September 16th, 2009
An International Conference at Tallink City Hotel A. Laikmaa 5, 10145 Tallinn, Estonia

European Union: Costs, Benefits and Strategies for Estonia

Basic democratic values and free market principles helped shape Estonia's economic policies throughout its period of growth since its independence (1994-2007). Strict constraints on government budgets and monetary policy, combined with a relatively impartial business environment and strong political commitment to maintaining these limits, have brought Estonia to top of the list of emerging markets. With low inflation and high GDP growth rates, employment and living standards in Estonia converged toward core European Union country levels much faster than most CEEC's.

Yet in 2007 Estonia found itself slipping into serious recession, a victim of its own relaxation. The focus of the State and the nation shifted from responsible "austerity" to hastening prosperity. Whatever the complexity of the causes and the details, the story is not completely a-typical of emerging market crises. What is different in trying to formulate a strategy for Estonia is its general, if imperfect, commitment to the requirements of the European Union and joining the Euro-zone. These requirements, if the State is truly committed to them, impose serious limits on policies for Estonia's recovery.

Indeed, now in the middle of a severe crisis, the currency peg to the Euro and the budget deficit requirements for joining the Euro-zone take away important tools a State can use to deal with the crisis, leaving Estonia with sub-optimal choices in selecting strategies for stabilization and growth, leaving severe budget cuts and painful unemployment. How has the currency peg worked for Estonia in the recent period of neglect of the Maastricht inflation criterion? Did the currency peg contribute to the crisis, is it making it worse or better? What would joining the Euro-zone do for Estonia? What would a postponement of joining the Euro-zone mean? Is the Euro-zone the right decision? If so, is now the right time for it?

In addition to the EMU requirements are the regulatory burdens of the European Union. Large EU support funds for regulatory implementation express the need for economic convergence - yet EU regulations can be seen as bringing Estonia further out of the category of developing nations and into the group of developed nations, but they could also be undermining competitiveness and the economic convergence needed to truly join this group.

It has been five years since Estonia joined the European Union. How much policy-making independence is integration worth and what kind of policy independence is very worth sacrificing for integration? Furthermore, what would failing at integration to the EU mean for independence in relation to some other power to which Estonia could lose independence? What polices might the government implement to shape the road to recovery? It is time for an evaluation, a critical analysis of the costs and benefits, an interpretation of what has happened and a strategy for what must happen.

> For more Information please download PDF with CONFERENCE PROGRAM here.