Estonian Finance Minister Jürgen Ligi is exemplary of the Estonian political class: a Reform Party loyalist, Ligi formerly served as minister of defense and easily glided into the finance minister's seat when Reform and IRL booted SDE out of the coalition last year.Ligi is of interest this week for an interview with journalist Justin Vela in Business Week. In the piece, you can see how Estonia is trying to spin its highly probably 2011 Eurozone entry in a regional context:
"When asked why Estonia attracted more investment during the 1990s than the other Baltic countries, the unabashedly pro-Western Ligi responded, "We spoke better English. In Latvia they spoke better Russian, and in Lithuania more Polish and Russian."
The minister said the Baltic countries differ more than usually portrayed. Estonia, he said, is influenced more culturally and economically by Finland and Sweden, its main trading partners. Latvia is mostly influenced by Russia, and Lithuania by Poland. Nordic telecommunications and electronics companies and banks have invested heavily in Estonia since the fall of the Soviet Union.
Ligi said it is Estonia's orientation toward the wealthy and well-run Nordic economies and the investment and business they offer that allowed Estonia to develop more quickly than the country's southern neighbors and to recover from the financial crisis faster."
Ligi also weighs in on Estonia's recent economic crisis:
"For me the emotional moment when I realized the severity of the crisis came in 2007," Finance Minister Jurgen Ligi said in a recent interview. "We were too optimistic. In society and in government."
There are other interesting opinions in the piece. A recommended read.
83 kommentaari:
nothing new from the Estonian political class in so far. "addicted to Neoliberalism" as the Estonian economist Kattel described it once. they are not able to repeat anything else than phrases and word bubbles. its a quasi religious belief in an ideology ignoring all economic facts and all the damage this ideology has caused yet worldwide. by the way: Kattel is one of the few Estonian economists daring to have a look beyond pure fiscal discipline. In a recent article on his blog he was comparing the situation in Greece with that one in Estonia, predicting Estonia in the long run much harder economic problems than Greece. the post can be found here:
http://avalikhaldus.blogspot.com/2010/04/should-greece-follow-estonias-example.html
what damage idelologic based fiscal discipline can cause Europe has already seen once in the 1930s. There are not few economists in Europe seeing the same fatal errors arising again. Even if no one wants to listen to it in Estonia: this will end up in an economic ans social catastrophe for the country.
The big spending, massive public sector Western-European countries will end up in a social catastrophe.
Unless war happens, Estonia will be fine.
@ McMad:
Maybe Western European countries could start to decrease public spending by cutting contributions to EU-structural funds for the post-communist countries (for Estonia an estimated 9% of GDP in 2010)? It's a lot easier to have low taxes when the Estonian budget is supplemented with tax money paid by Western Europeans.
Net transfers:
http://www.econoshock.be/wp-content/uploads/2010/05/Schermafbeelding-2010-05-23-om-22.24.14.png
Net transfers per capita:
http://www.econoshock.be/wp-content/uploads/2010/05/Schermafbeelding-2010-05-23-om-22.23.58.png
@McMad: this is exactly this kind of arrogance I mean. like the Estonian political class, behaving like a child, not listening to facts or arguments. what Temesta says about the subsidies Estonia is receiving is entirely correct, more information on this issue can be found here as well:
http://avalikhaldus.blogspot.com/2010/03/addicted-to-neoliberalism.html
quote: "Baltic policy makers have become addicted to neoliberalism. ... he addiction is paid for by the current European taxpayers (substituting Baltic domestic public and private spending through EU’s structural funding) and the future Baltic taxpayers as key industrial, labor market and other policy reforms are postponed while unemployment grows and wages fall."
@Temesta
That would be absolutely fine with me, but i think a rather more effective savings could be made, in the Netherlands in this case, to stop spending 7 billion Euros per year on non-western immigrants: http://www.elsevier.nl/web/Nieuws/Politiek/266116/Massaimmigratie-kost-Nederland-7-miljard-euro-per-jaar.htm?rss=true
@McMad: no some kind of Estonian style xenophobia against immigrants? people like you are really confirming the negative picture people in the west have won about the still low quality of democratic political culture in Eastern Europe in general and (like you are confirming with your own xenophobic words) obviously in Estonia as well. be glad that you are not living in my country, spreading hate against minorities as you are doing it is punished quite tough by the law in Western Europe.
@moevenort
"spreading hate against minorities as you are doing it is punished quite tough by the law in Western Europe."
Wow, such a democratic statement.
Study based on hard facts and published by one of the most reputable Dutch publication is "hatred", nice.
Just to let you know, with 21 years behind me as a Dutchman, i am very much a product of the West.
@McMad: than you probably know that the laws against spreading racism in Germany are quite strict (fortunately) Unfortunately I know that some not so nice racist political parties have spread around in the Netherlands the last years. and obviously there are also some people like you in the Netherlands who seem to like that kind of racist stuff. Fortunately the majoritie of the people in the Netherlands is still still thinking much more tolerant and democratic than racist like you.
@moevenort
and you, my boy, have shown your true socialist face, more than happy to silence everyone who doesnt share your ideological views by "punishing them by law", as you so nicely put it yourself.
Stalin would be proud.
@McMad:
"That would be absolutely fine with me, but i think a rather more effective savings could be made, in the Netherlands in this case, to stop spending 7 billion Euros per year on non-western immigrants: http://www.elsevier.nl/web/Nieuws/Politiek/266116/Massaimmigratie-kost-Nederland-7-miljard-euro-per-jaar.htm?rss=true"
On this one I partly agree with you. I have no problem with immigrants, also not with most non-European immigrants, but I think it is a problem when a significant part of immigrants are living on welfare money, without ever having contributed to the system.
@McMad: socialist face? aha - because I have something against racism? So in your eyes the German state is socialist as well when he punishes spreading racism by law? would be interesting to know where else you see socialist ghosts *lol*
What else you call someone who immediately pulls out the "racist" card.
Just to let you know, this study shows that non-western immigration costs Dutch tax-payer 7 billion Euros a year. This is based on a factual study, the data is available for scrutiny.
Facts, my boy, are not racist.
But as far as you are concerned, people even considering researching such statistics should be punished.
You Germans always had difficulties understanding what democracy and freedom really mean ;)
@McMad: you have really nice attitudes, boy. first spreading some racism against immigrants. than spreading some new prejudices against my country. I have news for you boy: we have understood democracy better than people like you might think. because fortunately this country has learned from the past. and with your crude opinions: its a pattern, of course always take away the little the weakest ones in society have- like from immigrants. it´s so easy as they have no lobby who defends them. have you ever thought in your racist fog that i could might be a better idea to take something from those ones who have caused the crisis? e.g. from the bankers with a tax on stock market transactions? but I guess that is probably too high for you as you like it more to beat on the weak ones who cannot defend.
It's kind of hard to figure out where the political spin ends and reality begins in Estonia. This euro adoption process has been a real challenge for the country, but seen as necessary to lift the country out of its very deep slump. People tend not to ask how Estonia got into the slump to begin with, though. Ligi was in the government in 2005-2007, though not in his current position.
@moevenort
To TAKE from someone??
Very sad you do not realize how much you sound like your forefathers 70 years ago.
@ McMad:
Deregulated economies with a small government are also not immune for disaster:
Ireland, having a small public sector with taxes accounting for 34% of GDP (Estonia: 31%, Sweden: 49.7%) (http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP), is the country that, after Greece, has the most problems with sustainability of its public debt (http://www.pwc.com/gx/en/press-room/2010/public-debt-sustainability-hawksworth.jhtml)
The Economist predicts that the budget deficit of Ireland in 2010 will be 19.4% of GDP (Sweden: 2.1%) (http://www.economist.com/markets/indicators/displaystory.cfm?story_id=16274565, subscribers only).
Iceland like Ireland is also well known for its low taxation rate and deregulated economy, and has builded up a very big public debt in two years. (https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html).
The difference with Estonia is that these countries had large domestic banks that had to be saved (exploding real estate bubble in Ireland, recklessness in Iceland), otherwise their economies would have totally collapsed (Imagine what would happen if the scandinavian banks would stop all their activities in Estonia).
@Giustino: it´s not so hard to see: basically it is a conflict between two economic approaches: the neoliberal one (who was hugely dominant the last two decades, especially in the Baltics) and the Keynsianist, that is saying that neoliberalism has brought us the crisis and will ruin us more and lead to a economic catastrophe like in the 1930s if we continue like this. while most countries worldwide ( including US and finance minister Geitner) slowly begin to distance from neoliberalism, some countries ( especially the Baltics, in particular Estonia) still seem to be addicted to the old paradigma as they have never learned something else. that`s basically what Kattel describes.
@McMad: please try to use some arguments instead of beating around with childish accusations,ok ? or is the topic mentally too high for you?
@ Giustino:
"It's kind of hard to figure out where the political spin ends and reality begins in Estonia. This euro adoption process has been a real challenge for the country, but seen as necessary to lift the country out of its very deep slump. People tend not to ask how Estonia got into the slump to begin with, though. Ligi was in the government in 2005-2007, though not in his current position."
According to 'the architect of Estonia's currency', having the Euro or not doesn't make such a big difference:
http://www.balticbusinessnews.com/article/2010/06/04/Estonia_s_currency_architect_sees_no_need_to_rush_euro_adoption
I think that with the adoption of the Euro, Ansip and his friends want to divert attention from their past failures. Most people don't have a clue about how an economy actually works, so they value the adoption of the euro for more than it is worth. In 2007 Ansip was in no rush to have the euro and suddenly it's a matter of life and death, that's not credible.
@Temesta
Im sure there is nothing that can actually safeguard against global financial disasters, except near-total economic isolation, which would provide a stable poverty.
Not the kind of stability i would enjoy.
@moevenort
..and the arguments in your previous post are?
@ McMad:
In the countries I mentioned global problems aggravated domestic circumstances that were already not quite healthy.
The only point I wanted to make was that the kind of economies that you (and I partly) prefer also can get caught up in unhealthy situations.
Mr.Moevenort, how did you find yourself in this hideous little country of ours in the first place? And if you got out of here alive, why do you spend your valuable time hanging around Estonian themed blogs? You remind me of some Estonians who have moved abroad but still are attached to their past enough to post comments how everything is but shit and piss in their former fatherland.
"The only three eastern European economies with currency boards would do better to focus on improving competitiveness than joining the euro, said Hanke, a professor at Johns Hopkins University and a senior fellow at the Cato Institute in Washington,"
@bunsen_lamp? and your point is? using swear words and accusations? or do you have some valuable facts to tell about the topic of the post? politeness and using arguments do not seem to be your strenght, isn`t it?
Racism is natural.
It is merely an expression of alienation. Alienation in its entirety is the very basis of the Universe.
Human relations, as part of the Universe, are dependent on ever expanding matter. The constant theme is increasing alienation.
Entrophy.
Since the Big Bang the Universe has been expanding and the distances between subparticles continue to increase until there is no more matter.
We can try to fight entrophy, but ultimately everything will succumb to it.
Blame the Big Bang for me being a racist.
It is THAT fundamental.
I am truly sorry.
In 2007 Ansip was in no rush to have the euro and suddenly it's a matter of life and death, that's not credible.
Life or {political} death. Remember how the municipal elections turned out. People can make fun of the opposition (and they deserve all of it), but they still won. The political climate is changing these days. Rahvaliit and the Greens have basically imploded. The next parliament might only have four parties in it (or maybe some new party will rise from the ashes).
@moevenort: yes, that's me alright. Politeness and arguments is something that happens to other people.
My point, though, was that you clearly had some bad experiences in your previous life in Estonia. You, being a German, as you say, could just as well forget all this country which you despise so much (as could clearly be seen from your posts here) and move on. But tough trooper as you are, you go on to enlighten us natives about our shortcomings. Shows character, I admit, but still, you seem to take it a bit pricklishly if we ungrateful bastards throw rotten tomatoes at you. Grow a thicker skin.
This moevenort guy is interesting. Always preaching about solidarity, "true" democracy and tolerance and at the same time foaming at the mouth how much he loathes Eastern Europeans and how untermensch Estonians are because they have all the bad qualities in the world. And of course he himself is only limited to some very dogmatic irrational beliefs and prejudices. A'la "Estonians are self-centered materialists blablabla...". Talk about tolerance? More like xenophobia. =P
@Evil Purc: and you want to confirm it with that childish behaviour and accusations? or can yontribute something to the topic? some arguments would be nice, may be? - forget it, boy - I wan´t fall on your low level of words..
Have a cookie. =]
@EvilPurc: well, I was quoting a critical Estonian economist. that is very xenophobic of course *lol* May be it would be much more worth to discuss his point of view about Esonian economy instead of behaving like a small child who doesn`t like the toy? or is that too high for your intellectual capacity?
Yes, it is too high for my intellectual capacity. You hit the nail on the head there. Good job. I wanted to point out some discrepancies in your texts. You talk about solidarity, tolerance and so forth, but seem really vengeful and patronizing. It's as if a person against the death penalty said that proponents of the death penalty should all be executed. =)
@Evil Purc: and I can still here no arguments about the topic of that post. just some nonsens private accusations. Do you have something to conribute about the economic arguments presented by Estonian economist Rainer Kattel concerning the economic policy of Estonia may be? or are childish accusations all you are able too?
@moevenort: I have no problem with your arguments, being a leftie meself, but I must admit, I have a problem with your general tone - I cannot but hear a certain patronizing and neocolonialist ring to it, a certain "white man's burden" thing. There are different ways to make a point and it is often easier to make your point come through when you don't make generalizations of your audience in advance.
@notsu: thank you for your hint. I am sorry if my comments made this impression to you, it was not my impression. The only think I really want to discuss is about the economic arguments. Unfortunately I made the experience that it is quite hard to exchange arguments with neoliberals. Because mostly they have none. from the content their ideology bases on complete emptyness, just phrases and word bubbles. And I also made the impression that they then fall back to swear words and childish accusations in order to hide it. I am sorry if my tone has been a little bit harsh.Unfortunately sometimes this often seems to be the only language neoliberals understand. They are not used to deal with counter arguments to their ideology . That is what really sad. If they would try to make a discussion based on pure arguments I would be the last who would not appreciate it.
I have to say I totally agree with notsu. Moevenort's tone is so bitter and spiteful, and I can't see any arguments except for referring to Kattel repeatedly - but lots of personal accusations and insulting presumptions.
Mind your attitude!
Estonia in NY Times. http://www.nytimes.com/2010/06/08/world/europe/08estonia.html?emc=tnt&tntemail0=y
@moevenort: glad to hear your intention, at least the conscious one, was different. Well, what I meant was that social democrats and neolibs have been on each others necks earlier in this blog and the colonialist argument has never been a factor in this before. The thing is, when one is a foreigner making statements about a different country in this country's context, one'd better be careful not to have "holier than thou" attitude and better refrain from arguments in style of "we know it better than you". It is easy to slip otherwise. The criticism is always easier to take from an "insider", so the best thing would try to wear insiders shoes as much as possible during the argument. I have been a foreigner several times, so it has learnt me these things.
*taught me*, I meant
Notsu, you mean it's like why only Bill Cosby can tell the blacks to pull up their pants.
Only a fellow Estonian can tell other ugri-mugris to start acting normal.
moevenort, I'm not seeing that you even have an actual argument here.
To paraphrase Siim Kallas: Estonia has been governed by the principles of fiscal conservatism, open economy and balanced budget.
Which of those you personally disagree with?
@Mart: I disagree with all three of them. Especially fiscal dicipline in times of recession is like kamikaze. Look at what happened all over Europe at the beginning of the 100s, then you may get an idea why.
1930s I mean
What would happen without the massive transfers from the EU - over 6% of GDP in 2009 and estimated to be 8 % of GDP in 2010? Without these transfers, Estonia would look much more like the average for other countries in the EU.
While i think Ligi and Estonia deserves a great of credit for brining the fiscal situation under control (and getting all of that EU cash), the lack of dialog on the subject has been disappointing. Given the lack of discussion/will to consider devaluation at the end of 2008 going for the Euro was the best approach.
Hopefully exports can continue pull the country into sustained growth but the 1st. quarte 2% decline in GDP and rising inflation are not really harbingers of a robust recovery.
@notsu: I try to take your criticism serious, because what I really want is to initialize some thinking about the topic only. Another German, someone who grew up in Estonia, lived there for a long time and knows the country much better than I do, was writing something about this topic in his blog in German language. He uses much better words than I could do, so I briefly translate what he is writing:
"How can a contry with an economic decline of nearly 15% in the last year and continuing decline this year fullfill all Maastricht criteria although other countries, with a much more stable economy cannot? wonders do not exist, scientists say, so lets have a look what could have happened: ...most probable scenario: all other european countries have not "satisfying" macro economic data because they have taken money and savings and credits to protect their economy, to protect their people, in order to prevent mass unemployment and the decay of important sector of the economy. All this has not happened in Estonia. So I have one question to the people of Estonia: Do you realize what is happening? Do you realize what your government is doing? Do you understand that you had a choice to chose another way? Do you understand that 19,8% unemployment is nothing that comes from heaven? that it is possible to prevent something like this? Greece had no choice. You had a choice and you still have it. Or do you really not understand that your fiscal dicipline is downsizing you into nothingness? that you won´t so quick get out of the hole you have diged yourself? Or tell me, how you want to create new economic growth? By the next real estate bubble? Or do you want to increase domestic demand? with which money? export of unclear what to unclear whom? When you understand all this, do you agree with it? How can a minority government push all these laws through the parliament? I do not justify violent protest like in Greece, but without any protest? What does it say about the quality of Estonian Democracy? , about the culture of discussion? about the possibility to speak about diagreement with governmental opinions in your country? Is this the Europe of social market economy? that Europe that cares for its people more than for the profits of some banks? that Europe whos declared targed it is to lower unemployment? all that cultural princips and ideals were badly violated by Estonian politics, but as it looks like no one contradicts in this country."
moevenort, so you are blaming Estonia for not initiating a large-scale fiscal stimulus package?
Where would we have gotten the money for that?
@ Mart: one first step to get money would have been to initialize progressive taxation at least. It is no wonder that the state is notoriously out of money even for basic tasks when no one in a country pays slightly more then 20% taxes. How high is the percentage of people benefiting from such a system?
@ Mart:
moevenort, so you are blaming Estonia for not initiating a large-scale fiscal stimulus package?
Where would we have gotten the money for that?
Actually Estonia is/was in a much better budgetary position than most other European Union members prior and also during the crisis.
At the end of 2009 the central government reserves amounted to approximately 8.9 percent of GDP (Estonian Ministry of Finance). The rest of the money they could borrow on the international financial markets.
Sure, this would increase public debt, but because of Estonia's low debt prior to the crisis, it would remain within reasonable borders. Once the Estonian economy starts growing again, this debt will be payed back. True, this will have a slightly negative influence on future growth rates, but this would have been compensated by the economy not having decreased with 15% in 2009.
Offcourse, Estonia would have to delay Eurozone entrance with a few years.
moevenort, you seem to be under an assumption that income tax is a relevant component of Estonian state budget. It is not so. The revenue from income tax is just around 5% of the total revenue from taxes (and the revenue from taxes is just around 75% of the budget).
Also, whom would you be taxing here? The top income quintile is made out of people earning 11000 kr/mo or more. That's around 700 euros, to put it into a perspective for you.
The numbers I have quoted from memory, but they shouldn't be off by more than a percent or two.
PS. I will write up an answer to Temesta later on.
@Brüno Bill Cosby comment: kind of, but not only. I've been through it and when I take care to not start like "you people should start to behave", when I start straight with arguments instead, there is a fair chance most of my audience doesn't get offended. It has worked even better when I've used personal memories, even been emotional - but at the same time very clear that these are my emotions, my feelings, not like "them people are doing it wrong and I'll teach them". But it is not always easy when I'm angry or hurt myself and there the cultural clashes come.
Gotten debt to keep jobs huh? These were mostly highly ineffective jobs. Sure, they brought bread to someone's table, but it's not like the local Opel factory was about to close. It was more like the local factory that still uses 1970s technology and employs 40 people for the work of 5 was about to close. A big portion of the unemployed are former builders. Should we have fed the real estate bubble with state loaned money? (Which is actually done at the moment, the money is EU support and the projects are large road works etc, not poorly built family homes).
Yeah, sure the government screwed up bigtime for lowering taxes in the heat of the bubble... but Estonia's biggest pro-tax party was in the government for god's sake, Keskerakond. They allowed it to happen and were happy to collect the cream. Now they of course loathe the current government from the opposition. So while things probably aren't alright, there isn't much that could be done better either. Our economy sucks, trying to blow some air into it with loans or let part of it die and try to rebuild it? I don't know, you decide, seems like most Estonians are pro-change.
Letting part of it die hasn't worked like was hoped either though, as the head of the Konjuktuuriinstituut, Maire Josing pointed out in a recent interview, because structural change hasn't taken place in the economy. So since the structure of occupations hasn't significantly changed, the good that was hoped from rebooting the economy might be lost. But we still have 100 thousand unemployed people on our hands.
there is one other interestinf fact: an OECD report from 05/2010 was critezising Estonia for being one of the countries in Europe with the lowest standards concerning social welfare state funding. While on the average industrial countries spend 20% of GDP for welfare state tasks ( the EU avaerage level is 27%), the amount in Estonia is only 12,5 % of GDP. OECD was also saying critical that welfare state spending in Estonia is disproportinal benefiting already rich parts of society. source: der Standard, Wien,
http://derstandard.at/1271378408519/Wissen-Estland-und-der-Euro
Well, everybody with a heartbeat should understand the unreasonably high emapalk numbers by Reformierakond are bullshit, but not much there is to do if people keep voting for them.
@ Andres: what I was asking myself when I was in Estonia, why it still is like this? Why still so many vote for the Reform Party? Are the people really convinced themselves by the ideology Reform Party is spreading? why there is no real protest os those onces who disagree? Is it part of mentality? political culture? I am not blaming anyone, just asking why.
The main point on the agenda of Estonias .gov should be improving competitiveness. Attract and create business. What the leftist bleeding hearts don't understand is that by creating a social welfare, high tax society will do exactly the opposite. Businesses wont come here, existing businesses will relocate to other countries with more favorable tax-schemes. People will lose their jobs (and i mean real jobs, not .gov created social jobs that are nothing more than unemployment in disguise). The country will enter a vicious circle, where the number of people who actually earn any money will decrease, so to keep the social welfare monster afloat, this decreasing number of people has to be taxed even more, which will decrease the countries competitiveness even more, more businesses will pack their bags etc etc.
While nothing can defend an economy from worldwide economic disasters, the highly competitive economies have a FAR greater "bouncing back" power.
Singapore or HK anyone?
Its the same ancient 'Fish versus Fishing' thing :P
The bleeding heart types want to give the fish to the needy, while the more rational types want to make sure the needy are fishing themselves.
moevenort, it would be fair to point out that the OECD numbers are from 2005.
Estonia's state budget for 2010, for example, spends around 18 billion for pensions and around 12 billion for the national health insurance, out of 90 billion total.
Again, to give some perspective, the whole budget for 2005 was somewhere around 50 billion.
The numbers are again quoted from memory, but should be in the right ballpark.
Hope this helps.
I was missing an answer to Temesta from yesterday.
I hope that you are not under an impression that the central government reserves have gone unused. We have already burned through half of the liquidity reserve (well over 5 billion).
As for taking out a loan, that would have been theoretically possible. The terms for such a loan, however, would have been most unfavourable (either including considerable spending cuts, such as we are doing anyway, or terrible interest rates).
@ Mart: According to my knowledge the OECD numbers I was quoting are from 2010. Like this it is also mentioned in the article of the Austrian Newspaper "Der Standard" . The figures seem to be from the MAy 2010 OECD report "OECD Reviews of Labour Market and Social Policies: Estonia 2010". Here an exerpt from the OECD press release: "Estonia, already hard hit by the worldwide recession, faces a serious challenge in the form of rising poverty among unemployed people and pensioners. The government needs urgently to find ways to stave off major hardship, according to a new OECD report. OECD Review of Labour Market and Social Policies: Estonia says that over 60% of unemployed people and over 40% of pensioners live in poverty, based on the standard OECD measure of people earning 60% of the national median income. (...)
Ensuring a fair and equitable society for all is a prerequisite for sustainable economic growth,” OECD Secretary-General Angel Gurría said. “As the economy picks up, the government should do as much as possible to help the most disadvantaged.” "
source: http://www.oecd.org/document/13/0,3343,en_2649_37419_45159245_1_1_1_1,00.html
I was missing an answer to Temesta from yesterday.
I hope that you are not under an impression that the central government reserves have gone unused. We have already burned through half of the liquidity reserve (well over 5 billion).
As for taking out a loan, that would have been theoretically possible. The terms for such a loan, however, would have been most unfavourable (either including considerable spending cuts, such as we are doing anyway, or terrible interest rates).
I am not talking about a loan from the IMF or some other institution but about loans from the financial markets. The only conditions they set are the interest rates, which do not have be necessarily terribly high. Lithuania last year and also probably this year had/has to finance deficits of about 8% of GDP (their initial deficit was much higher). Their economy is in a worse condition than the Estonian one, but the interest rates they have to pay are lower than Hungary's of Greece's.
I am not saying that Estonia should have let its deficit go completely out of control, but a bit less fanaticism in cutting the budget would have prevented the loss of thousands of jobs.
My problem with the chosen policy is:
1. The government knew that this strategy would increase unemployment.
2. Unemployment benefits in Estonia are very limited in time, and afterwards you only receive about 1000 Kroons a month. How can you pay rent, buy food, ... from this? 40% percent of the Estonian unemployed are now longterm unemployed, so they live from 1000 Kroons a month.
The government consciously pushed people into poverty, while there were strategies available to soften the misery caused by the crisis.
The ultimate thing that nations need to do is to collectively outlaw the ursury - the interest.
Interest is the root cause of all evil.
Everything else is a merely a symptom.
It is pointless to fight with the symptoms.
Temesta ütles...
I am not saying that Estonia should have let its deficit go completely out of control, but a bit less fanaticism in cutting the budget would have prevented the loss of thousands of jobs.
The job losses were a result of the deflating housing bubble, which was fueled by easy loans by lax Swedish owned banks. I don't think it would have been wise for the government to borrow to prop up the bloated construction industry
The job losses were a result of the deflating housing bubble, which was fueled by easy loans by lax Swedish owned banks. I don't think it would have been wise for the government to borrow to prop up the bloated construction industry
It's not about propping up the construction industry. Government lowered wages, cut the budget of departments. This lowered domestic demand even more, hitting companies that otherwise could have survived or would not have to lay off so much people.
You can have companies that work completely healthy also during the boom times and companies that are not, like many construction companies. Not all companies that go bankrupt are 'badly managed companies', certainly not in times of crisis. They are just the victims of their costumers not having enough money anymore.
The main point on the agenda of Estonias .gov should be improving competitiveness. Attract and create business. What the leftist bleeding hearts don't understand is that by creating a social welfare, high tax society will do exactly the opposite.
Just to add a few words here, from personal experience, a major limit to the development of the Estonian economy is a low-skilled labor force. Most of the men (and women) I know among family and friends aren't really qualified to do much of anything other than construction/contracting type work. Those who haven't gone down that route in general became teachers, another thankless job, but at least with some social benefits. Estonia needs really strong trade schools and schools for adults to learn new skills so that it can attract that foreign investment. Is that 'social welfare' to invest in institutions that will eventually create jobs? Isn't the presence of quality adult education programs and strong trade schools one of the bright spots of the Nordic system? Because being a nation of contractors and electricians and cabinet makers is fine -- when everyone wants to give their new house an upgrade. But when that's over? What next? By the way, I don't want to denigrate the work of these men and women -- I just know that they often struggle to find work. It's hard to find a job when there is limited demand for the only thing you know how to do. And it's amazing how the universities have to go around begging for money just to produce new classes of professionals that keep big foreign employers like Playtech stocked with IT talent. Even Estonia's pride, its genome project, is funded by the EU because the whole 'market forces' idea fizzled when the investors and the academics didn't see eye to eye. They had to go with hat and hand to the EU social democratic slush fund to stay online. But that's a good investment. With access to all those samples and a good infrastructure and, of course, a well educated staff, big pharma will eventually come sniffing around. Those are the types of jobs you want. You don't want to get stuck up "euro remont" creek without a paddle, know what I mean?
The main point on the agenda of Estonias .gov should be improving competitiveness. Attract and create business. What the leftist bleeding hearts don't understand is that by creating a social welfare, high tax society will do exactly the opposite.
The countries with the biggest social welfare systems are also among the most prosperous countries in the world, why wouldn't that be possible for Estonia?
Do you think Sweden has an underdeveloped and uncompetitive economy? Germany, a country with high taxes and big social welfare system is currently one of the most competitive economies in Europe and the world.
Here you have the The Global Competitiveness Report 2009-2010:
http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/index.htm
Six countries from the top ten have social welfare states.
Justin, those construction contractors are the ones who do most of the voting. They are a clear majority in Estonia, although mostly a quite silent one. Those people just don't know better. Their intelligence level is hindering them to think beyond "Reform promises us money to buy a new LCD screen/Lexus/sauna, awesome!". Or if they're a poorer, "Keskerakond promises me 500 kroons". People from universities etc are stuck-up "linnavurled" to them. A true Estonian stays in his isolated home, drinks beer, watches Suvereporter and doesn't give a fuck about how his neighbour or the society in general is doing.
I like the level of discussion that has developed around that post. finally it is a real discussion about different conceptions now.
"finally it is a real discussion about different conceptions now."
What ever gave you the impression that there is no political discussion in Estonia in the first place?! This is what it's like all the time. Maybe your experience was somewhat limited and nonpresentable. Have you ever considered that?
@Giustino
I dont know in what circles you move but i have the feeling that everyone in Estonia is a IT-wizard, business manager or has a degree in something :D
@Temesta
I would rather see Estonia make top 5 in this list: http://www.popularsomething.com/2010/02/worlds-freest-economies-of-2010.html
That is true. Most everyone in Estonia has an advanced degree in rehepapplus. A form of project management.
Everyone is Rainer Sternfeld.
who is Rainer Sternfeld?
"Most everyone in Estonia has an advanced degree in rehepapplus"
Pay no attention to Brüno's nihilist ramblings - the man can't even spell "rehepaplus" correctly.
Ramblings? More like Andy Kaufmanesque stand-up comedy quips, I'd like to think.
Read them and hear a snare drum and cymbal crash after each one.
And loud boos, of course.
You may have a point there, piimapukk. Thanks for saving/making my day.
Always glad to oblige, my friend. First I destroy your day and then I make it. Looks like I am offering a full buffet of human emotions, piggybacking on some poor dudes semi-serious blog. My cuckoo's nest.
I changed my name to Piimapukk yesterday. Can't explain it why. I was strangely inspired by the piece I heard on ooylikool program about the things that are gone forever and all we have left are fond memories.
So it was you all along, Andy? Thanks for straitening that one out. Now go and seek attention elsewhere, you talantless dog.
I was away for the weekend, but here's some additional answers.
moevenort, when I replied that the numbers are from 2005, then I meant that I have actually read the OECD report and the figure of "12,5% of GDP" is referenced in the report as a figure from the year 2005.
Temesta, did you notice the state that the financial market was in back when we would have needed the loan? A point of reference would be that the interest rates for Lithuanian government bonds at 2009 were around 15%.
Of course, as you rightly point out Estonia could have afforded it - but at a price of multiplying the national debt. I for one believe that a right choice was made.
@ Mart:
Temesta, did you notice the state that the financial market was in back when we would have needed the loan? A point of reference would be that the interest rates for Lithuanian government bonds at 2009 were around 15%.
Of course, as you rightly point out Estonia could have afforded it - but at a price of multiplying the national debt. I for one believe that a right choice was made.
If Estonia would be more generous to its unemployed (certainly the ones who cannot count on the support of family or friends) in times of crisis, I would agree that it was the best strategy.
In the interest of better understanding I post hereby the Google translation of the sage comment above:
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If and when Giustino removes it this will hopefully remain for the posterity!
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