Global Crisis Blog

Benchmark Estonia:  It’s Run Like a Business

By Shlomo Maital

   Little Estonia, population 1.3 m., will dump its currency and join the 16 countries in the Euro bloc next January.   This has become near-certain following the EU announcement that Estonia has met the Masstricht fiscal preconditions for Euro membership, noting that “Estonia stands out… fulfilling the criteria clearly”.  The European Commission was far less upbeat about several other large Eastern European countries waiting to adopt the euro, such as Poland and Hungary.  The last nations to join the euro were Slovenia in 2007 (another smart small country with about 2 m. people),  Cyprus and Malta in 2008 and Slovakia in 2009. 

   Estonia has been hard hit by the global crisis, and by the EU recession; it has 18 per cent unemployment. But despite this, its budget deficit is modest (less than 3 per cent) and it has a Balance of Payments current account surplus.   By embracing the euro, Estonia integrates its capital markets with the EU and trashes all the many problems related to having a weak unstable currency. 

   Some years ago,  I brought a group of Israeli managers to Talinn on a benchmarking trip. We were amazed.  Estonia has first-rate IT capabilities. It is even one of the first countries to run elections on-line.  And you can file your annual income tax report on-line, too, in 20 minutes, and most people do.  Cabinet meetings are held electronically, with absent or travelling ministers joining through their webcams.   Estonia has closely integrated its economy with Finland, acting as a kind of off-shore “China” for that country. 

    Recently, NYT columnist Tom Friedman quoted an expert who said that it is hard to compete with China, because that country “is run like a business”.  Estonia, too, is run like a business, by its clever political leaders.  Let Poland, Hungary, Bulgaria, the Czech Republic,   Latvia, Lithuania, Romania and Sweden – the remaining countries struggling to fulfill Masstricht requirements – study Estonia carefully. Let them try to run their countries properly, as businesses.