EU ministers discussed the free movement of data

On June 17. in Tallinn, European Union’s Competitiveness and Information Technology Ministers discussed how to better exploit the potential of the European single market through the free movement of data.

“The digital solutions that we use daily in our home countries, for example to communicate with public authorities, should also be available in other countries. I’ve invited my colleagues to think about how to improve the user experience of the single market for both citizens and enterprises,” Kadri Simson, the Estonian Minister of Economic Affairs and Infrastructure said.

The free movement of data to authorities in other countries would mean, for example, that an architect would not need to apply for a business permit to design a house in another Member State. Data already submitted in one member state and verified by the authorities could be made available digitally to the competent authority in another country, which could then immediately identify which qualifications and rights the person had.

“Stimulating the cross-border provision of services has a positive effect on the economy as a whole. It supports the establishment and expansion of businesses and the creation of jobs, and gives consumers more choice at more affordable prices,” Simson explained.

The main objective of the Competitiveness Ministers is to identify obstacles that limit the free movement of data and find ways to move forward.

“For many European countries, the problem is how to create a clear and common legal framework for an EU-wide data economy,” Simson said.

Estonia aims to agree on a general approach for the introduction of e-services during its presidency.

Source: Estonian Ministry of Economic Affairs and Infrastructure

Estonia to lead the EU budget negotiations

The Council of the EU, the European Parliament and the representatives of the European Commission are meeting today in Brussels to discuss the 2018 EU draft budget for the first time. The negotiations will be led by the Deputy Minister of Finance Märt Kivine.

“The successful approval of the revenue and expenditure of the EU budget for 2018 is one of the priority tasks during the Estonian Presidency of the Council of the EU,” Märt Kivine said. “The Council’s position provides a solid foundation, based on which to agree on such EU budget for 2018 that would take the European Union forward. The Council proposes, in line with its generally frugal approach to the budget, to focus the resources on areas with the highest added value.”

The ambassadors of the member states approved the common position of the Council of the EU with regard to the 2018 EU draft budget on Wednesday. The Council’s position for 2018 provides €158.9 billion for commitments with regard to expenditure. A total of €144.4 billion of the 2018 budget has been planned for payments in the following year, which is 7.4% more than this year.

The Council’s position strongly focuses on measures, which aim to stimulate the creation of jobs and growth, strengthen security and address the migration issue.

In the 2018 budget, the Council wants to contribute to smart and inclusive growth by providing €76.5 billion for commitments, which is 2% more than this year. In doing so, the Council requests to increase its appropriations for commitments in connecting Europe facility by nearly 4%, which would amount to €2.7 billion in support of trans-European networks in transport, energy and communication networks.

According to the Council’s proposal, the Fund for European Aid to the Most Deprived (FEAD) would receive €556.9 million in the following year. The appropriations from structural and investment funds will increase by a quarter, since the regional policy has been successfully implemented in the member states. The payments will increase significantly, because the implementation of the 2014-2020 budget period programmes has reached cruising speed following the initial start-up years.

Source: Estonian Ministry of Finance

Minister: the EU budget must contribute to growth

The Economic and Financial Affairs Council, commonly known as the Ecofin Council, approved its guidelines for the 2018 EU budget today.

“The EU budget should help boost smart and inclusive growth. To achieve this, the budget should concentrate on new investments conducive to jobs and growth,” said the Minister of Finance of Estonia, Sven Sester. “However, steps should be taken to ensure that the red tape associated with the use of EU funds does not increase. Therefore, we urge all institutions, bodies and agencies to reduce or freeze their administrative expenditure as much as possible and to request financing only for justified needs.”

The guidelines by the finance ministers of the European Commission marked the start of the procedure for drawing up the general budget of the Union. During its term of the EU presidency, Estonia must lead the negotiations with the European Parliament, the Council of the European Union, which represents the governments of the Member States, and the European Commission preceding the adoption of the EU budget.

The finance ministers also gave the discharge to the Commission for the implementation of the EU’s budget for 2015. The discharge to the Commission was prepared in the light of an annual report from the Court of Auditors.

The finance ministers agreed on the general approach of the Anti-Tax Avoidance Directive draft (ATAD2). The new legislation will counter tax evasion and avoidance stemming from disparities between the taxation systems of different countries.

“Tax evasion and tax avoidance should not give anyone an undue competitive advantage,” said Sven Sester. “Estonia supports the fight against tax evasion and tax avoidance as well as the common approach proposed by Malta, holders of the current EU presidency.”

ATAD2 will be a supplement to the Anti-Tax Avoidance Directive adopted last summer, addressing hybrid mismatches with regard to non-EU countries. Hybrid mismatches occur where the same transaction or entity is treated differently in two different jurisdictions, providing an opportunity to avoid taxation in cross-border cases.

On Tuesday, Minister of Finance Sven Sester meet with Andrus Ansip, the European Commissioner for Digital Single Market and Vice President of the European Commission, following the meeting of the Council, to discuss matters related to the forthcoming Estonian EU presidency.

At the meeting of the finance ministers of euro area countries (the Eurogroup) on Monday in Brussels, the Minister also presented Estonia’s proposals for cutting red tape, including the entrepreneurial account initiative. The ministers discussed the ease of doing business in the euro area and the opportunities to improve the business climate. The discussions will continue in April.

ECB President Mario Draghi, the IMF’s European chief Poul Thomsen and ESM Managing Director Klaus Regling briefed the Eurogroup on the situation in Greece: the country has returned to economic growth and its unemployment rate is in decline for the third consecutive year. Greece has achieved the target of medium-term primary surplus set out in the last year’s economic adjustment programme.

The European Commission also presented its winter 2017 economic forecast to the Eurogroup.

Source: Estonian Ministtry21 of Finance

Estonia denies that UK offer to help with experts is influencing attempt

A high-ranking Estonian official responsible for EU affairs has denied claims alleging that the British offer to provide its experts to help Estonia with the EU presidency in the second half of next year represents an attempt to influence Brexit negotiations.

“The claim made in the Politico article to the effect that Brits are influencing us is a pure invention,” Klen Jäärats, director for European Union Affairs at the Government Office, told BNS.

American political-journalism website Politico reported on Thursday that the UK had launched a behind-the-scenes diplomatic effort to influence EU affairs during the Brexit process by offering to lend officials to Malta and Estonia, two small countries that will hold the bloc’s presidency next year.

The fact that Estonia will be borrowing experts for its presidency from other member states and EU institutins was known long before the Brexit referendum was held, said Jäärats.

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Estonia has received more direct investment than many other newer members of the EU

  • Estonia’s foreign direct investment position* at the end of 2015 put it behind only Hungary in volume among the newer European members from Central and Eastern Europe
  • The Estonian current account in 2015 posted its largest surplus since independence was regained
  • Both exports and imports of goods and services were down last year, but imports by more
  • The current account was affected by large dividends paid out by the banking sector

Adjusted data show that the current account of the Estonian balance of payments had a surplus of 447 million euros in 2015, the largest since independence was regained. This does not reflect the strength of Estonian exports however, so much as a general decline in the trade of goods. Although both exports and imports of goods and services were down, it was the faster decline in imports that led the surplus in goods and services to grow. The surplus on the current account increased because the outflow of investment income slowed as large-scale extraordinary dividends were paid out by the banking sector in the middle of the year, and the income tax paid on these dividends to the Estonian state principally slowed the outflow. A little more was received from the European Union Structural Funds for infrastructure development than in 2014. The outflow of capital from the financial account was one billion euros larger than the inflow and the main channel for the outflow was portfolio and other investment.

Estonia was behind only Hungary for the foreign direct investment position among the newer European members from Central and Eastern Europe, and at the end of 2015 the direct investment position in Estonia was almost the same as the GDP of the year.

* Direct investment data for Estonia cover the period 1993-2015.

Figure. Direct investment position in Central and Eastern European countries at the end of 2015 as % of GDP
Direct investment position in Central and Eastern European countries at the end of 2015 as % of GDP

Sources: Eurostat, Eesti Pank

See better graph here

EC: government aid to Estonian Air was illegal

The Estonian national airline will fold following a decision by the European Commission that funding given to the company by the Estonian government was not in line with EU regulations. The company, founded in 1991, does not have the funds to pay back the state and will declare bankruptcy.

The Commission began an investigation into Estonian state aid to the company in 2013, with Estonian authorities waiting for a decision ever since.

Today, on November 7, the Commission ruled that the around 90 million euros given by the Estonian government to the company, gave the company an competitive advantage over others. This means the government must demand the full amount, plus interest, back from Estonian Air. The state had also earmarked a further 40 million euros, which would have been given to Estonian Air in case of a positive decision. That money will now go to the Nordic Aviation Group.

Commissioner Margrethe Vestager, in charge of competition policy, said: “Companies should compete based on a sustainable business model rather than relying on continued support by the State to stay in the market. Estonian Air has repeatedly received public subsidies over the past five years but did not carry out the necessary restructuring to become viable as a business. It would not be a good use of taxpayer money to keep Estonian Air in the market artificially – nor would it be fair to competitors, which have to compete without such support.”

The crunch question for the Commission was whether a private investor would have acted the same was as the Estonian state, pouring in as much money on the same conditions – if the state aid corresponded with market conditions.

The Commission ruled that Estonian Air received support three times, although EU regulations allow state aid to be given only once a decade. The Commission also ruled that the company did not have a credible restructuring plan and that measures aimed at limiting the distortions of competition were not sufficient.

The end

The government has set up two companies, which will begin to take over from Estonian Air. One (Nordic Aviation Group) will manage Estonian Air’s routes, while the other (Transpordi Varahaldus) will take on lease contracts.

Economy Minister Kristen Michal said on Friday that if a negative decision is made, then the Estonian Air fleet will be grounded from Sunday.

He said those at their destinations will be flown back home and those with tickets for future flights, will receive compensation. Those with an Estonian Air ticket have been asked to go to www.estonianair.ee or call +372 605 8888 for more information.

The board of Estonian Air today decided to halt all business activity from Sunday, November 8.

The company serviced around 500,000 people annually in the last few years, giving employment to 200 people.

History

It is a sad ending for a company, which became a symbol for newly re-independent Estonia at the beginning of the 1990s.

The company was founded during turbulent times but helped Estonia establish connections with the West. In 1995, the company purchased two brand new Boeing aircraft, giving a boost to a nation trying to rebuild from over 50 years of occupation.

Between 1996 to 2010 the state relinquished controlling shares in the company, and only purchased the company back in 2010 to ensure it did not go bankrupt.

Since 2009, the government has handed around 135 million euros into the company in capital injections, state aid and restructuring aid. The last time the company earned a profit was in 2005.

In 2012, losses amounted to over 50 million euros, from a turnover of less than 100 million. Until then, and after, losses were far smaller. The reasons for 2012 losses were in the company’s drive to expand. In 2011 the state hired Tero Taskila, a Finnish expert who came with a much criticized 30,000 euros per month salary, to take the company to another level. Yet, the plans to expand the company failed. Estonian Air was also hit by higher fuel prices, troubles with aircraft and salary increases.

In 2013, the company embarked on a large-scale restructuring path, cutting its fleet and the number of destinations. Staff numbers were halved.

Source: ERR

Estonia has one of the most open economies in EU

Adjusted data show that the current account of the Estonian balance of payments had a surplus of 205 million euros in 2014. Goods exports were smaller than imports, but the opposite applied for services, and in total the surplus of goods and services increased to 681 million euros. Revenues from European Union Structural Funds for infrastructure development were significantly lower in 2014. The outflow of capital from the financial account was 191 million euros larger than the inflow and the main channel for the outflow was portfolio investments.

Estonian exports and imports of goods and services stood at 167% of GDP in 2014. This is double the European Union average and shows that the national economy depends to a large extent on the external environment. The index of openness is usually higher for small countries than for large ones.

For more, see The Estonian Balance of Payments Yearbook 2014. The English version of the balance of payments yearbook for 2014 will be published on the Eesti Pank website on 30 September.

 

 

Source: Bank of Estonia (See better graph )