May 15, 2014

Estonia and the European Union—A 10-year Balance Sheet

Estonia has the prerequisites for repeating Finland’s success. To achieve this we need openness, inspiring politicians and a strong Europe.

I remember that, in the summer of 1992, I was in Finland with a group of Estonians and our hosts invited an official to tell us about politics. The speaker dedicated a large part of the talk to the European Community—Finland had just submitted its application to join, and the Maastricht Treaty that shaped the European Union was most probably ready as well. It was midsummer, and we sat in a meeting room furnished with light wood somewhere in Helsinki, listening to a talk related in Finnish about how the European Community would become the European Union and looking at graphics of its future structure, “pillars” and institutions. The Finn apologised, saying that it was still a new topic for them, and that there were as yet no proper Finnish expressions for all the EU terminology. From the point of view of an Estonian, the sense of insecurity radiating from the lecturer was astounding. It was the greatest change in Finnish history since the Second World War, they stressed.
For people from a country where you could not buy milk from a shop six months before, it was difficult to comprehend that the Finnish economy was in decline and unemployment high. For the Finnish, it was by no means clear what results could be expected from joining the gigantic Common Market, and this was expressed by the speaker many times. Last but not least, the person cautioned that Estonia should observe for “at least” 15 to 20 years how membership affected Finland—and only after that, and after getting its economy on its feet, consider whether there was a case for Estonia to apply for EU membership. The picture should be clear by then.
For my companions and me, all this talk about the European Community was not particularly interesting. Estonia had already just achieved its ultimate goal—the restoration of independence—and the new goal was to rebuild the country and reinforce that independence.
The European Community, to which Finland and even Sweden did not yet belong, was abstract and too strongly tied to economic interests. At that moment, for us at least, it was not so much about the idea of Europe as about a common market (of rich countries), with what appeared to be too many complicated rules.
A few years later, however—more or less by the time of Finland’s accession in 1995—it was clear to the majority of Estonians that it was precisely the European Union that should be Estonia’s next big goal—a touchstone of belonging to the free world as an equal that would help to consolidate freedom and boost the economy. This mobilising aim is the primary and probably greatest contribution of the EU to creating the Estonia of today. Nothing else would have so excited officials, politicians and voters alike and encouraged them to make an effort—especially in the 1990s, when NATO membership still seemed out of reach (and NATO is a narrower issue anyway).
For about ten years, a goal that stood above partisan interests helped to overcome domestic political bickering and frequent cabinet changes. Even Arnold Rüütel, whose appointment as president was a disappointment to many, managed to give a positive overtone to his term of office by backing the mutual goal of EU membership.
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It is also worth recalling that Estonia was invited to join the EU before Latvia and Lithuania—this was a defining contribution to Estonia’s development. The self-myth of the Estonian state needed to be created and cultivated. At that moment, many entrepreneurs started to expand into the Baltic States and Estonia’s image as a special one among them was shaped.
Since 1998, the “Estonia question” has always been high on the public agenda in Latvia and Lithuania. At first, the main opinion was of Estonia’s arrogance or skill in promoting its reputation better than did its southern neighbours, but by the mid-2000s—and certainly by the end of the decade—Estonia served as a mostly positive example.
The effects of the Estonian politicians’ consistent action at the time are clearly observable in the emigration statistics of the Baltic States. The number of foreigners who have settled permanently in Latvia and Lithuania has been several times greater than in Estonia (also when considered as a proportion of the population).
We can reprimand the statesmen of the 1990s for all manner of things, but it has to be said that, at the time, there was never a feeling that this independence would not work out or that we did not know where we were heading. There was a goal and everybody could see that people were working hard to achieve it.
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Accession in 2004 brought Estonia to a whole new world. There was an extraordinarily strong, albeit subconscious, sense of arrival—the end of history—and its effects became manifest immediately.
Firstly, it was clear that Estonia was one of the poorest EU member states. The free movement of persons within the Union made this even more evident. Politicians unanimously placed the promise of a rapid improvement in well-being before all other goals. The culmination of this competitive bidding was the Estonian parliamentary election of March 2007. Economic growth that at times reached 10%—partly conditioned by an investment risk that decreased after accession almost to the levels of Germany and Finland—was blindingly intoxicating.
A year earlier, the government had missed the opportunity to adopt the euro. Speaking to parliament, the then Prime Minister Andrus Ansip described this almost as a deliberate choice: “On no condition am I or are any other members of the government willing to sacrifice fast economic growth in the name of adopting the euro by a specific date”.
Secondly, the absence of great goals along with rapid economic growth highlighted the advantages of political stability. Support from EU member states, especially Germany, ensured that it was easier to overcome the unrest that erupted in the centre of Tallinn in April 2007, almost certainly driven by a Russian propaganda campaign. Overall, that kind of support also reinforced the continuing status quo.
By the time the economic crisis arrived in the autumn of 2008, the majority of the political elite were deep in their comfort zone. And, once more, EU membership immediately proved useful.
Firstly, the competent handling of resources from EU structural funds evened out the drastic decline that followed, in essence functioning as a stimulus package that could not otherwise have been afforded. Secondly, the government managed to arrive at a consensus that the euro was the right and great goal to back, as adopting the euro would compensate for the  suffering created by the loss of people’s well-being.
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Unfortunately, “European money”, like the stability produced by EU membership, has turned out to be a double-edged sword.
Nearly all large public investments during the new budget period, like the previous one, have come from EU structural aid; the Estonian state mostly covers only the minimum required cost-sharing contribution. What is more, structural aid is used to finance things that are difficult to describe as investments in the accepted sense—labour market measures, enterprise support, job creation, financial instruments and so on. This has enabled Estonia to use tax revenues to pay larger pensions, for example—which is good and proper in itself, but raises greater concerns for the sustainability of public finances with each passing year.
What will we do after 2020? This question has not been answered clearly by the government, who have really rather refrained from looking for a reply.
The years since recovering from the economic crisis have provided disturbing confirmation that the EU is, at least for the Prime Minister’s party, a comfort zone in which one may hide from making difficult decisions regarding Estonia’s development. (In this context I recommend Jüri Raidla’s presentation at the Postimees opinion leaders’ luncheon, which includes examples ranging from administrative reform to updating the constitution.)
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The fact that the EU is moving from one crisis to another, but thereby becoming stronger, also applies to considering Estonia as part of it. Every Estonian knew well before 2008 that the Prime Minister and other ministers went to Brussels to discuss important matters, but it did not seem that important. The economic crisis led the public to discuss solidarity. At times this discussion followed a self-centred path but, figuratively speaking, this brought questions about Europe’s future from the foreign pages to the economics and politics sections. Almost imperceptibly, issues of Europe’s future became issues of Estonia’s future.
It can be seen from following the crisis in Ukraine that we treat Europe’s steps as “our” steps and perceive Europe’s possibilities and limitations as ours. In our consciousness, Europe is hopefully no longer the place where diplomats with good language skills should be sent to “represent” us or where weary politicians wait for their retirement.
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Estonia has already gained hugely from the four fundamental freedoms of the EU—the free movement of goods, services, capital and persons—and will certainly benefit increasingly from them. Some see the free movement of persons as bringing losses rather than gains but, as mentioned earlier, the issue is not the European Union, but conditions in Estonia. On a level above basic well-being, the question consists in finding the goals, ideas and perspectives that would enable Estonia to bind its people to their country. At the same time, it is a question of Estonia’s soft power.
In the context of the free movement of persons, Estonia has so far virtually failed as a destination for intra-EU migration. Although populist complaints about a flood of aliens coming from new member states have emerged in the United Kingdom and other wealthy states, the mostly young and active migrants are a great economic support for ageing societies in the long term. Estonia, too, would have a lot to gain from thousands of fellow Europeans, instead of a few individuals, wanting to settle here.
Why has virtually no one migrated here since we joined the EU? We have many advantages—a clean environment, little bureaucracy, an e-state, proper education, a simple tax system (the list could go on)—yet every foreigner moving to Estonia still makes the news. Indeed, Estonia is poor, the wage level is low and no one will resettle for the sake of benefits. Why, though, have we not attracted entrepreneurs or students? I believe that we have a discouraging attitude, and it shows.
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Back to Finland
In various country rankings, Estonia is, on average, in 30th position among 200 or so countries. Should we be pleased?
The same average 30th position was held by Finland 20 years ago, at the time of its accession to the EU. Now Finland usually takes third place in these rankings.
How has Finland advanced so much? Can we do the same? I believe that Finland has moved up the lists thanks to the internationalisation of its economy and society. It has truly made use of the opportunities of the EU as a very large economic space, making Finland look many times larger to the world as a part of Europe and erasing in large part the borders that make a small country seem a province of a bigger one. Estonia has the prerequisites for repeating Finland’s success; but to achieve it we need openness, inspiring politicians and a strong Europe.

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