Household electricity prices in the EU rose by 2.9 pct in 2014

In the European Union (EU), household electricity prices rose by 2.9% on average between the second half of 2013 and the second half of 2014 to reach €20.8 per 100 kWh. Since 2008, electricity prices in the EU have increased by more than 30%. Across the EU Member States, household electricity prices in the second half of 2014 ranged from €9 per 100 kWh in Bulgaria to more than €30 per 100 kWh in Denmark. It cost €13.3 per 100 kWh in Estonia.

Household gas prices2 increased by 2.0% on average in the EU between the second halves of 2013 and 2014 to hit €7.2 per 100 kWh. Since 2008, gas prices in the EU have risen by 35%. Among Member States, household gas prices in the second half of 2014 ranged from just over €3 per 100 kWh in Romania to above €11 per 100 kWh in Sweden. It cost €4,9 per 100 kWh in Estonia.

Taxes and levies made up on average in the EU 32% of the electricity price charged to households in the second half of 2014, and 23% of the gas price.

When expressed in purchasing power standards (PPS), an artificial common reference currency that eliminates general price level differences between countries, it can be seen that, relative to the cost of other goods and services, the lowest household electricity prices were found in Finland (12.4 PPS per 100 kWh) and Latvia (13.7).

Read more from Eurostat, the statistical office of the European Union

European economy and the rouble

The flash estimate from Statistics Estonia shows that the economy grew in the first quarter by 1.2% year-on-year and declined by 0.3% quarter-on-quarter. This is weaker than was expected in the Eesti Pank December forecast, though it is still only a preliminary estimate. Lower growth than in the fourth quarter was partly a reflection of the depreciation of the rouble in November and December against the euro.

Russia has only a limited influence over the Estonian economy as a whole. However, exports to Russia have still halved compared to what they were earlier and this has hit sectors that were exporting mainly to the Russian market or intermediating goods bound for Russia. Evidence of this comes from the transport sector acting as the biggest brake on growth in the first quarter. The impact of the rouble depreciation is also indicated in the survey of manufacturing companies organised by the Estonian Institute of Economic Research, which found there were more companies in January that perceived a deterioration in competitiveness outside the euro area than those that perceived an improvement. As the rouble strengthened against the euro during the first quarter, there were more companies by April that perceived an improvement in competitiveness. After the initial shock of the fall in the rouble, exports to Russia have started to pick up again.

The strengthening of the European economy supports growth in Estonia. The turnover of goods exports was about the same in the first quarter as a year earlier with exports to the European Union growing by 5% and exports outside the European Union declining by 14%. The expectations of people and of companies for faster growth in Europe have also strengthened in recent months. The economic confidence index for the euro area, which combines the indicators for the outlook in several sectors, was at its highest level in March since August 2011.

The fall in the oil price has had a dual effect on the Estonian economy, but mostly it has been positive. The fall in the oil price at the end of 2014 contributed to the fall in consumer prices and through this it supported growth in consumption. The negative effect of the oil price fall is seen in the shale-oil extraction industry. The seasonally adjusted output of the oil industry was a quarter smaller in the first quarter than in the fourth quarter. The effect on the economy of the fall in the oil price dissipated during the quarter as the oil price rose and the euro depreciated.

Domestic demand has increased mainly because of increased consumption. The volume index for retail sales rose by around 8% in the first quarter as inflation was low and wage income increased. However the trend for investment was probably similar in the first quarter to what it was in the second half of 2014. Investment growth has been held back by large investment projects coming to an end in certain sectors, particularly energy, while investments in other corporate sectors have increased. However there was a fall in the first quarter in the utilisation rate for production capacity, which indicates that the economy still has some room for production volumes to increase even without an increase in investment.

The main domestic risk to economic growth continues to be wage pressures, which may cause unemployment to rise if labour productivity fails to grow at the same time as wages and employees do not move to more productive sectors. The negative effect of wage pressures on the economy as a whole has not yet been significant however. Despite the wage pressures, manufacturing companies feel that their competitiveness in the European market has strengthened in the past half year.

Source: Central bank of Estonia

Author: Kaspar Oja, Economist at Eesti Pank

Estonia preparing for EU presidency

In anticipation of Estonia assuming the presidency of the European Union in the first half of 2018, the preparations have begun. Matti Maasikas, the Estonia’s Ambassador to the EU, told ERR that holding the presidency is like a “matriculation exam” for the country.

The task of the presidency is to ensure coordination and consistency in the decision-making process of the European Council and to facilitate negotiations with the European Parliament and European Commission.

Estonia will employ approximately 1,300 dedicated civil servants to accomplish this task – about 1,000 of them will deal with the policies and 300 as supporting personnel. The army of professionals will have to lead 200 working groups, make preparations for processing between 500-700 bills, and organize 1,600-2,000 official meetings.

Half of the 1,000 officials will be working as group or deputy heads, and about 200 will have to be based in Brussels, doubling the number of Estonians currently working at the Estonian representation to the EU. However, despite increasing the number of civil servants in Brussels, Estonia is not planning to expand its existing one, or rent new offices in Brussels – more people have to share the same floor space.

During the current coalition talks between the Reform Party, Social Democrats and IRL, there have been discussions about creating a European affairs’ minister position in the new cabinet, with the special responsibility of preparing for EU presidency.

Matti Maasikas is convinced that in order to ensure smooth presidency, Estonia needs a dedicated minister. “Holding the presidency of the EU is like a matriculation exam for Estonia and it needs an excellent outcome. None of the ambitious projects in Estonia have succeeded, nor will succeed, without a political lead. And none of the countries previously holding the EU presidency have done it without a minister of European affairs,” Maasikas said.

The former EU commissioner Siim Kallas is rumoured to be one of the candidates for the job, but this would effectively rule him out running for President of Estonia, when the position becomes vacant in 2016.

The presidency will cost Estonian tax payer at least 74 million euros, most of it will be spent on organizing meetings and events in Estonia, but 4 million euros will be allocated for presenting cultural events in Brussels and other European capitals. By comparison, Estonia’s neighbour Latvia, who is currently hosting the EU presidency, spent 9 million euros for cultural programs and bought a new residence for its representation in Brussels.

In addition to EU presidency, Estonia is also celebrating the centenary anniversary of its independence in 2018, adding extra pressure for various institutions.

Source: ERR News via Estonian Review

EIB provides 200 mEUR to support strategic investments in Estonia

The European Investment Bank (EIB) is establishing a new EUR 200 million loan facility for Estonia to support investments in research and innovation, sustainable transport infrastructure and the development of SMEs. The EIB loan will help Estonia to successfully absorb EU structural funds over the period 2014 – 2020.

“There’s no doubt that EU structural funds have already had a positive impact on the Estonian economy. We must continue to take advantage of these funds in the coming years” said Maris Lauri, the Finance Minister of Estonia, after signing the loan agreement with the EIB. She added: “Our aim is to take a long-term view and invest in building human capital and developing high value-added businesses. But these long-term investments require a lot of capital, even with the availability of EU funds, and that is why we value the on-going support of the EIB in providing long-term financing for projects that will improve Estonia’s competitiveness internationally, in turn creating more and better jobs.”

Pim van Ballekom, EIB Vice-President responsible for lending in Estonia, said: “With this support for key investments, the EIB is stepping up its efforts to strengthen the competitiveness of the Estonian economy and promote the effective use of the EU grant funds earmarked for Estonia. We are building on the excellent cooperation with the Estonian authorities and joining forces with the European Commission to support a large number of projects contributing to sustainable economic growth and a better quality of life for the people of Estonia.”

The EUR 200 million loan will be available as co-financing for selected projects under the Estonian operational programme for the Cohesion Policy Funds and the Rural Development Programme for 2014 – 2020. The EU structural funds will meet a fixed percentage of the costs of eligible projects, with the remaining part being covered from the State budget or by drawing on this EIB facility.  The loan will primarily support projects in the following sectors: research, technological development and innovation; transport, water and environmental protection; and infrastructure development in rural areas. The facility will furthermore focus on investments in education, and health-care, as well as improving training and access to employment. These investments will contribute to the further development of a knowledge-intensive and internationally competitive economy, a clean environment and sustainable transport infrastructure, which in turn will help to create the conditions for smart, sustainable and inclusive growth.

This loan is a continuation of the sound partnership between the EIB and Estonia, with the Bank of the European Union having already lent EUR 550m under a similar EU funds co-financing facility covering the period from 2007 up to 2013. To obtain an EU grant for an eligible project, the government must provide the co-funding. While the co-funding will largely be provided from budget funds, the EIB facility will be available to supplement these funds and to ensure that Estonia uses as much of the available EU funding as it can.

Background information:

The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. In 2009-2013, the EIB provided loans in Estonia totalling EUR 1.37bn.

Source: Estonian Ministry of Finance

Minister: EU-US free trade talks must be transparent

Speaking at a meeting of European Union trade ministers in Brussels on Friday, Estonia’s Minister of Foreign Trade and Entrepreneurship Anne Sulling said Estonia considers it important that progress in the negotiations on the Transatlantic Trade and Investment Partnership (TTIP) was made based on the negotiating guidelines agreed by the member states and that the negotiating process itself was as transparent as possible.

Sulling said that while the mandate for the talks and some of the EU positions have been made public already earlier, more information must be supplied in order for the public to be better informed about what is being negotiated, spokespeople for the Estonian Ministry of Economy and Communications said.

“The free trade agreement between the European Union and the United States is very ambitious and embraces a wide variety of issues. To avoid potential misconceptions, one must be more open in the negotiating process than so far,” Sulling said.

As the Estonian minister said, EU Trade Commissioner Cecilia Malmstrom has confirmed that the free trade treaty between the EU and the United States is definitely a priority for the European Commission and the commissioner hopes to be able to give a new impetus to the negotiations, which all member states are expecting.

“Estonia backs an agreement that promises profound liberalization that is as wide-ranging as possible. We find that in addition to the European Union and the United States also other countries stand to gain from this agreement. If the two biggest global trade partners agree about rules between themselves, this will have a positive effect also on third countries as well as the global trade system,” Sulling said.

The impact from the EU-U.S. free trade treaty on the EU economy is estimated to total 100 billion euros annually. The direct and indirect impact on Estonia might be even bigger because of Estonia’s high degree of dependence on foreign trade. For Estonia the United States was the eighth biggest trading partner in 2013. Estonia’s exports to the United States in that year totalled 358 million euros, making up 2.9 percent of Estonia’s total exports.

Source: Estonian Review via BNS

EU supports Estonian milk producers with €6.9 million

The European Commission confirmed its intention to adopt a 28-million euro support package for milk producers in Estonia, Latvia and Lithuania on Wednesday. The new package will be the latest in a series adopted by the European Commission in response to the Russian ban on the importation of certain EU agricultural products.

“I am very conscious of the significant impact that the Russian ban has had on dairy producers in the three Baltic countries given their exposure to the Russian market and the drop in prices,” said the EU commissioner for agriculture and rural development, Phil Hogan.

“When we look at the share of national production previously exported to Russia and the drop in prices since the start of the crisis, we see that the dairy sectors in Latvia, Lithuania and Estonia have been particularly adversely affected. I am pleased, therefore, that the Commission intends to provide support in the form of a financial envelope for each of the three countries which will support those dairy farmers which, as a result of the Russian ban, are encountering liquidity problems in exceptional circumstances,” Hogan said.

The amount of support being provided to each of the three countries is 6.9 million euros for Estonia, 7.7 million for Latvia and 14.1 million for Lithuania, based on their respective 2013-2014 milk production levels.

Source: ERR via Estonian Review

Cabinet agreed on potential routes for Rail Baltic

On Thursday, the Cabinet endorsed the preferred route corridors for Rail Baltic as proposed by the Ministry of Economic Affairs and Communications (MEAC) and consultants.

A more detailed examination will be conducted on two prospective routes in Harju county and the northern part of Rapla county and on one route in the southern part of Rapla county. The preferred route options in Harju county include the solution proposed by the county governor and the route corridor east of the Nabala Nature Reserve. In the southern part of Rapla county, the Government supported the route option 16d, proposed by the county governor, taking the rail track even further to the east from Kohila small town and Prillimäe village. In Pärnu county, work continues on one route corridor, which runs over fields and is least disruptive to the sensitive natural environment while also saving almost 11 million euros in costs.

The Minister of Economic Affairs and Infrastructures will propose a preferred route option for Harju county and the northern part of Rapla county to the Government in the spring of the coming year, following the publication of a draft plan. MEAC also continues development of a conceptual design for the entire route.

Furthermore, MEAC and the Technical Surveillance Authority have to draw up proportional alleviation measures to reduce the negative impact of railway construction on the built, natural, economic and cultural environments near the railway.

The length of the route in Estonia will be approximately 211 kilometres; it will cost 1.1 billion euros to build, of which 650 million will be paid from the EU budget and 500 million from Estonia’s contribution to cost-sharing.

The next stage will be drafting of more detailed plans for track crossings, various access routes and new transport links. The preliminary draft plan will be presented in the beginning of 2015 during public consultations in local governments.

Rail Baltic is an envisaged railway to connect Estonia with the rest of Europe as well as with the neighbouring Latvia and Lithuania. Supported by EU funding, the project is currently at a preparatory stage, with construction expected to start in 2017 or 2018.

Source: Government Communication Unit via Estonian Review

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