Open market is the answer

  • 2009-04-02
  • By Mart Laar
The annual Lennart Meri conference organized by the International Centre for Defense Studies gathered in Tallinn last week, bringing together a large amount of foreign political experts and thinkers, journalists, ministers and politicians from around the globe. Over the years, the Lennart Meri conference has become a major event not only in the Baltics but in European politics as a whole, where the people from whom foreign political decisions depend can discuss the most intriguing questions in a free atmosphere.
While in earlier conferences the target was mostly on foreign policy, this time it was not possible to avoid the economy 's especially economic crises currently ravaging the entire world.

The main reason for such interest was a question asked in one plenary of the conference 's would the current economic crises lead to the same result as the Great Depression in 1930s, to the fall of democracy and rise of totalitarianism, which at the end would lead the world to a new devastating war?

This is a serious question. To answer this question we must first look at the real situation in the Central and Eastern European countries, declared by the world press as the main source of instability in Europe. Actually the picture is more diversified.

First, while in the short term new member states can really be in trouble, in the longer term it is not so clear 's if the "old European" countries don't actually have even bigger problems. Their response to the crises, to print more money or to let countries fall into a deep deficit, is a dangerous gamble with the European future, which can at the end threaten us all. It might be soon clear that several Western European countries are actually in more trouble than Central and Eastern European countries.

So we reach the second point 's the situation is bad in some new member states, but the majority of them are doing not so badly. When Eurostat finds that the economic growth in "old Europe" will be -0.1 percent, then in new member states it will be nearly 2.5 percent. In 2008 Eurostat found that one of the most radical reformers in CEE, Slovakia, had the highest economic growth rate in Europe at 4.9 percent. The biggest economy among the new member states, Poland, is also doing well, which is good news to all its trading partners among new countries.

At the same time countries in the region that are not yet members of the European Union are in trouble. Especially dangerous is the situation in Ukraine, which has failed to pass necessary reforms and concentrated instead on internal political fighting.

Looking at some countries that are in trouble among the new member states, we may say that often this is the result of their own mistakes. The Hungarian socialist government has made some of the most devastating mistakes during their eight years in power, transforming Hungary from one of most developed countries in CEE to one of the most problematic. Hungary needs elections quickly 's otherwise the economic crises could grow into a political one. Unfortunately, it seems this will not happen as the socialists are trying to remain in power as long as possible.

Another country in trouble, Latvia, has also made mistakes. Weak governments, political instability and a high level of corruption 's combined with high spending and Russian influence in economic matters 's has created a very difficult situation. There is a new government in power in Latvia and we must wish them the best of success.

But freedom still works. This must be the main message of the G20 gathering. When we come out of this crisis, the world will need less protectionism and more free trade. When we stress the importance of freedom only in words and not in real acts, we may all go down.

On the European level this means that the rules must be the same for everybody. Countries in the eurozone can let their budgets dip into deep deficits, then for the applicant countries there is a deficit limit of 3 percent 's and I must say, for good reasons. At the same time, all of us know that huge deficits are some new kind of protectionism, targeted at spending more and supporting falling economies. This is not a fair game and can lead Central and Eastern Europe into a real crisis.

Finally, we must ask ourselves the question: do we have a single market in reality or not? We know that the market is actually only partly open. The best thing one can do for Europe is to help new member states overcome the crises by letting the market free, introducing a single market in reality and overcoming protectionism. This is the real way out of the crisis.

Mart Laar, a historian and statesman, served as Prime Minister of Estonia from 1992 - 1994, and from 1999 - 2002. He is currently chairman of the Union of Pro Patria and Res Publica Party (IRL). He wrote this article for The Baltic Times.