth of more than 5% per year during the last three years. The leu, the Moldovan currency, is stable.

Yet serious underlying problems persist.

According to the World Bank, poverty levels are still higher than before independence in 1991.

There is a wide and growing disparity between incomes in Chisinau and rural areas. Moldova is one of eastern Europe's most heavily indebted countries when its liabilities are measured in debt per citizen.

Remittances

Moldova imports more than 90% of its power from the east, particularly from power plants in Trans-Dniester.

The old are left behind as the young go abroad to find work

Recently tension has increased between Moldova and the breakaway region. If this was to erupt into open conflict, Moldova could be crippled by power shortages.

Every street corner in Chisinau, and even the smallest villages, have money changers, evidence of the vast amount of money that is being sent back from workers who have gone abroad.

"Remittances can help an economy but they have to be used wisely," says a western economist with long experience of working in Moldova.

"Last year alone, funds coming from abroad are estimated to have amounted to more than $400m."

"Yet, for the most part, this money has not been invested in long term projects but more in items of conspicuous consumption, like cars and new housing.

"Meanwhile, Moldova continues to lose its young and talented people, the very people who are vital for the country's growth and economic future."

Believe in the future

Mr Balmus, 52, was once a marathon runner on Moldova's national team. His wife and two daughters all work in the company.

"Despite all the obstacles to doing business, I'm determined to carry on," says Mr Balmus.