Strengthening the market rules without enforcing protectionist measures

Estonia
University of Tartu
 
Among all EU member states, the Baltic countries have been hit particularly hard by the financial and economic crisis. While the Estonian economy expanded 10.4 percent in 2006 and 6.3 percent in 2007, it stopped growing in 2008, and the GDP is forecasted to decline by 5.5 per cent in 2009. The government has decided to implement massive budget cuts in order to reduce the budget deficit for 2009. The gloomy outlook has not changed the fundamental principles of the government’s economic policy: i.e. commitment to liberal markets and accession to the Eurozone at first opportunity.
 
In the government’s view, the international crisis of financial markets has “proven the need for a common monetary policy in Europe”.[1] The Euro is seen as “an irreplaceable promoter of market stability and guarantee of long-term economic growth“.[2] Joining the Eurozone is the Estonian government’s number one priority in the coming years. The government is determined to carry out the painful budget cuts at any cost in order to retain Euro-eligibility. The slowing economy has helped curb the high inflation rates, making accession to the Eurozone in 2011 a realistic prospect, provided that the budget deficit can be kept within limits. According to recent public opinion polls, about half of the population of Estonia supports changeover to the Euro, while 40 percent are against it.[3]
 
Maintaining an open economic space
 
In line with its long-term liberal market policies, the Estonian government rejects protectionist solutions to the global crisis, arguing that “calls to protect markets, for increased state intervention into the economy and the need to protect so-called ‘key sectors’” do not constitute the correct response to the crisis. An open economic space based on even competition rules should be maintained, expanded and strengthened. According to Prime Minister Ansip, “economic interdependence that goes along with openness helps alleviate the effects of the economic downturn and creates opportunities for new growth”.[4] The freedoms of the internal market should be extended and deepened, and reform of the Common Agricultural Policy should be sped up. The EU budget must give greater priority to innovation and development, both of which are the basis for the growth of economic competitiveness. The EU must “stand firm against attempts to build barriers in international trade” and the crisis should not be used as “an excuse to backtrack on attempts to liberalise the world economy”.[5] In particular, trade between the USA and the EU should be developed further. While partial “strengthening of market rules” (including regulation and control of financial institutions) might be necessary, such rules should not “cripple the market’s ability for self-regulation” or “create an environment in which market players do not feel their own responsibility”.[6]




[1] Speech by Prime Minister Andrus Ansip on the Government’s European Union policy in the Riigikogu, 9 December 2008, available at: http://www.valitsus.ee/?id=8809 (last access: 26 January 2009).


[2] Ibid.


[3] Government Press Release, „Eestis toetab eurole üleminekut pool elanikkonnast,” 18 December 2008, available at: http://www.valitsus.ee/?id=8854 (last access: 26 January 2009).


[4] Ibid.


[5] Ibid.


[6] Ibid.