Budget cuts in the financial crisis

Estonia
University of Tartu
 
The dominant theme of the past six months is clearly the economic crisis. The Estonian economy has been in recession since mid-2008 and the Bank of Estonia predicts a 5.5 percent decline of GDP in 2009. The gravity of the situation became evident only in December 2008 when it turned out that the accrual of budget revenues had been very low due to a very fast cool-down of both the global and Estonian economies. While the government has reserves worth about 15 billion Kroons (and has not yet had to turn to the International Monetary Fund (IMF) for help, like the neighbouring Latvia), it decided to drastically cut the 2009 budget. After long debates between the coalition partners, an agreement was reached to cut the budget by eight billion Kroons, the equivalent of eight percent of 2009 spending. The cuts involve painful measures such as across-the-board reduction of 10 percent in public sector wages. The cuts will be formalised in a bill to be presented to the Estonian Parliament in February 2009. These measures are designed to help Estonia meet the Maastricht convergence criteria (now that inflation rates are down) but more importantly, to avoid bankruptcy of the Estonian state.
 

Will the EU defend democracy?

Estonia
University of Tartu
 
The future of the ENP and further enlargement of the EU and NATO are high-salience issues in Estonia. The conflict in Georgia is seen as marking a shift of paradigm in post-Cold War international relations in Europe. In the words of President Ilves: “It is now quite clear that the assumption that the borders of Europe are fixed and that no one will invade anyone are gone”.[1] Estonia’s leaders believe the EU has done too little to help its Eastern neighbours: “Europe has not given its neighbours the same privileges as have been given to Russia […] rather than assisting those democracies with visa policies or with having an effective European neighbourhood policy, we have decided not to deal with them lest they think they might become part of the EU. I think that ultimately it is about whether Europe will defend democracies and democratic choice or not. We do not know the answer to that question”.[2]
 

Satisfied with France, hopeful with regards to the Czech Presidency

Estonia
University of Tartu
 
The Estonian government considers the French Presidency to be a successful one, recognizing that it had to deal with many extraordinary events and managed to “address them very well”.[1] In particular, Estonia appreciates the active role that the French Presidency took in mediating the Russian-Georgian crisis, and securing the cessation of military activities relatively quickly. At the same time, there was a wide-spread impression that France was too eager to normalize relations with Russia after the latter had withdrawn its troops from Abkhazia and South Ossetia.
 
Other French successes, according to Foreign Minister Urmas Paet, include the EU military operation off the Somalian coast in response to pirate attacks (Estonian sailors have repeatedly been held captive by pirates and their fate has been followed closely by the media) as well as rapid reaction to military conflict in the Gaza sector. Estonia also appreciated the fact that important agreements were reached in the field of energy and energy security during the French Presidency.[2]
 
Five shared priorities
 

Strengthening the market rules without enforcing protectionist measures

Estonia
University of Tartu
 
Among all EU member states, the Baltic countries have been hit particularly hard by the financial and economic crisis. While the Estonian economy expanded 10.4 percent in 2006 and 6.3 percent in 2007, it stopped growing in 2008, and the GDP is forecasted to decline by 5.5 per cent in 2009. The government has decided to implement massive budget cuts in order to reduce the budget deficit for 2009. The gloomy outlook has not changed the fundamental principles of the government’s economic policy: i.e. commitment to liberal markets and accession to the Eurozone at first opportunity.
 

Cooperation and stabilisation of the post-1991 security architecture

Estonia
University of Tartu

A strong and stable partnership between the United States and Europe, as well as the improvement of the international reputation of the USA, is a key priority for Estonia.[1] In his recent ‘advice’ to the president-elect of the United States, President Ilves argued that “(o)f all the international issues that will demand President Barack Obama’s attention, two will be increasingly urgent: restoring the still-fragile relationship with Europe and addressing the collapse of the continent’s post-1991 security architecture”. The top three Estonian priorities for re-vitalizing the EU-US relationship appear to be the following:
 

A threat to Estonia’s long-term priority of enlargement?

Estonia
University of Tartu
 
Attitudes towards the EU in Estonia must be interpreted in the context of the economic crisis that hit Estonia full force in the end of 2008 (GDP is forecasted to decline by 5.5 percent in 2009). In this context, membership in the EU is seen as a source of stability. In a recent speech to the Parliament on the government’s EU policy, Prime Minister Ansip called on the public to reflect on the situation that Estonia would be in today were it not a member of the European Union. According to Ansip, it would be clear that in that case: “Estonia’s security would be more fragile, the economic decline would be deeper and it would be inappropriate to use the word welfare to describe the ability of the citizens to cope economically. All European countries that do not belong to the EU, be they more prosperous than Estonia, such as Iceland, or poorer, such as Moldova, are having a harder time today than the countries that are members of the Union”.[1]
 
This sentiment appears to be shared by the general public: according to the recent Eurobarometer survey, Estonians are more confident than any other nation in the EU that their country has benefited from being a member of the Union (78 percent responded affirmatively to this question).[2]