Smoke Sauna Of Fiscal Policy

July 11, 2007



Im sitting here at work first thing in the morning feeling a bit bored, not an uncommon thing given its July and Swedish business virtually shuts down over this time, so im sitting and thinking.

Im thinking about my thoughts and impressions of Eesti and how they have changed over time. Theres been a lot of articles out there of late about eastern european economic policy right now and in short how its getting hotter and hotter out east. Alot of the talk has been centered around some articles from The Economist which also points the finger mostly at Latvia. So whats happening in general? In "eastern" countries, the economies are hotting up, growth is far too strong and labor demand is outstripping supply, ie there arnt enough little wild and crazy eastern euros to fill the jobs, indeed the birth rate is falling in most countries. Everyone has a dig at Latvia because its the hottest of the hot right now, inflation up above 8% and everyone is spending up big on consumer items, for most baltic countries this is the first time they have EVER had any money, so theres a cultural pressure to be seen to have but mostly show the new moolah. This leads to large amounts of personal debt among the population. Latvia is an interesting example too because of the russian factor, its always been a hive of Ruski business activity, its got a port unlike Vilnius and well… the Russians were never that fond of doing stuff in Esonia, maybe you forgot the recent riots perhaps? On the contray, Latvia has actually been seen to snuggle with the Kremlin after these days, they are riding that money train alright.

So everyones having a dig at Latvia but they arnt the only ones, Estonia is getting hotter also but their financial policies are somewhat better. One big problem is labor shortages as I mentioned, it seems the sex tourists only want to come for a weekend and not stay longer to contribute more to the economy. Also its kinda hard for a skilled non EU citizen to come and work, the process has a bit of red tape around it and can take upward of 3 months, although I see come November the Eesti government is voting to change this and cut that time to 3 weeks. Great Success. Thats one thing they can do because many of these governments have their hands tied when it comes to finance policy. Their currencies are pegged to the euro so they cant mess with interest rates and most of the banks are foreign owned so the government cant set direct policy for them, sure its in a banks interest to do things which are good for that country but you can argue they dont do enough, they still want to make a profit this year and the next. Income tax is one area they can make a direct change but Estonia for example keeps insisting on reducing it. Good for this economic growth but didnt we just say it was growing too fast anyway? With all of this heat the move of the 3 countries to the euro has been pushed back. At one stage it was tipped to be 2008 or even 2007 for Eesti and Latvia but now conservative estimates put it at 2011 atleast and thats IF they can reign in this inflation figure. They arnt allowed to use the euro if this is too high because it strongly ties all the eurozone economies, if  one country gets too hot, everyone feels the heat.

So, enough of the economic background, suffice to say change is happening rapidly, not only in economic sectors but everywhere and i love it. Society is evolving, change is happening. They dont often get it right first go but they try. Sometimes they are beating their own patriotic chests a bit too hard and miss the obvious but thats a natural thing. I see the Estonian economy like a teenager, growing, youthful, full of energy, wants to be accepted among its peers but is still headstrong and a bit short sighted at times. However as we know, even the biggest of kids grow up eventually.

Which makes me think about my own thoughts on Eesti once more. When I was there several weeks ago I stopped and had a good look around… and i saw a place different to the one 3 idiots first rolled off the boat into well over a year ago now. When we first came we knew nothing, it was "crazy eastern europe" and when i looked upon it thats what i saw but now, after being there for so long and even calling it a home in some ways, I dont see "eastern europe" anymore, I just see a nice little country called Estonia, which is already really quite developed and nothing like the frontier town of my previous imagining. The question then comes to me, is this because Estonia has changed so much in a year or am I just seeing it differently because i know it kind of intimately now?

I dont think anyone will argue with me when I say its a little from column A and a little from column B.

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Louis Zezeran

Louis Zezeran

Louis Zezeran is an Australian Stand Up comedian and comedy promoter based in Tallinn, Estonia.

He was the co-founder of Comedy Estonia, Comedy Finland and Comedy Latvia. Louis writes, does gigs and performs at private events through the Baltics and Finland
Louis Zezeran

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