Estonia’s labor costs among the lowest in EU

Average labor costs in Estonia were 9 euros per person per hour in 2013, up from 8.4 euros in 2012, according to Statistics Estonia.

In member states of the European Union a more than tenfold difference was recorded in hourly labor costs last year, from 3.7 euros in Bulgaria to 40.1 euros in Sweden.

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Estonia’s government deficit among lowest in EU

The general government deficit of Estonia in 2013, measuring 2 percent of GDP, was lower than in any other EU member state save for Luxembourg and Germany, which boasted a surplus of 0.1 and 0 percent of GDP.

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New conference centre may become part of Tallinn Airport

The new multifunctional conference centre that the state wants to complete by 2018 when Estonia holds EU Presidency could be located in Ülemiste City and be made part of Tallinn Airport which is close by, writes Eesti Päevaleht.

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Ansip replaces Kaja Kallas as Europarliament’s No. 1 candidate

The general convention of the Reform Party decided over the weekend that the party’s Europarliament candidate list will be topped by former Prime Minister Andrus Ansip, writes Eesti Päevaleht.

In the initial list of candidates that was submitted to the convention on February 26 the list was topped by MP Kaja Kallas, daughter of European Commissioner Siim Kallas.

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Euro area countries need to react flexibly to economic changes

Governor of Eesti Pank Ardo Hansson said on Saturday at the high-level Ambrosetti Financial Markets Workshop in Italy that the experience of the euro area shows that countries in a monetary union need to have a responsible economic policy and should be ready to react flexibly to economic changes.

Mr Hansson used his presentation to compare the advantages and disadvantages of a sharp adjustment for countries suffering an economic crisis.

He said that one advantage of a sharp adjustment is that the rapid reaction of economic policy makers means there is a shorter period of high uncertainty weighing on economic activity, especially on investment decisions. Another advantage is that a rapid adjustment frees up resources for new businesses and activities. Mr Hansson emphasised that a sharp adjustment can help avoid reform fatigue in a society and prevents debts from building up too far in both the public and private sectors.

At the same time, economic policy makers need to be careful that the speed of rapid changes does not create problems by forcing viable firms out of business. It is also important for governments to explain clearly to society why the changes are needed and what effect they will have. He showed a comparison of Estonia’s adjustment during the economic crisis with the reactions of four other euro area countries, namely Greece, Ireland, Spain and Portugal. The comparison makes it clear that the faster adjustment in Estonia helped the country exit the crisis more successfully in terms of economic growth, employment, fiscal balance and debt.

The relatively rapid long-term growth in the Estonian economy and its ability to adjust have been based on a strong fiscal policy, a flexible labour market and relatively low debt levels, particularly in the public sector, explained Mr Hansson. The ability of the Estonian economy to escape from difficulties was aided by well-capitalised banks, consistent structural reforms and the desire to adapt economic policy quickly to changes in the economy. Unlike Estonia, several countries in the euro area were hindered in their reaction to the crisis by an excessively large financial sector.

Mr Hansson said that Estonia’s experience in the economic boom showed that a strong external anchor in the form of a credible fixed exchange rate arrangement might lead to policy complacency. The experience of the euro area during the economic crisis has proved that the economic policy of countries in a monetary union needs to be responsible and ready to react flexibly to economic changes.

The Ambrosetti Financial Markets Workshop on Friday and Saturday in Cernobbio, Italy, was attended by leading decision-makers from the world of financial and monetary policy. Ardo Hansson gave a presentation in the Saturday morning session on the Agenda for Europe.

For more information on the conference, see

See the presentation here

Source: Bank of Estonia

Cabinet divides €6 billion EU funds

The government agreed on Feb 25, 2014 how to spend the 5.9 billion euros of EU funds the nation is set to receive during the 2014 to 2020 budget period.

“The (EU) budget negotiations were very successful for Estonia and the whole of Europe. Estonia will receive 5.9 billion euros, while contributing 1.4 billion euros,” Estonian Prime Minister Andrus Ansip said at a press conference.

Ansip said that in addition to the 5.9 billion euros, the EU will also subsidize the Rail Baltic project, which will receive one billion euros, and a prospective high-voltage link with Latvia.

Compared to the previous 7-year budget period of 2007 to 2013, Estonia will receive 1.3 billion euros more.

Rural development will see its budget increase slightly from 726 to 766 million euros, while funds for agricultural subsidies will double from 503 to 1,007 million euros. The Social Fund will increase by 198 million euros to 588 million.

The Regional Development Fund will increase by only 13 million to 1,873 million euros, while the Cohesion Fund will decrease to 1,073 million from 1,150 million euros of the previous period.

Another 629 million euros will be available for other projects.

The budget will have to be approved by the European Commission.

Source: Estonian Review / ERR

FinMin: Europe must protect defence expenditure

EU Finance ministers of the European Union discussed the situation in Ukraine and the effect that the crisis has on Europe. “Ukraine’s current problems are beyond economic for Europe. The European Union must act together with the International Monetary Fund to help the country,” said Estonian Minister of Finance Jürgen Ligi. 

“Ukraine’s most critical need is currently support for state institutions’ and alleviation of the loss of energy subsidies.”
The Minister of Finance’s speech referred to Russia’s historical behaviour pattern in Europe. “This will happen again if Europe does not express will and readiness to protect itself and keeps making cuts in defence expenditure,” said Ligi. Estonia is one of the states that spend 2 percent of their GDP on national defence.

 Last week the European Commission adopted an aid package of upon to 11 billion euros with specific measures for economic and monetary aid for Ukraine. The package of up to 11 billion euros was also approved by the EU leaders.

Source: Estonian Ministry of Finance

Price rises in Estonia, eurozone seen converging

The difference between the Estonian and eurozone inflation rates is the smallest in recent years and inflation in Estonia is unlikely to accelerate markedly in coming months, the Finance Ministry and the central bank say.

Estonian consumer prices rose 0.6 percent year on year in February compared to a 0.8 percent increase in harmonized consumer prices in the eurozone. It is estimated that the Estonian harmonized index of consumer prices, which takes into account also the structure of spending by foreign tourists, may have dropped to nearly 1 percent in February. Thus, the inflationary difference between Estonia and the eurozone was the smallest in recent years, the Finance Ministry says in its commentary to consumer price statistics published on Friday.

Both the Finance Ministry and the Bank of Estonia note that price rise slowed down first and foremost due to the receding of external price pressures and lower heat and fuel prices. Besides, electricity and heat energy are indexed under services, which explains the overall decrease in the cost of services in a situation where many other service prices are rising.

Base inflation, that is, price rise of goods and services without food and energy, remained at the 0.8 percent level in February. Leaving out the impact of the drop in the cost of communication services, the price rise of services amounted to 3.4 percent, the central bank observed. Due to deceleration of import price rise, price rise of manufactured goods also continued decelerating and slowed down to 0.4 percent last month.

Unless unexpected external price pressures emerge, inflation in Estonia will remain at the current low level in the first half of the year, the Finance Ministry predicts.

According to the central bank’s forecast, inflation will stop at 2.1 percent in 2014.

Source: Baltic News Service via Estonian Review

Enterprise Estonia has reclaimed 0,7 pct of the support money

Enterprise Estonia (EAS) has in the last seven years reclaimed 6.4 million euros of grant money which makes up 0.7 percent of the support paid out during the same period.

“In the 2007-2013 period EAS satisfied support applications in the amount of 874 million euros and recalled grants in the amount of 6.4 million euros. For the whole period reclaimed grants make up 0.7 percent of the disbursed support and implemented activities,” EAS board member Taavi Laur said.

Last year the business support agency made 151 grant recall decisions in the amount of 2.7 million euros which cover both support schemes and programs, i.e. the entire activity of EAS, Laur said.

“The nearer the end of the period, the more recalls there are. This is natural, because at the beginning of the period the amounts were smaller in terms of both grants and auditing,” Laur said. The administration and control system of EAS received the highest evaluation without a single reservation in the course of the recent system audit, which means that it meets the principal requirements, he added.

Established in 2000, EAS promotes business and regional policy in Estonia and is one of the largest institutions within the national support system for entrepreneurship. After Estonia joined the European Union EAS became one of the final beneficiaries of EU structural funds in Estonia.

Source: Estonian Review

Minister met with EC tax representative

Minister of Finance Jürgen Ligi discussed tax issues with European Commission representative. The primary discussion issue in last week’s Brussels meeting with Algirdas Šemeta, European Commission’s Tax Representative, was the action against tax fraud – a crucial topic on the European Union and every Member State level.

The Minister expressed support to the Commission’s proposals for fighting against VAT fraud and presented Estonia’s experiences in improving tax revenue. Greater focus was dedicated to the amendment of the VAT declaration annex and the restriction of input VAT deduction for company cars.

“Analysis shows that our initiative is the most efficient known measure for Estonia in reducing the VAT revenue gap and ensuring fairer competitive parity for entrepreneurs. The fact that a similar system has been developed and implemented in other parts of the EU corroborates, among other things, that Estonia is on the right track,” noted Ligi.

The representative confirmed that it is up to the Member State to decide how to organize tax collection and Estonian initiatives are in line with the VAT directive. A reform similar to the declaration annex has been implemented in Portugal and is underway also in Slovakia, something the representative considered to be a very positive trend. According to Šemeta, the permission to restrict input VAT deduction for company cars has been granted for the majority of the states and to all that had asked for it.

According to the VAT gap report issued by the European Commission in October, 193 billion euros is missed as not accrued from the Member States and in 2011 the Estonian estimated tax gap was 18 per cent or 1.9 per cent of the GDP, an amount of 301 million euros. The Commission’s more efficient and firmer implementation of a VAT system action plan in order to support Member State efforts and hinder cross-border fraud is therefore thoroughly welcome.

Source: Estonian Ministry of Finance


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