Inflation stabilised in February 2006

Consumer price rise of February remained on January’s level. In the yearly estimation, the growth of consumer prices in February remained on the same level as in January, reaching 4.6 percent.
The tendencies in February were affected by the rising prices of food products, housing services and services related to the leisure time, while the prices of communication services decreased when compared to January. Estonia’s inflation in February exceeded the euro zone inflation by 2.3 percentage points.
The increasing expenses related to housing continued in February, amounting to 9.1 percent. It was caused by the continuing rise of administratively controlled prices (gas, electricity, heat energy) and rental prices. Like in January, the rise in the prices of food products resulted from the price changes of fruits and vegetables. As to the services related to the leisure time, the price increase was caused by the nearly 20 percent rise in the holiday trip prices. Heavy demand for travel packages has probably enabled to raise the brokerage margins, while the change in fuel prices has also contributed to these tendencies. Although the drop in the world oil prices could have caused the lowering of the prices of transportation services, including the price of motor fuels, it was not the case. The cheapening trend of communications services continued due to heavy competition.    
The monthly estimation of inflation was 0.5 percent. The main reasons were the price rise of transport services and food products, 1.4 and 0.7, respectively. The prices of alcoholic beverages and tobacco rose somewhat as well.
Euro zone inflation slowed down by 0.1 percentage points to 2.3 in February when compared to the previous month. The inflation is held up by expenses related to housing services and high motor fuel prices also in the euro zone.
Estonia’s 12 month average harmonised consumer price index, the basis of assessing the inflation criterion, moved to 4.2 percent in February, exceeding by 1.5 percentage points the reference value that is the basis for the inflation criterion (calculated on the basis of three countries of lowest inflation). The stable decline of Estonia’s 12 month average harmonised consumer price index can be expected in the second half of the year. Also the rise of reference value is expected to continue in this year.
Assuming that oil prices would stabilise in this year, it is the growing residential expenses due to administrative price changes that are expected to have the most significant effect on inflation. The gradual decrease of inflation is expected to take place in the coming months.
Source: Ministry of Finance

T.H. Ilves: There is no such thing as a ‘Baltic interest’

Toomas Hendrik Ilves
The Baltic Times, TALLINN
Interview by Kairi Kurm
Mar 01, 2006

When it comes to foreign policy, Toomas Hendrik Ilves is one of the most well-known experts in Eastern Europe. Seven years as Estonia’s foreign minister, together with the perspective of a former U.S. citizen, give him special insight into foreign affairs. As he says on his Web site, his most important challenge as member of the European Parliament, where he serves as first deputy chair of the foreign affairs committee, is to be as effective as 10 representatives.

Born into an Estonian family in Sweden and educated at Columbia and the University of Pennsylvania, Ilves’ horizons stretch well beyond Estonia. The Baltic Times met with Ilves to discuss his experience in the European Parliament, relations with Russia, and his rather unique theory about Baltic identity.

What are your main responsibilities as first vice-president of the European Parliament’s committee on foreign affairs?

My primary responsibility is running the committee when Elmar Brok isn’t there. As a bureau member of the committee (i.e. – president), and three vice presidents of the enlarged bureau, which includes representatives of the political groups [factions] in the Parliament, we decide who does which reports. In general, I am most concerned about the Europe east of the EU: Ukraine, Georgia the Balkans. I am the Parliament’s standing reporter on Albania.

When you were appointed in July 2004, you said you’d deal with EU relations with Russia. At the time, you said that, in the opinion of many new member states, EU policy has been too trustful of Russia.

This has turned into a significant dividing line in the Parliament, with new members taking a far more skeptical, and I would argue, realistic view of Russian behavior than older members. I wouldn’t say “too trustful” of Russia – simply naive. Then again, old members don’t have Russia as a neighbor. Nor have they experienced Russian/Soviet occupation.

All in all, this does produce a disharmony of perspectives between old and new members. A number of old member states have also behaved in ways inconsistent with EU practice. Gerhardt Schroeder’s pipeline deal with the Russians, done without consultation with four countries directly affected, is not something for the EU to be proud of. It does show, however, how little the EU counts when national – perhaps in this case personal – interests come into play.

When you ask an EU representative what the first thing that comes to mind regarding Estonia is, they say it’s a country that doesn’t request much – neither support for farmers nor transition periods in other areas. You also have said that Estonia doesn’t take advantage of its membership in the European Union. Why is this so?

I don’t know why. I suppose it comes partially from a natural reticence on the part of new members, especially with our cultural habits. It is not so much a matter of asking for something but participating actively in forming EU policy.

Indeed, I think that, as you phrased it, the question has the same entitlement mentality that dominates new members’ thinking and keeps them from accomplishing much more in the EU. As long as it is a matter of “Gimme, Gimme, Gimme” and “How much did everyone get?” we will have little impact on EU policy. Estonians, like many new member states, tend to think that if an issue doesn’t directly affect them, there’s no point in pursuing it.

This stands in stark contrast to older, more experienced member states, most notably Finland, which realized long ago that if it wishes to be a player in the EU, it needs to take an interest in and support the efforts of others, even if the issues are not immediately of Finnish concern.

Secondly, too much of Estonia’s EU policy is handled by what used to be the “international relations departments” of various ministries. There is little coordination consultation between ministries regarding Estonia’s national interests, above and beyond the more narrow interests of a particular ministry. Without coordination of the sort – let’s back off on this issue in the Social Affairs Ministry and get the support of France on issue X in home and justice affairs (this is a fictional example) – we won’t really get what we want. Then again, I suspect that many people in the government simply don’t know what Estonia wants.

In general, I believe the prime minister’s office should get much more involved in EU policy than it currently is.

Do Baltic representatives cooperate much in Brussels?

It depends on the issue. In the EU, one cooperates if there are shared interests. It may turn out, however, that there is a convergence of interests between Estonia and the U.K., or Estonia and Cyprus. It is quite pointless to talk of a priori cooperation with anyone. As Lord Palmerston said, “States don’t have permanent friends, they have permanent interests.” This is also true in Europe. Different countries have different interests, and most realize that cooperating will get you further.

But there is no such thing as a natural “Baltic interest,” except for perhaps the Baltic Sea, and here one must also work with the Swedes, Finns, Danes, Poles and Germans. On TENS (Trans-European Networks) it is clear that Balts, Poles and Finns need to cooperate, etc.

Do you sometimes feel that ties are not strong enough between Estonians, Latvians and Lithuanians?

I would say that ties between Estonians, Latvians and Lithuanians are far stronger than with anyone else. I am probably the biggest defender of Latvia in the European Parliament. But I really am tired of these kinds of questions. We aren’t teenagers. We don’t constantly have to examine our relationships and feelings about each other. Indeed, I find these discussions take the place of having nothing else to say. Relations must be based on mutual interests – of which there clearly are many – and not on romanticism.

Estonian politicians usually call Estonia a Baltic country. You, however, prefer to call it a Nordic country. Why?

I have written at length on this, and I really don’t see the need to repeat an argument I made seven years ago. But the main point is that Nordic countries provide Estonia with a cultural/social model that I would like to see adopted. I see no model called “Baltic.” This in no way precludes political, military and other forms of cooperation, but frankly I am tired of answering this question until someone comes and defines to me what “Baltic identity” is. Since no one has done this, I refer people to my article from many years ago.


What is the future of Estonian-Russian relations?

As long as Russia fails to come to terms with Estonian independence, or, on a greater scale, the “greatest tragedy of the 20th century,” Mr. Putin’s characterization of the collapse of the U.S.S.R., I doubt we will see much of a change. This has little to do with Estonia. We see Russia treat Poland, Ukraine, Georgia in exactly the same neurotic way that has more to do with its own inability to deal with its past than anything Estonia has or has not done.

I understand that, in your opinion, the best way to treat Russia is to ignore it. But improving relations with an eastern neighbor could open several business opportunities in Russia, couldn’t it?

I simply believe that meeting the current demands of Russia and the concomitant costs to Estonian statehood and democracy is too high. Sure there are oil-transit trade businessmen who think they can make even more money if only the Estonian government would make Russian a state language or some other silliness. I personally don’t think Estonia should represent the financial benefit of a few people who plan to spend the rest of their life in Marbella, Spain anyway. If you want to make money from Russia, move to Russia.

Moreover, with EU membership, double tariffs have been removed so there should be no formal problems making money. If there are problems, they’re of the sort that don’t belong in civilized business dealings. On the other hand, any country that places political requirements on doing business is of dubious reliability as a partner anyway.

It is simply silly to say improving relations will improve business without looking at what the Russian government sets as preconditions for “better relations.”

How would you solve the current situation with Estonian Railway? Should the government purchase the shares in order to avoid Russian capital taking over Estonian transit business?

I have no opinion on this, as I do not know what the current situation is. In general, however, and as the current port-sale debate in the U.S. and the Mitall case in Europe shows, countries are sensitive about their infrastructure being bought up by foreign citizens. On the other hand, there is little one can do about it in a globalized world.