EU Membership Good for Estonia, Analysts Say

Tõnu Mertsina (Postimees/Scanpix)
5/2/2014 3:15 PM
Category: Economy

Estonian financial analysts agree that joining the EU has benefited in many ways, while the country also shares the challenges faced by the EU due to the 2008 economic crisis.

In an interview with uudised.err.ee on Thursday, Tõnu Mertsina, Swedbank's chief economist, listed the main benefits of joining the EU: subsidies have improved Estonian agriculture and also improved the opportunities of working abroad. The travel and work freedom has led to a brain drain, he said, but some professionals with extensive experience have also returned.

The adoption of the euro would have been impossible without the EU, and while the currency is no miracle cure, it has increased the confidence of investors, he said.

Since Estonia is and will remain a net receiver of EU subsidies for the coming years, that money has supported Estonian state finances and, to a certain extent, changed the functioning of Estonia's market economy, Mertsina said.

Estonia is the top receiver of EU subsidies in terms of its relation to the GDP and the EU will continue to provide funds for structural readjustments as long as the purchasing power of the state remains under 75 percent of the EU average. Estonia has reached 71 percent and it will take a few years to reach that level, and also, it does not automatically mean becoming a net contributor because some subsidy policies are still ongoing, Mertsina said.

The economic health in the EU varies greatly according to countries and while deficit has gone down, the state finances have not improved on the whole, because governments have increased spending and unemployment continues to be a problem. The euro also functions differently according to the structure of the economy of a given member state, Mertsina said commenting on the state of EU's economy.

According to SEB Bank analyst Ruta Arumäe, the EU has provided a fifth of Estonia's budget. Ten years ago, Estonia's purchasing power was 58 percent of the EU average, Arumäe said.

The EU also constituted a safety net during the economic crisis and has broadened Estonia's opportunities for trade, the analyst said.

In the next 10 years, Estonia will not receive as much money from the EU because it will reach the 75 percent mark.

“Estonia's further development will be slower and certainly different,” she said.

She stressed that not only Estonia, but the entire EU has changed in these 10 years and the change will be even greater in the next decade, brought on by the accession of several poorer states and the need to overcome the crisis.

“Further developments could either go the way of closer integration or separation – in terms of efficient management, both options are probably better solutions than the current system,” Arumäe said.


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