Economy in recovery but savage spending cuts have left marks

The Estonian economy grew quickly between 2011 and 2012, because it was making up ground it lost during the crisis. Unemployment is stuck at 10 per cent, while inflation runs at 5.5 per cent, among the highest rates in the euro area.

Not everyone is enjoying the economic recovery. At a market behind Tallinn’s main station Viktor (35) is selling handbags and hosiery. He says his income does not go as far as it used to because petrol and food are more expensive. Another stallholder, Galina, is topping up her pension by selling herbs. She has a son and a grown-up grandson working in Finland because they can earn higher wages there.

Tens of thousands of Estonians are working in Finland, says Harri Taliga, chairman of the Estonian Trade Union Confederation, which he views as a sign of the country’s weak recovery. Estonia is Europe’s “useful idiot”, he says, for undertaking austerity measures harsher than almost anywhere else.

“I cannot imagine that in other countries it would be possible to cut wages by 20-30 per cent,” he says. The legacy of Estonia’s 47-year Soviet occupation means that older workers were not ready to protest against cuts, he thinks.

“People are not secure and they are afraid of losing their jobs.”

Estonia remains one of the poorest countries in the European Union, where national income per head is half the level of western European countries.

This is why opposition politicians have asked why the country, which joined the euro in 2011, should contribute money to a rescue fund for Europe’s struggling economies.

In August its parliament approved the European Stability Mechanism rescue fund. This puts Estonia on the hook for €1.3 billion, a hefty sum for a country where the annual state budget is a little over €6 billion. The first down-payment would be €150 million.

Polls show a majority of Estonians back the currency, although in smaller numbers than most other euro zone countries. Their support may reflect the country’s continuing gain from European Union funds.

“We are still net beneficiaries, although with the bailout we get a little bit less. This is one reason why it wouldn’t be wise or polite [to refuse to contribute to the bailout],” says Prof Listra.