In a presentation made in Kiev on Thursday, former Estonian Prime Minister and European Commissioner Siim Kallas highlighted the 1992 currency reform, visa waivers with important neighbouring countries such as Finland, the legal revolution and successful privatisation as the economic policy success factors that created the preconditions for the formation of private capital in Estonia.
“I understand – my liberal ideas are no longer popular in Europe, but I will carry on promoting them, since they have brought great success to Estonia, for example, the corporate income tax exemption,” Kallas told students at the Taras Shevchenko National University in Kiev. “Favouring state capitalism has always been a short-sighted policy in history. Estonia has managed to achieve success because we have had the guts to make decisions, which have seemed too radical or even dangerous to very many others.”
“Estonian success started after taking advantage of windows of opportunities. As a rule, all windows of opportunities remain open for a very limited period of time and we were able to take advantage of these opportunities,” he said. “The greatest and most significant opportunities were certainly accessions to the European Union and the NATO, for which there was a lot of political opposition from the West, not to mention from Russia.”
“But the success started earlier - first, with the currency reform,” Kallas said. “For the economy to function, reliability of the currency in the eyes of the people is extremely important. We managed to gain people’s trust thanks to the exchange rate of the Estonian kroon being fixed to the German mark. The value of the currency remained very stable for the whole duration of the period when the kroon was in use.”
“Another great kick-starter of the economic life were the visa waivers, above all with our close neighbour Finland, which we achieved in 1997,” he added. “I would say that the visa waiver with Finland was brought to us by the Finnish media that was very supportive, in spite of the opposition from the government. There was belief in Finland that the visa waiver would bring a lot of criminals from Estonia to Finland, while Finland had a visa waiver with Poland. Our statement that there were more criminals in Poland than there were residents in Estonia became a strong argument then.”
Siim Kallas also mentioned the legal revolution, which helped Estonia develop more rapidly. “With the strong support of President Lennart Meri, we were able to develop a modern legal system, which impelled Estonia greatly. Including the successful privatisation, which created preconditions for the creation of private capital.”