A daily blog on the thrills, spills, and frequent absurdities of the world's one and only 'non-imperial empire' - as Barroso himself called it - the European Union.

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Wednesday, 19 October 2011

Estonia Grows Disillusioned With the Euro

The sun has gone down on the Estonia-euro honeymoon. Picture by Htkava.

Ever get that feeling you've jumped onto a sinking ship, only to look back and find you're already out of sight of land? The Estonians are waking up to just that pleasure. Less than one year ago, the arrival of the euro was greeted with street parties: five thousand people lined the streets of Tallin to exchange their krone, and the president himself ceremoniously withdrew a 5 euro note from a hole-in-the-wall. The entire nation of one and a half million people was breathless in anticipation of finally having a say in the world. This was, in the eyes of many, what they had escaped Communism to do.

That overwhelming wave of support is, however, receding faster than a European banker's hairline: according to a poll by Turu-Uuringute AS, only 55% would favour the single currency, were there to be a second referendum (which, since they gave the 'correct' answer the first time, there won't be). There is a growing sense of disillusionment, disappointment, or even anger: many of those who turned out en masse to vote in a referendum on euro membership feel mis-sold. The rush to join something that could give them a greater say in the world was overpowering: a 'no' vote was a vote for isolation and intimidation. But the euro hasn't turned out to be the economic renaissance that they were told it would be; quite the opposite, in fact.

The government can point to some economic success: IMF estimates state that Estonia was Europe's fastest-growing economy, at a whopping 6.5%. But, given that Estonia's chief export market is the eurozone itself, that can reasonably be expected to fall quite sharply, and at any rate, none of it has made a blind bit of difference to your average citizen in Tallin. For not only do they have the fastest-growing economy of all European nations, they also have the highest inflation. Food bills for families - as well as the price of basic utilities - have skyrocketed. Real wages have fallen for the eleventh quarter in succession. Their contribution to the EFSF, the EU's new bailout fund, may seem minor, at £2 billion. But this is the poorest country on the continent: that's almost one fifth (14%) of their national economy and a third of their annual budget.

To add to this, there is a disconnect between the central bank and the people. Ulo Kaasik, deputy governor, is one of the most orthodox in Europe: he still thinks that Greece can get back on the path to recovery in exactly the way the EU intended, all semblance of economic reality be damned. But the people remain highly sceptical: 58% of them oppose further Estonian involvement. Estonians are, in the words of Anti Poolamets, 'paying our money to much richer states for their mistakes.'

Eurosceptics, such as Mr. Poolamets, may be a small force in Estonian politics - the novelty of coming in from the cold does not wear off fast. But nonetheless, their words are likely to find resonance with the Estonian public, who can see third of their annual budget at the beck and call of the European for no explicit purpose. In the absence of explanations from their government or their central bank as to how piling more debt onto an indebted country is ever going to help matters, they just might turn to more maverick voices that say that, in entering the eurozone, the country took the wrong turn in its search for a voice in the world.

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