Estonia signs on to chide Europe's heavyweights

  • 2004-02-19
  • By Aleksei Gunter
TALLINN - The prime ministers of Estonia, Italy, Holland, Poland, Portugal and Spain published a joint statement this week demanding strict adherence to the Stability and Growth Pact, which regulates fiscal policy for countries in the euro zone, without exception.

The pact has come under increased strain now that Europe's big guns - Germany and France - have ignored the budget deficit limits.
The statement, Joint Contribution to the Spring Council 2004, focuses on the importance of the so-called Lisbon criteria, which were designed to make the EU the most advanced economy in the world by 2010 and on the dangers of economic recovery of the EU.
"Economic recovery must respect the principles of macroeconomic stability. Our commitment to sound budget policies should not be questioned," reads the statement.
"The Stability and Growth Pact is an essential element of economic governance in our Economic and Monetary Union and a necessary condition to sustained economic growth that we all pursue, and its rules must be applied consistently and in a nondiscriminatory basis."
The joint statement came just two days before French President Jacques Chirac and British Prime Minister Tony Blair were to meet German's Chancellor Gerhard Schroeder on Feb. 19 in Berlin to discuss the options of recovery of the French and German economies.
"Estonia is interested in the development of Europe's competitiveness. Joining the statement complied with Estonia's state priorities," Prime Minister Juhan Parts was quoted by his press advisor as saying.
Economic growth in the 12-nation eurozone amounted to a flaccid 0.4 percent last year, well behind the United States, where the economy expanded by 3.1 percent. More voices are blaming the stagnant European economy on Germany and France and are calling on them to reform their bloated social service-laden budgets.
According to the pact, Europe's two biggest economies should be fined for breaching the 3 percent budget deficit rule, but EU finance ministers agreed last year to exempt Paris and Berlin from any disciplinary measures, which subsequently angered the European Commission.
Though still not a member of the eurozone, Estonia has not concealed its ambition to adopt the European currency. Perhaps more importantly, by signing the statement the Baltic country has shown once again that it will not be shy about expressing its opinion in Europe's most pressing matters.
In November Parts and Blair published an opinion piece in The Financial Times defending every EU member state's sovereign right to regulate its tax and social policy, which Germany and France want regulated via a new EU constitution.
"There are not first or second class members in the European Union. The 2004 entrants are equal with old member states from the very first day," wrote Blair and Parts.
Andres Kasekamp, director of the Tallinn-based Foreign Policy Institute, said that Estonia's joining the declaration shows this country is fiscally responsible and takes EU rules seriously.
"Estonia is a country which has a very disciplined financial and economic policy and therefore is interested that other countries do so as well," Kasekamp said.
"I think that the letter will have little impact. I don't think it will force Germany and France to reconsider anything... Out of the future 25 member states, six is not that big of a number," he added.
In Kasekamp's opinion, it was notable how many countries are missing.
"The Dutch and the Portuguese are probably the most annoyed at the breach of the stability pact, and so are Italians. They've made sacrifices in the past [to comply with the pact] and now feel betrayed. But why Poland and Estonia joined the statement it is very difficult to say," said Kasekamp.
Andrus Saalik, head of the economic analysis of the Finance Ministry, said Estonia was "clean" as to the reproaches mentioned in the joint statement.
"For the last three years our government sector budget has had a surplus, and from 1993 to 2003 we have had a balanced budget," he said.
Saalik said that although in the last 12 years Estonia has had several different Cabinets, all considered a conservative budget policy important.
"We have to carry on with this trend and keep the budget surplus in the reserve for the hard times ahead," Saalik said.
Estonia had overcome its slight economic decline in late 1990s by using the budget surpluses.
"The deficit of the government sector in 1999 reached 4.6 percent of the GDP, which exceeded the Stability and Growth Pact limit. If we were a EU member state then, we would receive a recommendation to lower the deficit, which we did," Saalik explained.
He added that taking into account the recent developments in the EU, the Stability and Growth Pact could be reconsidered and enhanced with real measures against the countries that do not comply with it.

Key demands in joint statement:
More and better jobs. Implementation of the recommendations of the Employment Taskforce headed by Wim Kok.
Active promotion of private sector involvement into R&D.
Balance between regulation objectives of and their impact on competitiveness in order to avoid excessive burdens to business, especially SME's.
Correct and timed transposition of EU legislation into national law.
Preparation of mid-term review of the Lisbon strategy in 2005.
Strong commitment to sound budget policies. Following the rules of the Stability and Growth Pact on a non-discriminatory basis.