Estonia’s President Sends Wrong Message Meeting Putin

President Kersti Kaljulaid of Estonia meets with her Russian counterpart, Vladimir Putin, at the Kremlin in Moscow, April 18
President Kersti Kaljulaid of Estonia meets with her Russian counterpart, Vladimir Putin, at the Kremlin in Moscow, April 18 (Kremlin)

For the past decade, the Baltic states have maintained a strict policy toward Russia: no official state visits by presidents, prime ministers or other high-ranking officials.

That changed last week, when Estonian president Kersti Kaljulaid visited a newly renovated embassy in Moscow and stopped by the Kremlin for a cup of tea with Vladimir Putin.

In itself, the meeting does not carry much weight, as nothing crucial was said or done. But it sent the wrong message. Read more “Estonia’s President Sends Wrong Message Meeting Putin”

Baltic States Have Most to Fear from Trump Victory

Estonian prime minister Taavi Rõivas and NATO chief Anders Fogh Rasmussen deliver a news conference in Brussels, April 3, 2014
Estonian prime minister Taavi Rõivas and NATO chief Anders Fogh Rasmussen deliver a news conference in Brussels, April 3, 2014 (NATO)

For Eastern Europe and the Baltic states in particular, a Donald Trump presidency could be disastrous. The Republican has created doubt about whether or not the United States would honor NATO’s collective defense clause, Article 5, under his leadership.

Hillary Clinton, the likely winner on Tuesday, will have to ease Eastern European anxieties while at the same time supporting a genuine European defense policy that is based on a considerable hike in budgets. Read more “Baltic States Have Most to Fear from Trump Victory”

United States Deploy Artillery, Tanks to Eastern Europe

The United States will permanently deploy artillery and tanks in the Baltics and Eastern Europe, Ashton Carter, President Barack Obama’s defense secretary, announced on Tuesday in a move that is almost certain to upset their former Soviet master, Russia.

Vladimir Putin, the Russian leader, announced earlier that the country would add more than forty intercontinental ballistic missiles to its nuclear arsenal to offset NATO deployments in the east.

The deployments are meant to reassure NATO member states that joined the alliance after the Soviet Union collapsed in 1991. The three Baltic states, which have few armed forces of their own, have been especially unnerved by Russia’s aggression in Ukraine in the last year. Read more “United States Deploy Artillery, Tanks to Eastern Europe”

Estonian Border City Putin’s Likeliest Next Target

Tallinn Estonia
Tallinn, Estonia at night, January 25, 2013 (Mariusz Kluzniak)

After Russia’s annexation of the Crimea, the Moldovan breakaway region of Transnistria might seem the likeliest target for future Russian territorial claims. Indeed, the region, which, like the Crimea, has a majority ethnic Russian population, requested admission into the Russian Federation last week. In a 2006 referendum, 97 percent of Transnistrians voted to join Russia.

But Daniel Berman, a PhD candidate at the London School of Economics, points out at his blog that Russian annexation of Transnistria is actually unlikely. Whereas the Crimea was historically part of Russia and is separated from the country only by a narrow waterway, Transnistria shares no border with Russia. Rather it borders on the west of Ukraine — the very region that seeks deeper integration with the rest of Europe instead of Russia. Read more “Estonian Border City Putin’s Likeliest Next Target”

The Curious Case of Estonia: Where Austerity Works

The Economist has a good story about tiny Estonia, which is turning out to be a textbook example of how austerity works to regain competitiveness and economic growth.

The small Baltic nation, which joined the euro this year, implemented “shock therapy” liberalization after the Soviet Union collapsed in 1991 — and prospered because of it before it felt the effects of the global economic downturn, starting in 2009.

Estonia maintains a flat income tax rate, low corporate taxes and few barriers to international investment and trade. It has performed particularly well in finance and information technology and built strong trade relations with Finland, Germany and Sweden. Read more “The Curious Case of Estonia: Where Austerity Works”

Estonia Prepares to Join the Eurozone

In the new year, tiny Estonia is set to become the seventeenth country to adopt the euro as currency. The expansion of the eurozone comes at a time of considerable upheaval. Policymakers have had to invest billions in bailouts and stabilization funds this year to preserve the stability of the single currency.

Estonia has only been a member of the European Union for six years. Since gaining independence in the 1990s but especially during the last decade, the small Baltic nation with a population of just 1.3 million has enacted significant market reforms, producing impressive GDP growth rates before the recession hit in 2009. Estonia maintains a flat income tax rate, low corporate taxes and open borders to international trade and investment. It has performed particularly well in finance and information technology and built strong trade relations with Finland, Germany and Sweden.

The global downturn severely affected Estonia. Its economy contracted by as much as 14 percent last year but is already showing signs of recovery. Impediments remain in the shape of rigid labor regulation and remnants of corruption however.

While larger countries in Central and Eastern Europe, including Poland and the Czech Republic, now have doubts about joining the single currency bloc as a result of the debt crises that rocked Greece and Ireland this year, Estonia is confident that adopting the euro will usher in an era of renewed prosperity. Its neighbors, Latvia and Lithuania, also still anticipate to enter the eurozone between 2013 and 2015.

Public support among Estonians for joining the euro has decreased, down from a peak of nearly 60 percent to somewhere around half of the population today. Prime Minister Andrus Ansip of the free-market Estonian Reform Party nonetheless assured lawmakers this month that joining the euro “will bring along more jobs, higher pensions and faster economic growth. It will bring us stability,” he predicted.

Despite disappointing growth rates and high unemployment, Ansip’s government has enacted deep budget cuts in order to balance the books. Estonia has among the lowest levels of sovereign debt in Europe and reduced public-sector salaries with as much as 10 percent. Its deficit next year is expected to reach 1.6 percent of GDP, well below the European limit.

Whether Estonians, subject to harsh austerity measures, will approve of further rescue efforts for eurozone countries facing sovereign default is doubtful. Slovakia, which pursued a similar economic and fiscal policy in the wake of the downturn, previously refused to help bail out Greece. In either event, Estonia’s finance minister is convinced that the currency will survive. “Talking about splitting the euro is not the way out,” Jürgen Ligi told The New York Times. “There would be huge immediate losses for both sides.”