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ESTONIA


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 6,413 5,500 5,100 100
         
GNI per capita
 US $ 4,130 3,870 3,780 74
Ranking is given out of 208 nations - (data from the World Bank)

REPUBLICAN REFERENCE

Area (sq.km) 
45,227 

Population
1,423,316

Principal 
ethnic groups 
Estonians 63.9%
Russians 29%
Ukrainians 2.7%

Capital 
Tallinn

Currency 
Kroon

President 
Arnold Rüütel

  

Background:
After centuries of Swedish and Russian rule, Estonia attained independence in 1918. Forcibly incorporated into the USSR in 1940, it regained its freedom in 1991 with the collapse of the Soviet Union. Since the last Russian troops left in 1994, Estonia has been free to promote economic and political ties with Western Europe. 
The referendum on EU entry was won by the pro-EU side quite comfortably, 66.9% to 33.1% against
Nobody would dispute Estonia's excellent credentials to belong to Europe. Founded by the Teutonic Knights and the mercantile Hanseatic League in the early Middle Ages it was always looking across the sea rather than inland. Just across the Gulf of Finland, it is in all but name a Scandinavian country. It adhered to the Reformation before any other European state in the 1520s and has been a model of Nordic propriety ever since. The Protestant work-ethic is proverbial.
The very success of Estonia since independence outside not only the USSR, but also the EU, however, gave some Estonians second thoughts. The Centre Party, Estonia's largest opposition group urged the nation to vote against EU membership. They object strongly to the fact that the EU is requiring the Estonians to scrap a great deal of their free trade practices, adopted since 1991. It is as if they have to join a new USSR, which does not take account of their peculiarities.
It is arguable that the Estonians could have achieved all that they need from integration into Europe already without the drawbacks. Since independence they have done remarkably well. The Germans, their traditional allies, helped to set up the koruna, their new currency, in June 1992. They soon established a free trade regime second to none in the world. It was a question of a bonfire of controls. 
GDP leaped ahead at 5% rates of annual growth. The sagacity of the move to monetary independence was shown in 1998-99 when they were the one FSU state to survive the rouble crisis without much in the way of reverse.

Update No: 274 - (27/10/03)

Sweden has a considerable influence in Estonia, which sees itself as a Scandinavian country in all but name. The Swedish premier, Goran Persson, visited Estonia on August 28th and urged it to vote in favour of the EU, just as he was urging his own people to vote for the Euroland, a campaign that failed. He told his counterpart, Juhan Parts, that membership of the EU had benefited Sweden and would do the same for Estonia.

Implications of referendum result
The 'pro' vote was widely anticipated. The government had already prepared legislation to put before parliament to bring Estonia's practices in line with EU norms. 
The government approved and submitted to the parliament on September 18th a bill which would end the free-trade agreements with Ukraine, Turkey and European Free Trade Association (EFTA) countries Iceland, Liechtenstein, Norway and Switzerland. The agreements have to be terminated to fulfil the obligation set in the EU accession treaty to terminate all free trade agreements before joining the EU. Upon becoming an EU member, Estonia is obliged to join all EU foreign agreements and implement them even before the corresponding agreements are concluded.
The Estonian government recently approved a bill on increasing fuel, tobacco and alcohol excises. The excises need to be increased to harmonise Estonian excise laws with European Union directives. 
The increased excises will be collected starting May 1st, 2004, when Estonia becomes a European Union member. The EU allocated a transition period to 2010 to fully harmonise the excises on cigarettes and other tobacco products.
Specifically, petrol excises will be increased form 3.5 kroons to 4.5 kroons per litre, those on diesel fuel from 2.55 kroons to 3.84 kroons per litre and those on 1,000 cigarettes from 210 to 240 kroons. Inflation is expected to grow next year because of this.
The expected revenues from new excises are taken into account in the draft budget for 2004. The additional fuel excise revenues will finance the repair and construction of roads, and those on alcohol and tobacco will be spent on culture and education.

Massive European presence
Nobody would dispute Estonia's excellent credentials to belong to Europe. Founded by the Teutonic Knights in the early Middle Ages it was always looking across the sea rather than inland. Just across the gulf of Finland, it is in all but name a Scandinavian country. It adhered to the Reformation before any other European state in the 1520s and has been a model of Nordic propriety ever since. The Protestant work-ethic is proverbial.
The very success of Estonia since independence outside not only the USSR, but also the EU, however, gave some Estonians second thoughts. The Centre Party, Estonia's largest opposition group, urged the nation to vote against EU membership. They object strongly to the fact that the EU is requiring the Estonians to scrap a great deal of their free trade practices, adopted since 1991. It is as if they have to join a new USSR, which does not take account of their peculiarities.
It is arguable that the Estonians could have achieved all that they need from integration into Europe already without the drawbacks. Since independence they have done remarkably well. The Germans, their traditional allies, helped to set up the koruna, their new currency, in June 1992. They soon established a free trade regime second to none in the world. It was a question of a bonfire of controls. 
GDP leaped ahead at 5% rates of annual growth. The sagacity of the move to monetary independence was shown in 1998-99 when they were the one FSU state to survive the rouble crisis without much in the way of reverse.

Key meeting in August in parliament
The key event in the build up to the referendum which probably decided it was an extraordinary session of parliament on August 25th held to debate a special report drawn up by all parties on the impact of entry. 
Foreign Affairs Committee Chairman, Marko Mihkelson noted that EU membership should reduce strains in Estonian-Russian relations and end the doubled customs duties that Russia has imposed on imports from Estonia for more than eight years. There was little debate among the 94 deputies attending the session, as almost all agreed the EU membership is the best way for Estonia to protect its national interests and guarantee stable development. The deputies mentioned farmers and fishermen as clear winners as the EU will give them greater aid, while likely losers will be pensioners and the unemployed who will have to cope with increased costs of living after admission.
Somehow, nevertheless, symbolism matters, Estonia was certain to vote for EU entry, after all. It would be wise of Brussels to ensure that they do not come to regret it.

Life goes on
While the 'pro' vote in the referendum is the key event in Estonia for the moment, which will dominate its politics for months, indeed years ahead, normal life still goes on. A recent change in the government make-up is an instance of this, quite unconnected to the pro-EU result.
Estonian Finance Minister, Tonis Palts, recently tendered his resignation to Prime Minister, Juhan Parts. Palts said he was resigning "to protect his family and political partners from unjustified and, in most cases, anonymous criticism related to his earlier entrepreneurial activities." Immediately after the formation of the government on April 2nd, 2003, the Estonian Tax Department opened several cases against Palts, including for tax evasion by moving his assets to off-shore zones and for concealing income. Palts has denied these charges. Parts accepted Palt's resignation and suggested to President Arnold Ruutel that Parts be replaced by Taavi Veskimae.

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FINANCIAL NEWS

Estonia posts 0.2% inflation in September

Consumer prices in Estonia in September went up by 0.2 per cent from the previous month, data from the country's statistics department showed. Food prices went up by 0.6 per cent and non-food goods 1.7 per cent, while service charges went down 0.3 per cent. Inflation was 2.4 per cent in the year ending September 2003. The Bank of Estonia lowered its inflation forecast for 2003 to 1.5 per cent from 3.2 per cent. Inflation was 2.7 per cent in 2002.

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FOREIGN ECONOMIC RELATIONS

Tallinn & Kiev eye strong bilateral ties

Estonia is ready to promote Ukraine's further integration into Europe, and the efforts of the Ukrainian state to join the World Trade Organisation, Estonian Foreign Minister Kristiina Ojuland, said at a recent meeting with Ukrainian Foreign Minister, Kostiantyn Hryschenko, New Europe has reported. The meeting took place during Hryschenko's participation in the 58th session of the UN General Assembly in New York, the Ukrainian MFA press service reported.
One of the main subjects for the discussion was the problem of deepening political dialogue between the two countries, including encouraging Ukraine's accession into Europe.
Hryschenko has congratulated his Estonian counterpart on the successful results of the referendum on membership in the European Union. It was pointed out that, in the context of Ukraine's Eurointegral strivings, Ukraine-Estonia relations at the current stage must be diversified and deepened. This concerns, primarily, political, trade and economic areas, as well as bilateral consultations in order to exchange experience in the field of cooperation with the EU and NATO.

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