Euro not the 'cure-all' some expect

  • 2010-01-21
  • Staff and wire reports

TALLINN - Edward Lucas, writing in The Economist, says that Estonia shouldn’t waste the lessons being taught by this economic crisis. He says “Estonians should… take a hard look at themselves, their society and their state, and work out how to dump bad habits and adopt good ones.”

There are no quick fixes, only important changes, he asserts. “Independence was not a panacea, nor was introducing the kroon, or joining NATO and the EU. Adopting the euro will be no panacea either: it is a necessary condition for solid prosperity in future, but not a sufficient one.”
Estonia should not respond to the crisis by running to Russia’s arms in the hope of big money and a happy life. He notes that Latvia has tried this, but “making friends with Russia in the hope of good results is a high price to pay, and offers “scanty benefits.”

It would also be wrong for Estonia to abandon the liberal, open, westward-oriented economic policy it has followed for the past 17 years. It was not, and is not the government’s job to sort out the economy by “intervention, subsidy and other meddling.”
Questioning the government’s actions of the past several years, he says  that a “degree of smugness and complacency in government is one reason why we had such an over-heated lending boom and property speculation.” The result is an economy that is vulnerable to the world downturn.

Estonia after the euro needs to concentrate much more on the quality of life, not the quantity of money. Estonia’s competitiveness in the long run cannot rest just on low costs. Nor will Estonia be able to compete to attract the brightest brains by offering the most money. But it can be a clean, safe, enjoyable, interesting friendly place to live. That will keep Estonians from emigrating, encourage Estonians abroad to come back, and make it easier for foreign employers to send their best workers here.

Estonia as a country has to be open to talents and ideas from outside. Lucas says that it is “shocking” that Estonians who have graduated from the world’s top universities are not coming back home to teach and study, that they say they are treated as outsiders. A small country such as Estonia cannot afford any cartels and protectionism - it needs the best ideas and the best people.

Ultimately, however, Estonia is a success story, says Lucas. “But I worry that the pipeline of good stories is looking a bit empty. E-government, Skype and cyber-defense, to take three stories which got Estonia lots of good publicity, in each case had an element of hype. But they reflected real-life successes. Now I find my editors are interested in different stories: the combination of economic crisis, western weakness, and Russian revanchism is a particularly scary one. It is the main story now in Latvia. I hope it will not be for Estonia, too.