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ESTONIA


 



In-depth Business Intelligence 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 8,383 6,413 5,500 95
         
GNI per capita
 US $ 3,870 4,130 3,870 72
Ranking is given out of 208 nations - (data from the World Bank)

Books on Estonia

REPUBLICAN REFERENCE

Area (sq.km) 
45,226 

Population
1,341,664

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

Capital 
Tallinn

Currency 
Kroon

President 
Arnold Rüütel


Update No: 301 - (30/01/06)

Officials debate safety of Baltic Sea pipelines
The recent gas crisis is having rippling effects throughout the former Soviet space. Everyone is reconsidering their options. Gazprom, by abruptly cutting off gas supplies to Ukraine for two days at the beginning of the year, is forcing them to think of alternatives.
Estonia and Finland are considering the construction of a natural gas pipeline between the two countries on the floor of the Gulf of Finland, Estonian Foreign Minister Urmas Paet told reporters after a meeting with his Finnish counterpart, Erkki Tuomioja. "A breakeven study for an Estonian-Finnish gas pipeline is underway," the minister said.

The paradise for capital - and labour? 
Estonia has reason to be wary of Russia of course. It has become Europe's most fervent champion of capitalism and free market ways in revulsion against its socialist past. 
Social experiments have been possible in Estonia that are unacceptable in more mature capitalist economies, such as Germany. Fired with a free-market fervour and hurtling into the high-tech future, Estonia feels more like a Baltic outpost of Silicon Valley than of Europe. Twenty months after it achieved its cherished goal of joining the European Union, one might even characterize Estonia as the anti-Europe. 
The flat tax has become an article of faith. Estonia became the first country to adopt it in 1994, as part of a broader strategy to transform itself from an obscure Soviet republic into a plugged-in member of the global information economy. 
By all accounts, the plan is working. Estonia's economic growth is around 10% per annum and was nearly 11% in the last quarter -- the second fastest in Europe, after Latvia, and a pace more reminiscent of China or India than Germany or France. 
People call this place E-stonia, and the cyber-intoxication is palpable in Tallinn's cafes and bars, which are universally equipped with wireless connections, and in local success stories like Skype, designed by Estonian developers and now offering free calls over the Internet to millions. 

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The flip side of Estonia's market ethos is a thinner social safety net than in Europe's welfare states. Opponents of the flat tax here -- and there are some -- say it has widened the divide between rich and poor, making Estonia less like its Nordic neighbours and more like the United States. 
Germans showed how allergic they were to the idea when Angela Merkel chose a flat tax advocate as her economic adviser. Antipathy toward him was so intense that political analysts say it probably cost Merkel's party a clear majority in the German Parliament. 
Yet the concept has caught on in this part of Europe. Latvia, Lithuania and Slovakia all have a flat tax, while the Czech Republic and Slovenia have considered one. Tax policy, not support for the American-led war in Iraq, is the bright line that separates the so-called old Europe from the new. 
"Everybody dreams about a society with no inequality," Ansip said. "But the best policy is to have a strongly growing economy. With more prosperity we can increase social benefits." 
Taxes and welfare are not the only issues where Estonians seem to be diverging from Western Europeans. People are increasingly ambivalent about adopting the euro, even though the government still hopes to do so by 2007. The prime minister has been at odds with the European Commission, which has threatened to reduce its money for roads, bridges and other infrastructure. And Parliament recently voted by a wide margin to extend the deployment of the country's tiny contingent of troops to Iraq by another year. 
The war, which has inflamed much of Europe, is not a divisive issue here. Only two Estonian soldiers have been killed in Iraq. "We know what it means to live under a dictatorship in Estonia," Ansip said. "We were always dreaming that help would come, and we did get help, especially from the United States." 
Make no mistake: Estonia is grateful to be in the European fold. Membership in the European Union -- and NATO -- throws a security blanket over a land that has been subjugated repeatedly by foreign powers, most recently the Soviet Union. 
With Estonia safely inside, though, Europe no longer looks like much of a draw. The euro, which once symbolized prosperity, is now viewed by many here as an invitation to higher prices. Inflation has already doubled since Estonia joined the European Union in May 2004. As a cautionary tale, people here point to Italy, where the cost of a haircut or a cup of coffee spiked after it retired the lira. 
In any event, Estonia may miss its deadline of January 2007 for adopting the euro, because its inflation rate, close to 4 per cent, is above the limit imposed by treaty. That would apparently not faze too many people: in a recent survey commissioned by the government, 54 per cent of respondents said they did not want the euro, while 41 per cent favoured it. 
"We have always had mixed feelings about joining the monetary union," Marje Josing, the director of the Estonian Institute of Economic Research, said. "We have some experience of being part of a union." 
Feelings toward Europe soured further after Britain, which held the rotating presidency of the European Union, proposed reducing financing to new member states by US$16.8 billion between 2007 and 2013. Estonia, Ansip said, is counting on the cash. European leaders worked out a compromise December 17th that lessens the cuts, which mollified Ansip. 
The suspicion goes both ways. French and German leaders complain that Estonia and other flat tax countries practice tax dumping, using their rock-bottom rates to attract foreign investment. The solution, they say, is for European countries to harmonize their taxes, a proposal that gives most Estonians disquieting memories of their centrally planned past within the Soviet Union. 
Still, not everybody loves the status quo. Economics Minister Edgar Savisaar is among those who believe that the flat tax has deepened class differences. A prime minister of Estonia under Soviet rule, Savisaar now leads a popular centre-left party, which is in a shaky coalition with Ansip. 
Reinstating a progressive tax, he said, would pay for education and for more aid to families and the elderly. With Estonia facing a national election in March 2007, Savisaar is expected to make that a political issue. 
"What are the best societies to live in?"' asked Savisaar's top adviser, Heido Vitsur. "The best societies in the world to live in are the Nordic societies. We have to move in that direction." 
Ansip is all for catching up with Finland and Sweden. But he says Estonia should not do it by abandoning a policy that he says helped propel the country this far. "I don't think it's the right thing for every country in the world," he said. "But it really suits Estonia." 

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TELECOMMUNICATIONS

Elisa and Tele2 open their 3G networks in Estonia

Elisa and Tele2 mobile operators promise to open their third-generation (3G) mobile networks in Estonia in the year 2006, New Europe reported.
Estonia's largest mobile operator EMT opened its 3G network in Tallinn last autumn. Chariman of Elisa, Sami Seppanen, said that EMT's 3G network is actually a pilot network since it is accessible only outdoors and only in selected areas in Tallinn. "You cannot trust it," said Seppanen. Marketing Manager of Tele2, Kristjan Seema, said the question was how much the new network will offer added value and call Emt's 3G services niche products. Mobile operator Tele2 is starting an information campaign designed to bring lacking transparency in public procurement to the authorities' attention.

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