Wage Cuts Now On The Agenda In Estonia

This is hardly surprising, but still. The Baltic Business News is reporting that Indrek Neivelt, chairperson of the Estonian Development Fund is saying that Estonia isn’t competitive with its current cost base, and the only option that faces the country is lowering prices and cutting salaries.

“Our main problem after this consumption party is competitiveness. The money has been devalued in many export markets. With our expense base and prices we are no longer competitive. Polish food is going to Lithuania and it’ll be here soon. Soon we might not be able to produce food competitively,” Neivelt said. “Today is the situation that shopping in the UK is cheaper, sitting into the taxi is cheaper than in Tallinn, eating out is cheaper than in Tallinn – with our prices we aren’t competitive,”

Estonian PM Andrus Ansip also acknowledged in a press conference today that one of the reasons for the deterioration of the current crisis in the country is that some the governments in some export markets such as Ukraine, Russia, Sweden and UK had gone for allowing their currencies to weaken against the euro.

The number of unemployed is also on the rise in Estonia, and increased by 4155 or 15.8 pct in December month on month, according to the local Labour Market Board. Compared to December 2007 the unemployment rate has risen by 115.3 pct.

And local stock market analyst Tõnis Oja has come to the conclusion that the Baltic economic crisis may have affected Sweden more even than the Baltics themselves. Oja wrote in the magazine Äripäev that concerns that Swedish banks were overexposed on the Baltic loan and real estate market not only caused the banks’ share prices to plummet, but it was also partly responsible for the value of the Swedish krona falling from 1.67 SEK per Estonian kroon in the summer to 1.43 kroons (and by an equivalent percentage against the euro).

“If we look back to when bubbles started to burst, then one sign was February 2007 when share prices started to fall in Tallinn. This was soon followed by a similar trend in other Central and East European bourses. Stocks in Tallinn had been posting some of the world’s fastest gains for years and, as pioneers, it was our time to lead the downfall,” writes Oja.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".