- Reset +

"Estonia's Soviet Past Makes Austerity 'Worth It,' Ilves Says", Bloomberg

07.06.2010

By Ryan Chilcote and Ott Ummelas

Estonia, the least-indebted European Union member, managed to win public support for budget cuts last year because the Baltic nation faced greater hardship in the Soviet era, President Toomas Ilves said.

Estonia reduced spending last year by a 10th, which helped it meet EU conditions for adopting the euro in January without sparking public protests, Ilves said in a May 26 interview with Bloomberg Television in Tallinn. The nation's suffering under Soviet rule for 50 years until 1991, when the Soviet Union collapsed, made the austerity "worth it," he said.

The aspiration to join the euro, following European Union and NATO entry in 2004, is another step toward binding Estonia to Europe and increasing security, Ilves said. According to a report compiled by a parliamentary commission in 2005, direct human losses during the Soviet occupation reached 180,000, or 17.5 percent of the population. Half were killed and the others left Estonia either as deportees or refugees.

"People say: why are Estonians willing to put up with really cutting back on expenses," Ilves said in his residence, standing next to portraits of Estonian presidents of the pre-World War II era, who were executed or died in Soviet labor camps. "Compared to what Estonians have been through, the idea of reducing public expenditures by 10 percent is kind of worth it."

The austerity measures of Prime Minister Andrus Ansip's government totaled more than 9 percent of gross domestic product last year. They came at the cost of demand, and the $17 billion economy contracted 14.1 percent last year, the third-deepest contraction in the 27-member EU.

The Baltic state will outperform the 16 euro nations on the EU's fiscal criteria this year, according to the European Commission, the bloc's executive arm.

Estonia is set to become the 17th country using the euro next January. European finance ministers will rule tomorrow that "Estonia fulfills the necessary conditions for the adoption of the euro," according to a draft document obtained by Bloomberg News last week.