After the euro
- Our coming big objectives following the euro introduction are to ensure the quality of education, reduce dependence on energy and increase public sector efficiency, said Prime Minister and
Reform Party Chairman Andrus Ansip at the party's summer convention this year.
- The entry to the eurozone is definitely an important achievement, and its impact on economic recovery and the credibility of Estonia cannot be underestimated, said Ansip. But, if we want to
make Estonia a tiger, we need to ensure that our education is of high quality, secure cheaper energy supply and keep our economy competitive.
- Much remains to be done, concluded Ansip. Take, for instance, the situation in our supplementary education. Although we have managed to double participation in lifelong education, even during
the economic crisis, we are still far from the levels of Sweden and Finland.
Prime Minister Andrus Ansip's three priorities are a bit less counted in numbers and compared to an action list published this spring by FICE – the Foreign Investors' Council in Estonia -
under the headline 'What after the euro':
"Adopting the euro in January next year will definitely bring us into calmer waters, but other than that not much will happen on that magical date. What concerns us most is the fact that the
economic growth needed to boost employment and then reach a level of welfare similar to the surrounding nations we admire, will not come by itself!
For economic growth we cannot rely much on internal demand, as wealth has diminished. Growth must come from abroad, through export and trade of goods, services and tourism. For our natural
trading partners growth is forecast, but it will be slow, and dimmed by the overcapacity of the economies of our natural trading partners. A drastic improvement of the competitive advantage
of Estonia will therefore be a key to growth.
Improvement of our competitive advantage is urgently needed In order to create this improvement of competitive advantage we have to realize a convincing and sustainable mix of the following
What the euro will bring
- Higher productivity per unit of labor cost
- Structurally and substantially lower cost of labor in Estonia compared to countries like Finland, Sweden, Denmark, Germany and maybe even Poland will be needed
- Substantially lower tax levels (income, profit, capital, social) than in the countries that we compete with
- Lower levels of bureaucracy than competitors, resulting in lower operational costs of businesses
- Preferential living and working climate for professionals and an educated workforce (in social, cultural, entertainment (fun to live) terms and in terms of educational opportunities for
foreign nationals and their families)
- More flexibility in the operational environment of companies (regulations, permits, labor law, migration and immigration)
- Investment incentives
- Improving Estonia's internationality (education, immigration, English as a second language)
- Better local infrastructure (roads, public transport, digital highway)
- Improved, frequent and reliable air connections for passengers and freight
The euro will bring many clear benefits, but also limitations. The impossibility to quickly gain a competitive advantage by adjusting our exchange rate is one of them. While Estonia has never
used this mechanism in its recent history it could have done so as a last resort in case of a needed improvement of its competitive position.
Once in the eurozone this possibility is lost more or less forever. This means increasing importance of the other tools we have to boost our competitive position. It also reminds us of the need
for a stable and consistent policy with regards to these variables; while for an exchange rate adaption a stroke of a pen is sufficient, the impact of most other tools is felt only in the long
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