Honourable Riigikogu, Honourable Deputies,
This year, a decade has passed since Estonia acceded both to the EU and to NATO. The fact alone that today we are twice as wealthy as in 2004 is sufficient to demonstrate how well our economy has developed. We are also definitely much freer and more protected than ten years ago.
As a former Chairman of the European Union Affairs Committee and current Prime Minister, I can assure you that the key to the success of Estonian EU policy has always been openness, collegiality and responsibility. Estonia is a trustworthy and reliable partner. Next spring, the ‘Estonia’s European Union Policy 2011-2015’ policy document will expire and I shall have the great honour of presenting you with another regular report. Let me stress that this is an ‘Estonian European Union Policy’, as the viewpoints of Estonia in matters related to the EU are the common positions of the Government and the Riigikogu. EU matters are Estonian matters.
Honourable Members of the Riigikogu,
Let us think back to 2011 when the new Riigikogu and Government took office. The introduction of the euro in Estonia on the 1st of January 2011 significantly increased the security of the Estonian economy. Our accession to the euro area was also a well-timed political gesture in support of the viability of the common currency. Soon, however, some of the Member States of the euro area met serious difficulties, thereby threatening the stability of the whole project. It was in 2010 that Chancellor Angela Merkel pronounced these memorable words in front of the Bundestag:”If the euro perishes, so will Europe“. As late as in 2012, the well-known economist Nouriel Roubini predicted that the euro would be dead within a year if Greece and Portugal left the single currency. Like so many others, Roubini underestimated the strength of the economic and political integration of European countries. He also failed to see that the Member States are prepared to do whatever it takes to save the euro.
The situation was grave. Fortunately, we have no way of knowing neither whether the single market would have survived without the euro nor whether the individual Member States would have chosen protectionism, reintroduction of customs duty and devaluation. Therefore, it is understandable that developments to stabilise the euro area have been most forceful. The Member States of the euro area, the European Central Bank and the stability mechanisms of the euro area have helped to sustain the euro and have assisted those member states that have had difficulties in carrying out reforms. To date, most of the legal acts been passed, which were drafted to strengthen the budget monitoring of the Member States. These instruments are also necessary to enforce the EU Single Supervisory Mechanism and Banking Union. In view of this, I am most content that the banks present in Estonia successfully passed the stress test taken for joining the Banking Union. Although economic growth is still on the rebound in the euro area, we have established a strong foundation for preventing the next crisis.
I believe that the foundation of the euro area has also been strengthened by its expansion. The euro represents the strongest political and economic integration in Europe. Therefore, the expansion of the euro area has been in the strategic interests of Estonia. Estonia joined the euro without any concessions and, since then, Latvia has joined and Lithuania will do so too in 2015; Central European states will hopefully follow. There is reason to hope that all member states of the EU will fulfil the Maastricht criteria in 2020 through the support of the recently unified fiscal rules and requirements posed for the usage of EU funds.
I continue to believe that slackening the rules agreed upon in the Founding Treaties is not a solution. Calling an increased deficit ”flexibility“ does not make the deficit less dangerous. Due to the fact that we have kept state finances under control, Estonia has recovered from the crisis quicker than many other European countries. A stable Monetary Union lays the foundation for the growth of welfare in Europe, and Estonia’s message is taken seriously in these matters.
What if, two decades ago, Ukraine had chosen the same path as Estonia, or what if Estonia had remained where Ukraine is now? In 2013, the GDP of Estonia at current prices per capita was more than four times greater than that of Ukraine (19,031 and 3,919 USD, respectively). In the UN Human Development Index, we rank 33 and 83, respectively, and in the Competitiveness Report of the World Economic Forum, 29 and 76, respectively.
As the US President Barack Obama said in Tallinn this is a result of making or not making decisions. The development is neither quick nor easy. We did have the same starting point, but the baton of democracy and reforms was not picked up in Ukraine.
The shadow of corruption and authoritarian rule clouded the dream the people had fought for. Reforms, security, freedom and welfare were neglected in their wake.
Almost a year ago, in the evening of the 21st of November, the Euromaidan events started. This awakened the Ukrainians from the poisonous sleep of the shadows of the past, hopefully for good. Euromaidan developed in order to support Ukraine’s hope for a better future, a future in Europe and a wish to express it through a strong contractual relationship. For Europeans, the situation was somewhat unusual as this was the first time people not only expressed their sentiment but also laid their lives on the line under the golden stars of the European banner. This was a landmark expression of the people’s will.
After assuming office, I paid a visit to Kiev and I am glad that a year after Euromaidan, the whole nation has repeatedly confirmed this expression of their will in a democratic way – by choosing freedom, by choosing Europe, by choosing reforms, the rule of law and peace. This is not a unilateral expression of will to deaf ears – we must support Ukraine and other countries through the European Neighbourhood Policy.
And yet, it is not just Ukraine what is at stake here. Heretofore unheard of has happened – the European policy and partnership relations are face to face with brute force.
Vahur Made put it this way in Postimees on the 19th of October. I quote: "The issue at stake here is no longer simply that of Europeans wanting to have a cosy, safe and caring European Union. The issue is increasingly that the forces in world of politics seeking to weaken the EU, to pose existential challenges to the EU should see that Europeans are strong, unanimous and able to defend their interests and institutions," What conclusions can we draw from this conflict?
First, it is imperative that Europe and the rest of the Western world stand united. Only this way we can influence the rest of the world, such as the EU and the USA have shown through their cooperation regarding the Russian sanctions. In a situation where the aim is obviously to freeze the conflict, it is needless to discuss alleviating the sanctions. This is not a civil war, just like there were no democratic elections in some of the regions of the Donetsk and Luhansk area. Unless the agreements of Minsk are fulfilled and as long as another frozen conflict is being created on the European soil, we must consider additional sanctions.
Secondly, we should help Ukraine in solving the conflict, support the reforms and provide material help. War damage to infrastructure alone is estimated at more than 8 billion USD. The Marshall Plan for Ukraine proposed by Anders Aslund in the Financial Times on the 22nd of October is worth considering. I have discussed the need for reforms with President Poroshenko and with Prime Minister Yatsenyuk, in order to implement the Deep and Comprehensive Free Trade Agreement and the EU-Ukraine Association Agreement. Ukrainian leaders have assured me that the Estonian expertise of reforms leading up to the EU accession is in high regard in Ukraine. While white vans are carrying away anything of value left in the conflict region, Europe cannot remain indifferent about what will happen next.
Third, Ukraine is and wants to be a European country for which the door of Europe should remain open. The integration process of associated countries must continue. In 2011, we wanted European Neighbourhood Policy countries to have as deeply integrated economic and political ties to Europe as possible. Today, we have made significant strides with the contractual basis. If we want the four freedoms of the European Union to be even more at their reach in 2019, the concluded agreements and reforms have to be carried out. We should be able to welcome the full compliance of Ukraine and Georgia with the requirements of the visa-free movement of people on the Eastern Partnership Summit in Riga next May.
Fourth, the security situation in our continent is not to be taken for granted. We must strengthen our common understanding of the new security situation and unify our security assessments. There are just three countries fulfilling the two percent defence budget requirement of NATO today: Greece, Great Britain and Estonia. The combat groups created for improving the quick response ability of EU have never been deployed, and creating missions has been slow and onerous. It is obvious that you cannot defend your interests and values if your defence area is not covered with sufficient capabilities. Cooperation between the European Union and NATO is more important than ever before. The decrease in defence spending by allies who are together in the EU and NATO must be halted in light of the new security situation.
I would like to paraphrase Mario Draghi in saying that – not only euro, but also – Europe has to be protected whatever it takes.
As of now, the EU Single Market has become the internal market for our companies. In August of 2014, 72% of Estonian exports went to the Single Market, either directly or through value chains. Of course, this number could be larger and our exports could have more added value. Therefore, it is essential for Estonia that the Single Market should work smoothly and at minimum transaction costs.
The latter means that accessing the market, concluding transactions and implementing contracts for Estonian entrepreneurs should be as easy, fast, efficient and secure as possible. Therefore, we continue to believe that our ultimate goal could be a unified European Civil Code. We have made considerable progress in the field of civil law lately and I hope that the initiative of the Common Sales Law and cross-border company migration will remain in the focus of the new Commission.
However, if I had to highlight the areas in which too little has been achieved within the last five years, these would be the Free Movement of Services and Digital Single Market. Five years have passed since the Services Directive was implemented, and we are still talking about its implementation potential, which amounts to a total of 2.6 % of EU GDP according to the Commission’s own estimate. 0.8% of that has been achieved to date.
Therefore, we should implement the Services Directive to the maximum extent, and provide new opportunities. In doing that, we should concentrate on the services sector and the abolishment of bottlenecks, which will have both major cross-border economic potential and an economic effect (e.g. abolishment of restrictions of establishment).
When the second Barroso Commission established the post of Vice-President for the Digital Single Market, many people failed to see its necessity, and tended to link it primarily to communications and roaming fees. True enough, today, everyone can directly feel the effects of decreasing roaming fees.
In addition to roaming fees, the Electronic Identification and Trust Services regulation, which Estonia supported and was approved in September, can be regarded as a significant achievement. It will establish a pan-European framework for a mutual recognition of electronic identification and a market of digital trust services. I sincerely hope that Estonian companies who are among the best in the world in this field will use this potential to the fullest, and that in 2020 it will be possible that at least 20% of EU citizens use electronic identification daily.
Yet, already back in 2010, my predecessor made the proposal to create a Digital Single Market by 2015. Unfortunately, the legislation needed for that has only been partly submitted and passed.
Today, we understand that we are lagging behind with this in Europe. ‘Digital’ is not a ‘thing’ in itself, and the issue here is by far not just regulating communication. Today, and even more so tomorrow, all fields of life will be digitally boosted in all aspects. Data security and consumer protection, copyright and many other areas will have to keep up with technical developments.
Therefore, we should not talk of an internal market and a digital market separately; we need an action plan consisting of specific measures, just like the internal market and single market initiatives of Jacques Delors and Mario Monti. Why not call this action plan that has to be passed the Digital Single Market Act, enabling the secure cross-border movement of data, services and goods. The 300 billion euro investment package proposed by the new President of the European Commission, Jean-Claude Juncker, and being prepared at the moment, must account for the development of a cross-border digital infrastructure. I sincerely hope that the new leaders of Europe will listen to the call of Eric Schmitt, the CEO of Google, for Europe to “embrace digital disruption“. If the Moore’s Law concerning the development of technology, which was mentioned by the President in his annual speech, still holds, computing power will have quadrupled compared to today by the time of Estonia’s presidency in 2018.
As we are a country on the geographical outskirts of the EU, network industries or energy, transport and communications connections and the developments of the single market in this sphere are especially important for us. In 2013, our transition period for opening the electricity market ended. To facilitate the development of the energy market, the second undersea cable connection between Estonia and Finland (Estlink 2) was completed in 2013 with the support of EU funds. Last week, Elering opened an emergency power station at Kiisa, which supports these external connections and has the capability to react to unexpected power shortages in the Estonian power system in just 10 minutes.
In addition to that, the European Commission allocated 112 million euros last week for the establishment of a third power link with Latvia. The connection with Latvia is planned to be completed by 2020. With the support of the next EU budget, we must be able completely to disconnect ourselves from the electricity system of north-western Russia. At the European Council last week, we created the foundation for that, when we decided to establish the European Energy Union by 2030.
In 2012, we passed amendments to the Natural Gas Act in the Riigikogu based on the EU 3rd energy package. As a result of these amendments, the provider of gas-carrying services and the dominant provider of gas will soon have to be separated in terms of ownership, and the market opened to alternative sources.
At present, Estonia is clearly too vulnerable, which was also confirmed by the recent sectoral stress test by the European Commission. Above all, we need to develop of the gas market in order to enhance regional supply guarantees, improve energy security and reduce prices.
Already in 2005 we started talks on a pipeline connection between Estonia and Finland. In 2009 this advanced to include a project for a liquefied gas terminal for the Baltic region. Insofar as it was not possible to find a solution that would satisfy both these projects, and the companies failed to communicate with each other, we asked the European Commission in May 2013 to help mediate these talks.
With help from the Commission, we reached a Common Goals Agreement in February, according to which the related companies had to propose a plan by May 2014 for how the regional terminal should be established jointly. However, in June it was clear that no common solution acceptable to the European Commission could be offered.
By now, the European Commission has said that it has done what it can to find a solution, and it is now up to the states themselves again. Creating a market comprising of a pipeline and a terminal, however, has been the other side of the same coin. We are in a situation where it is impossible to say with any certainty that the pipeline, and consequently a regional gas market, will be established.
To this end, the Minister of Economy and Communications and I have been holding talks with the Prime Minister of Finland in order to find a solution, and I hope it is still possible to find one. In order to find a regional solution, a pipeline will first have to be established, which is a priority for the market and for a guaranteed supply. The EU continues to be ready to co-finance this to the extent of up to 75%. After that, investments have to be made into a gas link with Latvia, and liquefied gas terminals have to be built that will satisfy the needs of Finland as well as Estonia and the other Baltic States. It is entirely possible that investments into the terminals will only be possible against the market after the link has been built. In any case, it is clear that even in the event of a market failure, European support for the regional terminal can only be quite minimal.
However, it is not only in terms of the energy systems that we are at the periphery of the continent; we are also missing transport connections. Therefore, it is very important that on the 28th of October the Transport Ministers of the Baltic countries signed an agreement to establish a Rail Baltic Joint Venture. In 2011, Rail Baltic was not a blue train car; it was more like an ethereal dream. Today, it is one of the most important EU transport projects.
We will continue our joint efforts with the other Baltic States by presenting a joint investment application in 2015. We are close to achieving the goal and the only way now is forward; the connection between Estonia, the other Baltic States and Finland to the European centres can be accomplished in a decade. For this achievement, I would like to express my heart-felt gratitude you to the European Commissioner for Transport Siim Kallas most of all. The members of the Riigikogu and the Governments that will assume office after the elections of 2015 and 2019 will have to carry this project to a successful conclusion. Now is the time to start generating interest among the transport, logistics and industry enterprises in the new connection.
In view of the new working programs of European institutions, I would like to emphasise one more important development. This is the need to reach a broad-based trade agreement with the USA. We need a new standard in the 21st century to combine the trade rules of our times on the basis of the largest markets and purchasing power. Let us, between ourselves, call this a new standard for the countries that love to live and trade in a world economy based on rules and free competition. Should developments on global talks freeze again, I believe that other countries sharing the same way of thinking and the same values will join this model (especially OECD countries). The small problems and special interests of Europe and America should not hinder the prospect we have of concluding this treaty in the next few years.
All in all, Estonia is content with the basic tenets of the new working programme presented by the European Commission President as well as with the new structure of the European Commission in general. Our expectations and views coincide to a large extent and this is also expressed in our programme documents. I hope that the members of the European Commission who assumed office last Saturday will have a chance to meet the Parliaments of all EU countries at least once during their tenure.
As the new European Commission has already started work, I would hereby like to thank the outgoing President José-Manuel Barroso as well as the President of the European Council, Herman Van Rompuy, who left office in November, together with their teams, for a fruitful cooperation and successful crisis management.
Ever since accession, it has been customary for Estonia to work in the EU according to the ‘Estonian views’ discussed and approved by the Riigikogu.
To date, we have implemented, in the spirit of the recommendations of the OECD state report, a management model for EU matters that is based on openness and participation as well as honest and timely intervention. Today or tomorrow, we will present for approval through the Electronic Coordination System for Draft Legislation the new Rules of Procedure for EU Matters, which will be done in order to implement the Rules of the Government. This new procedure will be enacted based on the premise of the Legal Regulation Development Plan until 2018, which was approved by the Riigikogu. The Plan states that that EU decisions are also Estonian decisions and that at the national level these decisions should be taken the way that is customary in Estonia.
Recent examples of efficient cooperation between the Riigikogu and the Government in defending the views of Estonia include the discussions held in the Riigikogu on European Neighbourhood Policy and the political support for concluding treaties with countries benefiting from the neighbourhood policy. I sincerely hope that association treaties with Ukraine, Georgia and Moldova will be ratified in the Riigikogu today. I would also like to highlight the solid support of the European Union Affairs Committee in discussions regarding regional fishing quotas. The Committee was also in instrumental in making the visit of the chairmen of the European Union Affairs Committees of the Parliaments of the Baltic States and Poland to Estonia a great success. During this visit the esteemed guest were able to acquaint themselves with the Estonian oil shale industry.
Thanks to the cooperation between our own institutions and beyond our borders, Estonia has the reputation of a reliable, involved, innovative and European-minded member state. We have been, chiefly thanks to the Riigikogu consistently the member state with the lowest deficit in adopting the European Law. Our mindset is not based on an eagerness to fulfil European directives with a German precision, but rather on our general legal culture. It is based on a belief that agreements are meant to be kept. This in turn opens new opportunities for Estonian people and companies in Europe.
A good example of our cooperation is also the nomination procedure of the candidate for the Commissioner last spring. Considering the international importance of the Commissioner, this is without a doubt an issue of national importance that should be discussed during a plenary session of the Riigikogu. Only the best candidates can represent Estonia at an office of such importance. It is indeed a great distinction for Estonia that Andrus Ansip assumed the office of the Vice-President for the Digital Single Market. The mandates of the Government, the Riigikogu, but also the mandate given by the people at the elections of the European Parliament empower the new Vice-President to realise one of the main priorities of the European Commission – the establishment of the Digital Single Market.
The Government that will assume office after the elections will have a much more significant role to play in the Estonian political landscape – the next composition of the Riigikogu will be in office during Estonia’s Presidency of the EU in 2018. Those set to become members of the Government of the Republic in the wake of the next elections will have to be ready to assume a leadership role in their areas of expertise within the EU. It is also of no small significance that these individuals will have to lead sessions of the European Council brokering difficult compromises, while working in English. It will be the responsibility of the next Prime Minister to assemble a team that will make Estonia’s Presidency a success.
In view of Estonia’s development, I am glad that at important times we have the courage to take decisions and the will to take action. We are supported by the determination of Estonians, our readiness to find compromises and our European-mindedness. In this decade, we have learned that in order to move along in Europe, you have to contribute to the development of Europe. All pre and post accession Governments and compositions of the Riigikogu, together with the hard-working officials in the numerous workgroups, have made their significant contributions to this end, and they have earned the gratitude and full acknowledgment for their work.
Together, we have made Estonia bigger!
Thank you very much!