It’s the euro zone Jim, but not as we know it. Sixteen
months after it joined the struggling currency bloc, Estonia is
booming. The economy grew 7.6 percent last year, five times the
euro-zone average.
Estonia
is the only euro-zone country with a budget surplus. National debt is
just 6 percent of GDP, compared to 81 percent in virtuous Germany, or
165 percent in Greece. Shoppers
throng Nordic design shops and cool new restaurants in Tallinn, the
medieval capital, and cutting-edge tech firms complain they can’t find
people to fill their job vacancies. It all seems a long way from the gloom elsewhere in Europe.
Estonia’s
achievement is all the more remarkable when you consider that it was
one of the countries hardest hit by the global financial crisis. In
2008-2009, its economy shrank by 18 percent. That’s a bigger contraction
than Greece has suffered over the past five years.
How did they bounce back? “I can answer in one
word: austerity. Austerity, austerity, austerity,” says Peeter Koppel,
investment strategist at the SEB Bank. After
three years of painful government belt-tightening, that’s not exactly
the message that Europeans further south want to hear. At
a recent conference of European and North American lawmakers in
Tallinn, Koppel was lambasted by French and Italian parliamentarians
when he suggested Europeans had to prepare for an “inevitable” decline
in living standards, wages and job security, in order for their
countries to escape from the debt crisis.While spending cuts have triggered strikes, social unrest and the toppling of governments in countries from Ireland to Greece,
Estonians have endured some of the harshest austerity measures with
barely a murmur. They even re-elected the politicians that imposed them.“It was very difficult, but we managed it,” explains Economy Minister Juhan Parts. “Everybody
had to give a little bit. Salaries paid out of the budget were all cut,
but we cut ministers’ salaries by 20 percent and the average civil
servants’ by 10 percent,” Parts told GlobalPost.“In
normal times cutting the salaries of civil servants, of policemen etc.
is extremely unpopular, but I think the people showed a good
understanding that if you do not have revenues, you have to cut costs,”
adds Parts, who served as prime minister from 2003-2004.
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