A Lesson To Be Learned

Birgit Püve/Spiegel International

Former Soviet Republic Could Be Next to Adopt Euro
No European country has been more adept than the former Soviet republic of Estonia in dealing with the global economic crisis. Tallinn implemented some of the toughest austerity measures seen in Europe and, in one year's time, has qualified to become the next country to introduce the euro.

Meeli Hunt is Estonia's best-known unemployed person. When she appears on TV talk shows, she is always perfectly coiffed and still wears designer glasses. She is now even slimmer than she was when she worked as a government press officer. She goes to the gym every day, and she doesn't look her age of 52. She developed her exercise habit when she suddenly lost her job.

Hunt has had a typical Estonian career, which took off after the country gained its independence from the Soviet Union in 1991, a time when everything seemed possible. But in 2008, her career took an equally precipitous nosedive when economic growth came to a grinding halt in Estonia. She managed to survive tough times with her savings, and now things are slowly starting to look up for Hunt, and for the rest of the country. "I've become tougher and more frugal," she says.

Say what? Used her savings to smooth over the bumps in the road? As these are conservative principles, coupled with her obvious beauty, the nitwits over at red-leaning Media Matters may well have another shitfit.

As a press officer at the Defense Ministry, she established a good reputation as a multimedia manager. Hunt marketed Estonia, a new NATO member, on the Internet. Later on, she handled public relations for the Freedom Monument, a source of national pride that was erected in downtown Tallinn last year.

Then, one day, her superior walked into her office and began hemming and hawing. She shouldn't take it personally, he said, but the government had to save money and she was being let go. At the time, a law protecting employees against termination, which has since been abolished, allowed her to keep her job for another month before becoming unemployed.

An Unparalleled and Painful Austerity Program

Since the fall the Soviet Union, Estonia has enacted what is probably the most liberal set of economic regulations in Europe. The Estonians can attribute a booming decade of double-digit growth to these regulations, but they have also been responsible, after the brutal crash, for an unparalleled and painful austerity program.

Fiscally, the program has been effective. Estonia has cleaned up its finances in only one year, and the country now satisfies all criteria for membership in the euro zone, the countries that use Europe's common currency. Tallinn is taking on new debt that amounts to only 2.4 percent of gross domestic product (GDP), and the country's total debt at the beginning of the year was only 7.2 percent of GDP, compared with 115 percent for Greece. Estonia intends to introduce the euro in January 2011. The coins, which have already been designed, depict the contours of the country, which is so far in the east of the European Union that the Baltic Sea is called the Western Sea.
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But there is a price for this success: 137,000 people are out of work, which, for a population of 1.3 million, makes for 19.8 percent unemployment.

'A Liberal Test Laboratory'

Hunt has described her unemployment experiences in a blog. "Without a job, you're suddenly alone," she says. People who used to be good friends suddenly stop calling.

Hunt was one of 26 people who lost their jobs in her office. They formed a club and vowed not to disband until all of them had found new jobs.

What went wrong in Estonia? "We installed a liberal test laboratory in our country," says economics professor Rainer Kattel. "It worked well, too well, in fact."

In the 1990s, Tallinn privatized all unprofitable government-owned companies, ports and banks and introduced a flat income tax, which is currently at 22 percent for all Estonians.

Scandinavian banks, in particular, began investing heavily in Estonia. They took over the financial sector and acquired real estate, and investors built office towers.

And that club Meeli and her friends belonged to? Read the rest of Jahn Puhl's report at Spiegel International