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Analysis: Estonian economic miracle is based on EU aid

EU aid received by Estonia plays a much bigger part than what is admitted by PM Andrus Ansip whose favourite line is that Estonian public finances are the best in the EU, writes Eesti Ekspress weekly.

What the PM is not saying in public is that EU aid is Estonia’s lifeline and the country could probably not survive financially without structural funds. From 2004 until 2010, Estonia received over 3 billion euros from the EU. During the period, it itself contributed only 924 million euros to the EU budget in various payments. This means that for every euro that Estonia spent it got back two. This so-called net profit was 497 euros per every citizen of Estonia in 2010 figures.

Estonia is second in the list of EU’s biggest aid recipients, trailing only Luxembourg. Third is Lithuania, followed by Greece, Latvia and Hungary. The three largest net donors to EU are Holland, Sweden and Denmark.

The aid helped Estonia survive the economic crisis that started in 2008 since at that time EU outlays to Estonia skyrocketed from 200 million euros to about 700 million today. Without huge EU aid funds received in 2008 and 2009, Estonia would probably have had to make even bigger spending cuts, borrow from IMF and kiss goodbye to euro. „At that time Estonian tax receipts fell so dramatically that, figuratively speaking, without injections from Brussels our financial system would have been in coma,” says Hannes Rumm, head of the European Commission in Estonia.

He adds that by current plans, Estonia should receive between 4.5 billion and 5 billion euros from the EU budget between 2014 and 2020.

Some critics are already warning that Estonia needs a better plan for the future since the ongoing economic crisis is going to force large net donors to cut budgets. Whether prime minister Andrus Ansip chooses to believe it remains to be seen.