Construction price index in continuous fall

According to Statistics Estonia, in the 2nd quarter of 2009 the percentage change of the construction price index was -8.8% compared to the 2nd quarter of 2008. The construction price index fell for the second quarter in succession compared to the same quarter of the previous year.

In the 1st quarter of this year the construction price index fell 4.7% compared to the same quarter of the previous year, but in the 2nd quarter the fall deepened. In the 2nd quarter the fall of the construction price index was mainly influenced by the 17% decrease in the labour costs. The price indices of building machines and building materials are also in the falling trend. Of building materials, the index was mainly influenced by the fall in the prices of products of concrete, metal products, and of doors and windows.

In the 2nd quarter of 2009 compared to the 1st quarter of 2009, the change of the construction price index was -3.9%, mainly influenced by the decrease in the labour costs.

In the 2nd quarter of 2009 the percentage change in the repair and reconstruction work price index was -3.6% compared to the 1st quarter of 2009 and -8.4% compared to the 2nd quarter of the previous year.

The calculation of the construction price index covers four groups of buildings — detached houses, blocks of flats, industrial buildings and office buildings, as well as office buildings covered by the repair and reconstruction work price index. The index expresses the change in the expenditures on construction taking into consideration the price changes of basic inputs (labour force, building materials and building machines).

Change in the construction price index, 2nd quarter 2009

  1st quarter 2009 –
2nd quarter 2009, %
2nd quarter 2008 –
2nd quarter 2009, %
TOTAL -3.9 -8.8
labour force -7.4 -17.0
building machines -1.4 -4.0
building materials -2.7 -5.5
Index of detached houses -3.6 -8.7
Index of blocks of flats -3.9 -8.9
Index of industrial buildings -3.9 -8.7
Index of office buildings -4.1 -9.1

Change in the repair and reconstruction work price index, 2nd quarter 2009

  1st quarter 2009 –
2nd quarter 2009, %
2nd quarter 2008 –
2nd quarter 2009, %
TOTAL -3.6 -8.4
labour force -7.4 -16.7
building machines -0.7 -0.9
building materials -1.8 -4.3

 

Source: Statistics Estonia

Port of Tallinn’s passenger numbers

Ports of Estonia’s Tallinna Sadam (Port of Tallinn) served 766 845 passengers in June, which marks a growth of 15% compared with May.
Compared with June 2008, the number of passengers decreased by 6 493, it appears from the figures released by the state-owned port company.
Some 402 355 passengers, or 52%, arrived or departed on ships of the listed Tallink group. Tallink’s share of the passenger traffic declined by six percentage points in comparison with May.
Viking Line had a market share of 21% and Eckerö Line 14%.
Cruise ships carried 99 638 passengers in June, an increase of 22% against the same month last year. The market share of cruise ships at the port of Tallinn was 13%.

Source: Estonian Review

Tallinna Kaubamaja sees 5 pct sales growth in H1

Unaudited consolidated sales of the listed Estonian retailer Tallinna Kaubamaja in the first half of the year totalled 3.2 billion kroons (EUR 204.5 mln), up by 5.1% against the same period of 2008.
The growth in the conditions of economic crisis was mainly due to the expanded chain of Selver grocery stores, whose sales exceeded the year-earlier turnover by a fifth, the company said.
Tallinna Kaubamaja CEO Raul Puusepp observed that consumers have in the present situation understandably started to behave more rationally, looking for better prices and more advantageous offers.

Source: Estonian Review

Estonia 22nd in Global Enabling Trade Index

Estonia ranks 22nd, Lithuania 40th and Latvia 44th in the Global Enabling Trade Index drawn up by the World Economic Forum.
In the case of Estonia, the Forum underlined its strong IT and telecommunications infrastructure and the simplicity and effectiveness of border processes.
Among other things, Estonia had a higher ranking in the index than Japan, which placed 23rd.
Singapore ranked first in the index, with Hong Kong in second and Switzerland in third place.

Source: Estonian Review

Visa free travel to Botswana

Foreign Minister Urmas Paet and Prime Minister Andrus Ansip had meetings with Foreign Minister of the Republic of Botswana Phandu Tombola Chaha Skeleman, who was in Estonia on a visit. In his meeting with Urmas Paet, Chaha Skeleman informed the Estonian foreign minister that Botswana has implemented visa-free travel for Estonian citizens travelling to Botswana.
While discussing bilateral relations between Estonia and Botswana, relations in international organisations, developments in the region, and co-operation between the European Union and African nations, Foreign Minister Paet emphasised that after joining the European Union Estonia has done increasingly more diplomatic work directed towards Africa. “The development of Botswana is one of Africa’s success stories, and Botswana has one of the most dynamic economies in Africa. This is why Estonia is interested in exchanging information and finding opportunities to intensify bilateral relations,” said Paet.
Paet stated that Estonia is looking forward to visa-free access to Botswana for Estonian citizens. “This will increase the interest of tourists and create better conditions for entrepreneurs,” he noted.
Chaha Skeleman also met with Prime Minister Andrus Ansip. Their discussion focus was mainly on the field of IT and on opportunities for developing tourism-related co-operation. At the meeting, it was also noted that regardless of the differences between the two countries and nations, there are also important joining aspects, such as the colours of the national flag.
“Although our nations are different, we are emotionally connected by the colours of our flags,” said Prime Minister Ansip.
The prime minister introduced the e-government to the guests and described other popular e-services in Estonia, such as e-Tax Board, e-School, online banking and the use of the ID-card.

Source: Estonian Review

Landfills failing to comply with environmental requirements to be closed

According to the Waste Act, all landfills which fail to comply with the requirements shall be closed for waste deposit by 16 July 2009 and be conditioned by 16 July 2013. As of now, the last ten landfills in Estonia failing to comply with the requirements have been closed: Oru, Käina, Sillamäe, Sõmeru, Adiste, Kudjape, Aardlapalu, Valga, Viljandi and Räpo. New landfills have also been brought into compliance with environmental requirements and established, and some closed landfills have already been conditioned

The closure of landfills mainly concerns South-West Estonia and the islands. As of 16 July this year, waste to be deposited in Viljandi, Tartu, Põlva, Valga and Võru County should be sent to Pärnu, Järva or Jõgeva County. An increase in the price of refuse collection and waste transport can be prevented by separate collection of waste on site to the greatest possible extent and by the recovery of waste in the largest possible quantity. The Counties of Lääne, Pärnu, Rapla, Jõgeva and Järva have already closed their landfills which failed to comply with the requirements and waste from these regions has been transported to the landfills meeting environmental requirements already for the last few years. 

Sorting and temporary storage of construction waste as well as composting of biodegradable waste can continue in closed landfills on the basis of waste permits. These types of waste can also be used in conditioning the landfill if it has been foreseen in the closure project.

Until the 1990s, almost each larger settlement and company had a landfill and, in most cases, they lacked any kind of environmental supervision. Only after the restoration of Estonia’s independence, landfills creating environmental risks and causing pollution gradually started to be closed as well as supervision carried out over waste streams, the level of environmental awareness of the population raised, etc. Since the year 2000, 5 new landfills meeting all modern technical and environmental protection standards have been introduced. One such landfill can service several counties for at least the next 30 years.

Source: Estonian Ministry of the Environment

Maritime Days until Sunday

Tallinn Maritine Days 2009

Tallinn Maritine Days 2009

 

Tallinn Maritime Days 2

Tallinn Maritime Days 2

 

Oslo ship going towards Tallinn on 16.07.09

Oslo ship going towards Tallinn on 16.07.09

read more here: https://brilliantfixer.wordpress.com/?s=marine

EU political leaders sent Obama a letter

An Open Letter to the Obama Administration from Central and Eastern Europe

by Valdas Adamkus, Martin Butora, Emil Constantinescu, Pavol Demes, Lubos Dobrovsky, Matyas Eorsi, Istvan Gyarmati, Vaclav Havel, Rastislav Kacer, Sandra Kalniete, Karel Schwarzenberg, Michal Kovac, Ivan Krastev, Aleksander Kwasniewski, Mart Laar, Kadri Liik, Janos Martonyi. Janusz Onyszkiewicz, Adam Rotfeld, Vaira Vike-Freiberga, Alexandr Vondra, Lech Walesa.

We have written this letter because, as Central and Eastern European (CEE) intellectuals and former policymakers, we care deeply about the future of the transatlantic relationship as well as the future quality of relations between the United States and the countries of our region.  We write in our personal capacity as individuals who are friends and allies of the United States as well as committed Europeans.

Our nations are deeply indebted to the United States. Many of us know firsthand how important your support for our freedom and independence was during the dark Cold War years. U.S. engagement and support was essential for the success of our democratic transitions after the Iron Curtain fell twenty years ago.  Without Washington’s vision and leadership, it is doubtful that we would be in NATO and even the EU today.  

We have worked to reciprocate and make this relationship a two-way street.  We are Atlanticist voices within NATO and the EU.  Our nations have been engaged alongside the United States in the Balkans, Iraq, and today in Afghanistan.  While our contribution may at times seem modest compared to your own, it is significant when measured as a percentage of our population and GDP.  Having benefited from your support for liberal democracy and liberal values in the past, we have been among your strongest supporters when it comes to promoting democracy and human rights around the world.

Twenty years after the end of the Cold War, however, we see that Central and Eastern European countries are no longer at the heart of American foreign policy. As the new Obama Administration sets its foreign-policy priorities, our region is one part of the world that Americans have largely stopped worrying about.  Indeed, at times we have the impression that U.S. policy was so successful that many American officials have now concluded that our region is fixed once and for all and that they could “check the box” and move on to other more pressing strategic issues.  Relations have been so close that many on both sides assume that the region’s transatlantic orientation, as well as its stability and prosperity, would last forever.

That view is premature.  All is not well either in our region or in the transatlantic relationship.   Central and Eastern Europe is at a political crossroads and today there is a growing sense of nervousness in the region.  The global economic crisis is impacting on our region and, as elsewhere, runs the risk that our societies will look inward and be less engaged with the outside world.  At the same time, storm clouds are starting to gather on the foreign policy horizon.   Like you, we await the results of the EU Commission’s investigation on the origins of the Russo-Georgian war.  But the political impact of that war on the region has already been felt.  Many countries were deeply disturbed to see the Atlantic alliance stand by as Russia violated the core principles of the Helsinki Final Act, the Charter of Paris, and the territorial integrity of a country that was a member of NATO’s Partnership for Peace and the Euroatlantic Partnership Council –all in the name of defending a sphere of influence on its borders.

Despite the efforts and significant contribution of the new members, NATO today seems weaker than when we joined.  In many of our countries it is perceived as less and less relevant – and we feel it.  Although we are full members, people question whether NATO would be willing and able to come to our defense in some future crises. Europe’s dependence on Russian energy also creates concern about the cohesion of the Alliance.  President Obama’s remark at the recent NATO summit on the need to provide credible defense plans for all Alliance members was welcome, but not sufficient to allay fears about the Alliance´s defense readiness. Our ability to continue to sustain public support at home for our contributions to Alliance missions abroad also depends on us being able to show that our own security concerns are being addressed in NATO and close cooperation with the United States 

We must also recognize that America’s popularity and influence have fallen in many of our countries as well. Public opinions polls, including the German Marshall Fund’s own Transatlantic Trends survey, show that our region has not been immune to the wave of criticism and anti-Americanism that has swept Europe in recent years and which led to a collapse in sympathy and support for the United States during the Bush years. Some leaders in the region have paid a political price for their support of the unpopular war in Iraq.  In the future they may be more careful in taking political risks to support the United States.  We believe that the onset of a new Administration has created a new opening to reverse this trend but it will take time and work on both sides to make up for what we have lost. 

In many ways the EU has become the major factor and institution in our lives. To many people it seems more relevant and important today than the link to the United States.  To some degree it is a logical outcome of the integration of Central and Eastern Europe into the EU. Our leaders and officials spend much more time in EU meetings than in consultations with Washington, where they often struggle to attract attention or make our voices heard. The region’s deeper integration in the EU is of course welcome and should not necessarily lead to a weakening of the transatlantic relationship.  The hope was that integration of Central and Eastern Europe into the EU would actually strengthen the strategic cooperation between Europe and America.

However, there is a danger that instead of being a pro-Atlantic voice in the EU, support for a more global partnership with Washington in the region might wane over time. The region does not have the tradition of assuming a more global role.  Some items on the transatlantic agenda, such as climate change, do not resonate in the Central and Eastern European publics to the same extent as they do in Western Europe.

Leadership change is also coming in Central and Eastern Europe.  Next to those, there are fewer and fewer leaders who emerged from the revolutions of 1989 who experienced Washington’s key role in securing our democratic transition and anchoring our countries in NATO and EU. A new generation of leaders is emerging who do not have these memories and follow a more “realistic” policy. At the same time, the former Communist elites, whose insistence on political and economic power significantly contributed to the crises in many CEE countries, gradually disappear from the political scene. The current political and economic turmoil and the fallout from the global economic crisis provide additional opportunities for the forces of nationalism, extremism, populism, and anti-Semitism across the continent but also in some our countries.

This means that the United States is likely to lose many of its traditional interlocutors in the region.  The new elites replacing them may not share the idealism – or have the same relationship to the United States – as the generation who led the democratic transition. They may be more calculating in their support of the United States as well as more parochial in their world view. And in Washington a similar transition is taking place as many of the leaders and personalities we have worked with and relied on are also leaving politics.

And then there is the issue of how to deal with Russia. Our hopes that relations with Russia would improve and that Moscow would finally fully accept our complete sovereignty and independence after joining NATO and the EU have not been fulfilled.   Instead, Russia is back as a revisionist power pursuing a 19th-century agenda with 21st-century tactics and methods. At a global level, Russia has become, on most issues, a status-quo power. But at a regional level and vis-à-vis our nations, it increasingly acts as a revisionist one.  It challenges our claims to our own historical experiences. It asserts a privileged position in determining our security choices.  It uses overt and covert means of economic warfare, ranging from energy blockades and politically motivated investments to bribery and media manipulation in order to advance its interests and to challenge the transatlantic orientation of Central and Eastern Europe.

We welcome the “reset” of the American-Russian relations. As the countries living closest to Russia, obviously nobody has a greater interest in the development of the democracy in Russia and better relations between Moscow and the West than we do.  But there is also nervousness in our capitals.  We want to ensure that too narrow an understanding of Western interests does not lead to the wrong concessions to Russia.  Today the concern is, for example, that the United States and the major European powers might embrace the Medvedev plan for a “Concert of Powers” to replace the continent’s existing, value-based security structure.  The danger is that Russia’s creeping intimidation and influence-peddling in the region could over time lead to a de facto neutralization of the region. There are differing views within the region when it comes to Moscow’s new policies. But there is a shared view that the full engagement of the United States is needed.

Many in the region are looking with hope to the Obama Administration to restore the Atlantic relationship as a moral compass for their domestic as well as foreign policies. A strong commitment to common liberal democratic values is essential to our countries.  We know from our own historical experience the difference between when the United States stood up for its liberal democratic values and when it did not.  Our region suffered when the United States succumbed to “realism” at Yalta.  And it benefited when the United States used its power to fight for principle. That was critical during the Cold War and in opening the doors of NATO. Had a “realist” view prevailed in the early 1990s, we would not be in NATO today and the idea of a Europe whole, free, and at peace would be a distant dream. 

We understand the heavy demands on your Administration and on U.S. foreign policy.  It is not our intent to add to the list of problems you face.  Rather, we want to help by being strong Atlanticist allies in a U.S.-European partnership that is a powerful force for good around the world. But we are not certain where our region will be in five or ten years time given the domestic and foreign policy uncertainties we face.  We need to take the right steps now to ensure the strong relationship between the United States and Central and Eastern Europe over the past twenty years will endure. 

We believe this is a time both the United States and Europe need to reinvest in the transatlantic relationship.  We also believe this is a time when the United States and Central and Eastern Europe must reconnect around a new and forward-looking agenda.  While recognizing what has been achieved in the twenty years since the fall of the Iron Curtain, it is time to set a new agenda for close cooperation for the next twenty years across the Atlantic. 

Therefore, we propose the following steps:

First, we are convinced that America needs Europe and that Europe needs the United States as much today as in the past. The United States should reaffirm its vocation as a European power and make clear that it plans to stay fully engaged on the continent even while it faces the pressing challenges in Afghanistan and Pakistan, the wider Middle East, and Asia. For our part we must work at home in our own countries and in Europe more generally to convince our leaders and societies to adopt a more global perspective and be prepared to shoulder more responsibility in partnership with the United States.

Second, we need a renaissance of NATO as the most important security link between the United States and Europe.  It is the only credible hard power security guarantee we have. NATO must reconfirm its core function of collective defense even while we adapt to the new threats of the 21st century.  A key factor in our ability to participate in NATO’s expeditionary missions overseas is the belief that we are secure at home. We must therefore correct some self-inflicted wounds from the past. It was a mistake not to commence with proper Article 5 defense planning for new members after NATO was enlarged. NATO needs to make the Alliance’s commitments credible and provide strategic reassurance to all members. This should include contingency planning, prepositioning of forces, equipment, and supplies for reinforcement in our region in case of crisis as originally envisioned in the NATO-Russia Founding Act.

We should also re-think the working of the NATO-Russia Council and return to the practice where NATO member countries enter into dialogue with Moscow with a coordinated position. When it comes to Russia, our experience has been that a more determined and principled policy toward Moscow will not only strengthen the West’s security but will ultimately lead Moscow to follow a more cooperative policy as well. Furthermore, the more secure we feel inside NATO, the easier it will also be for our countries to reach out to engage Moscow on issues of common interest.  That is the dual track approach we need and which should be reflected in the new NATO strategic concept.

Third, the thorniest issue may well be America’s planned missile-defense installations. Here too, there are different views in the region, including among our publics which are divided. Regardless of the military merits of this scheme and what Washington eventually decides to do, the issue has nevertheless also become — at least in some countries — a symbol of America’s credibility and commitment to the region. How it is handled could have a significant impact on their future transatlantic orientation. The small number of missiles involved cannot be a threat to Russia’s strategic capabilities, and the Kremlin knows this. We should decide the future of the program as allies and based on the strategic plusses and minuses of the different technical and political configurations.  The Alliance should not allow the issue to be determined by unfounded Russian opposition.  Abandoning the program entirely or involving Russia too deeply in it without consulting Poland or the Czech Republic can undermine the credibility of the United States across the whole region.

Fourth, we know that NATO alone is not enough. We also want and need more Europe and a better and more strategic U.S.-EU relationship as well.  Increasingly our foreign policies are carried out through the European Union – and we support that.  We also want a common European foreign and defense policy that is open to close cooperation with the United States.  We are the advocates of such a line in the EU.  But we need the United States to rethink its attitude toward the EU and engage it much more seriously as a strategic partner.  We need to bring NATO and the EU closer together and make them work in tandem. We need common NATO and EU strategies not only toward Russia but on a range of other new strategic challenges.

Fifth is energy security. The threat to energy supplies can exert an immediate influence on our nations’ political sovereignty also as allies contributing to common decisions in NATO. That is why it must also become a transatlantic priority.  Although most of the responsibility for energy security lies within the realm of the EU, the United States also has a role to play.  Absent American support, the Baku-Tbilisi-Ceyhan pipeline would never have been built. Energy security must become an integral part of U.S.-European strategic cooperation. Central and Eastern European countries should lobby harder (and with more unity) inside Europe for diversification of the energy mix, suppliers, and transit routes, as well as for tough legal scrutiny of Russia’s abuse of its monopoly and cartel-like power inside the EU.  But American political support on this will play a crucial role.  Similarly, the United States can play an important role in solidifying further its support for the Nabucco pipeline, particularly in using its security relationship with the main transit country, Turkey, as well as the North-South interconnector of Central Europe and LNG terminals in our region.

Sixth, we must not neglect the human factor.  Our next generations need to get to know each other, too.  We have to cherish and protect the multitude of educational, professional, and other networks and friendships that underpin our friendship and alliance.  The U.S. visa regime remains an obstacle in this regard.  It is absurd that Poland and Romania — arguably the two biggest and most pro-American states in the CEE region, which are making substantial contributions in Iraq and Afghanistan — have not yet been brought into the visa waiver program. It is incomprehensible that a critic like the French anti-globalization activist Jose Bove does not require a visa for the United States but former Solidarity activist and Nobel Peace prizewinner Lech Walesa does.   This issue will be resolved only if it is made a political priority by the President of the United States.

The steps we made together since 1989 are not minor in history. The common successes are the proper foundation for the transatlantic renaissance we need today. This is why we believe that we should also consider the creation of a Legacy Fellowship for young leaders. Twenty years have passed since the revolutions of 1989. That is a whole generation. We need a new generation to renew the transatlantic partnership. A new program should be launched to identify those young leaders on both sides of the Atlantic who can carry forward the transatlantic project we have spent the last two decades building in Central and Eastern Europe.

In conclusion, the onset of a new Administration in the United States has raised great hopes in our countries for a transatlantic renewal.  It is an opportunity we dare not miss. We, the authors of this letter, know firsthand how important the relationship with the United States has been. In the 1990s, a large part of getting Europe right was about getting Central and Eastern Europe right.  The engagement of the United States was critical to locking in peace and stability from the Baltics to the Black Sea.  Today the goal must be to keep Central and Eastern Europe right as a stable, activist, and Atlanticist part of our broader community.  

That is the key to our success in bringing about the renaissance in the Alliance the Obama Administration has committed itself to work for and which we support. That will require both sides recommitting to and investing in this relationship.   But if we do it right, the pay off down the road can be very real. By taking the right steps now, we can put it on new and solid footing for the future.

Valdas         Adamkus                           Former President of the Republic of Lithuania

Martin          Butora                               Former  Ambassador of the Slovak Republic to the United States

Emil             Constantinescu                Former President of the Republic of Romania

Pavol           Demes                               Former  Minister of International Relations and Advisor to the President, Slovak Republic

Lubos          Dobrovsky                         Former  Minister of Defense of Czechoslovakia, former Czech  Ambassador to Russia

Matyas        Eorsi                                  Former Secretary of State of the Hungarian MFA

Istvan         Gyarmati                           Ambassador, President of the International Centre for Democratic Transition in Budapest

Vaclav         Havel                                Former President of the Czech Republic

Rastislav     Kacer                                Former  Ambassador of the Slovak Republic to the United States

Sandra         Kalniete                            Former Minister of Foreign Affairs, Latvia

Karel            Schwarzenberg                 Former Minister of Foreign Affairs, Czech Republic

Michal          Kovac                               Former President of the Slovak Republic

Ivan             Krastev                             Chairman of the Centre for Liberal Strategies in Sofia, Bulgaria

Aleksander Kwasniewski                      Former President of the Republic of Poland

Mart             Laar                                   Former Prime Minister of Estonia

Kadri            Liik                                    Director of the International Centre for Defense Studies in Tallinn, Estonia

Janos           Martonyi                            Former Minister of Foreign Affairs, Hungary

Janusz         Onyszkiewicz                    Former Vice-president of the European Parliament, former Defense Minister, Poland

Adam           Rotfeld                               Former Minister of Foreign Affairs, Poland

Alexandr      Vondra                              Former Minister of Foreign Affairs and Deputy Prime                                                     Minister, Czech Republic

Vaira            Vike-Freiberga                 Former President of the Republic of Latvia

Lech             Walesa                              Former President of the Republic of Poland

Source:  International Center for Defence Studies

Supplementary state budget for 2009

Estonian Second Supplementary State Budget for 2009 improves the public sector budget position by a total of EEK 5.5 billion. Within 2009 the public sector budget position has been improved a total of EEK 16.1 billion (7.3 percent of the GDP). 

Based on the Second Supplementary Budget volume of state budget revenues of the year is EEK 85.1 billion and the volume of expenditure is EEK 89.3 billion.

Background Brief on the Second Supplementary Budget for 2009

 Economical background

From 2005 to the beginning of 2007 the economic growth was very fast in Estonia and clearly exceeded the potential sustainable rate. The fast growth was accompanied by the loan boom and increase in real estate prices.

Consumer confidence reached the highest level of all times and the increase in private consumption exceeded 20% in the beginning of 2007. However, in spring 2007 the real estate market experienced a turnaround – the price increase was replaced by a decrease and the number of transactions started to decline. This caused a decrease in the real estate wealth of residents and uncertainty started to grow which had a negative impact on the consumer behaviour and investments.

These domestic negative trends were intensified by the international financial crisis in 2008 which outgrew into the global crisis and decreased considerably the export demand of Estonia. In addition to the growth in global risk margins and decrease in the loan demand, financial sector became cautious which also intensified the decline in investments and limited the economic activities of companies.

Current Status of Estonian Economy

As a result of the above, the Estonian economy has experienced a deepening fall from the Q2 of 2008, which has been accompanied with the fast growth in unemployment starting from the end of 2008. The Estonian gross domestic product (GDP) decreased by 15.1% in Q1 of 2009 in comparison with the same quarter last year. The fast decrease in domestic demand was the most important factor influencing the foregoing (21.4%). Export of goods and services also declined due to the shrinkage of external demand.

In Q1 of 2009, the number of employed persons amounted to 612,100, which is 44,400 persons less than at the same time last year. The unemployment rate increased to the highest level within the last eight years in Q1, being 11.4%. The average gross wage per month was EEK 12,147 within the period. The monthly wage has decreased by 1.5% or EEK 190 in comparison with the same period last year.

At the same time, the current account was balanced in the first quarter of this year, which means that involvement of extensive external loans is no longer required to finance the current deficit. Consumer prices decreased in June by 0.9% in comparison with June 2008; the monthly comparison shows that a price decrease commenced in Estonia in November 2008 and this is alleviation for all the consumers under the conditions of decreasing income.

The economic sentiment indicator improved in May for the second month in a row.

Tendencies in European and World Economy

Economic growth of the US, European Union and eurozone was? also negative in Q1 of 2009. Annual inflation of the eurozone was -0,1% in June.

Figure 1. Annual economic growth in different countries in the first quarter of 2009 (%)

Country EE LV LT DE HU SL SK FI GB US JP SE
GDP growth in Q1 of 2009 -15,1 -18 -11,8 -6,9 -4,7 -8,5 -5,4 -7,6 -4,1 -2,5 -9,1 -6,4

 

 

How Does the Foregoing Affect the State Budget?

 State revenues depend on the internal development as well as the development of economy of our trading partners. The Estonian economy, like the economies of almost all the other countries, is in the recession and this has also caused the decrease in revenues. Estonia is a small country and irrespective of the reserves accumulated during the years of economic growth, it is impossible to incur expenditures in the same manner as earlier based on the current revenue base.

The state has decreased the expenditures of the state budget this year and has searched for solutions from the revenue side twice. The state budget has been planned with a deficit from the very beginning, which means that the state revenues of the current year form less than the planned expenditures.

 Figure 2. State Budget Volume in 2009

  State budget for 2009 Along with Supplementary Budget 1 Along with Supplementary Budget 2
Revenues (billions of EEK) 97,8 88,2 85,1
Expenditures (billions of EEK) 98,4 91,9 89,3

 

NB! The Maastricht criteria take into account the general government deficit which is considerably more extensive than the central government position. In addition to the state budget, the general government includes the Health Insurance Fund, Unemployment Insurance Fund, local governments, state foundations, etc.

 Within 2009 the general government budget position has been improved a total of EEK 16.1 billion (7.3 percent of the GDP).

Savings

Operating expenses are decreased all over the state in the amount of EEK 613.4 million, incl. personnel expenses of EEK 288.2 million and management costs of EEK 325.2 million. Compared with the budget of 2008, operating expenses have decreased by a total of EEK 1.865 billion or 10.6%. Personnel expenses have decreased by EEK 955.6 million or 9.6% and management costs by EEK 909.9 million or more than 12%.

Provisions decrease by a total of EEK 1.929 billion and most of arises from the temporary suspension of contributions to mandatory funded pension. In addition to the above, provisions decrease by another EEK 520.7 million mostly on account of the activity support.

Investments decline by a total of EEK 54.2 million, incl. investment aid of EEK 51 million. The major part of the cut is formed of the decrease in the support assigned to the construction of the Narva bridge (EEK 50 million).  

The major decline in budgetary expenditures were made in the Ministry of Finance (EEK 1.440 billion), Ministry of Defence (EEK 187.4 million), Ministry of Culture (EEK 123.6 million), Ministry of the Interior (EEK 251.2 million) and Ministry of Social Affairs (EEK 182.8 million).

The greatest decreases in expenditures were the following:

  • state contributions to the funded pension in a total of EEK 1.408 billion;
  • expenditures of the state health insurance of the Health Insurance Fund in a total of EEK 376.4 million;
  • decrease in defence expenditures in a total of EEK 187.4 million;
  • decrease in expenses on renovation of the Narva bridge in a total of EEK 50 million;
  • state-commissioned education to universities in a total of EEK 45.3 million;
  • provisions to local governments, incl. educational costs, expenses of school lunch, subsistence benefits, funds for provision of social benefits and services, local government revenue base stabilisation support and supplementary payments to rural municipalities of islands and rural municipalities which include small islands in a total of EEK 36.8 million;
  • decrease in expenditures intended for the purchase of land in a total of EEK 35.5 million;
  • decrease in management costs of custodial institutions by EEK 30 million;
  • decrease in death grant in a total of EEK 20 million.

 Changes in Revenues

Taking into account the changes to be made by Supplementary Budget 2, the expected tax receipt of 2009 is EEK 63.4 billion and the expected non-tax revenues form EEK 21.6 billion. The total expected revenue of the state budget for 2009 is EEK 85.1 billion. In comparison with the State Budget Act for 2009 adopted in autumn, the state budget revenues have been decreased by a total of 13.1% under Supplementary Budget 2.

 Figure 3. Major Tax Changes

Substance of the change Impact on budget position of 2009 Impact on price of goods Impact on inflation*
2009 2010
Value added tax, the tax rate increase from 18% to 20%As from 01.07.2009 EEK 800 million 1,7% 0,81% 0,81%
Fuel excise duty, excise duty rate increase by 10.8–12%As from 01.07.2009 EEK 175 million 2,3% 0,15% 0,15%
Natural gas excise duty, excise duty rate increase from EEK 157 to EEK 367 per 1,000 m3As from 01.07.2009 EEK 45 million 3,7% 0,05%** 0,05%**
Change in environmental charges. ***As from 1.01.2010   0% -0,04%

* Irrespective of the inflationary impact accompanying the tax increases, the consumer prices continue to decrease, therefore these changes do not endanger the compliance with the Maastricht criteria.

** Including impact on inflation through appreciation of heat.

*** Electricity production environmental charges decrease in 2010, wherefore the impact on the CPI is negative.

 Review of Tax Changes Related to Supplementary Budget 2

In connection with the Second Supplementary Budget, the Value Added Tax Act, Alcohol, Tobacco, Fuel and Electricity Excise Duty Act were also amended. In terms of time the amendments are as follows.

 Changes from July 1st 2009

1)     value added tax rate is raised from 18 percent to 20 percent, reduced rate remains 9 percent;

2)     fuel excise duty rates are raised by 10–12%:

new excise duty rate of unleaded petrol is EEK 6,228 per 1,000 litres (formerly EEK 5,620);

new excise duty rate of diesel fuel is EEK 5,787 per 1,000 litres (formerly EEK 5,165);

new excise duty rate of diesel fuel for specific purposes and light fuel oil is EEK 1,056 per 1,000 litres (formerly EEK 960);

excise duty rate of natural gas increases to EEK 367 per 1,000 m3 (formerly EEK 157);

3)     the quantities of tobacco products exempt from excise duty brought by a traveller into Estonia from outside the EC territory are reduced as follows:

from 1 July 40 cigarettes instead of 200 cigarettes and 50 grams of smoking tobacco and chewing tobacco instead of 250 gram  may be brought into Estonia;

 4)     cigarettes, the revenue stamps subject to fastening on the sales packaging of which have been issued by the Tax and Customs Board prior to 1 July 2009, may be transferred at a price which is higher by the increase of the value added tax which is up to 1.7 percent of the maximum retail price until 30 September 2009. 

Changes from January 1st 2010

 1) excise duty rate of cigarettes is raised by 5%:

 the new fixed rate is EEK 525 and the proportional rate is 33 percent of the maximum retail price of cigarettes (the current rate is EEK 500 and 31%);

2) a requirement of a minimum amount of excise duty to be paid on cigarettes is established:

excise duty of at least EEK 1,001.40 per 1,000 cigarettes must be paid on cigarettes; 

3) the volume of the sales packaging of strong alcoholic beverages subject to revenue stamping decreases from 0.2 litres to 0.05 litres:

alcohol in a sales packaging of 0.05 litres to 0.2 litres (0.2 excluded) released for consumption prior to 1 January 2010 may be sold without revenue stamping until 31 January 2010;

5)     the requirement of revenue stamping for alcohol which is a medicinal product within the meaning of the Medicinal Products Act is declared invalid.

Source: fin.ee
Estonian Ministry of Finance

Eesti Energia announces tender to build new units

Narva Elektrijaamad (Narva Power Plants), a subsidiary of the Estonian power utility Eesti Energia, has announced a tender to design and build a new oil shale-fired thermal power plant near the north-eastern city of Narva.
The autonomous thermal power plant to be built on free land of the existing Estonian Power Plant and in its immediate vicinity is to have one or two energy units with a capacity of 300 or 400 megawatts, it appears from the tender announcement.
One unit consists of two boilers and one turbine. As an alternative, bidders also can put in an offer for mono-units of one boiler and one turbine.
According to the tender conditions, applicants for tender documents are required to have had average net turnover of at least three billion euros in the last three business years.
The company reserves the right to cancel the construction of one generating unit within about one year of the signing of the contract. The first unit is supposed to be completed in 2015.
The planned starting date of the tender is 30 June 2010 and the planned end date 4 March 2015.
Applications for participation in the tender will be accepted until 17 September.
Eesti Energia CEO Sandor Liive has earlier said that the new energy units will cost 800 million euros.
The two generating units built at the Narva-based power plants in the middle of this decade cost 250 million euros.

Source: Estonian Review