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Alar Karis: Being able to find optimism top issue for Estonia’s economy today

President Alar Karis said in his Independence Day speech on Saturday that lately, negative news about Estonia’s economy stands out the most, yet he is convinced that finding necessary optimism is the key issue for the economy.

“GDP is falling, banks are worried that rising unemployment could result in difficulties repaying loans, and people are increasingly anxious about tomorrow,” the president said, asking how can we overcome this anxiety.

“Anxiety’s magnitude isn’t determined solely by troubles and uncertainty, but above all by whether or not we feel like we can manage. Confidence that one will get by. Knowing that you aren’t alone, but are part of a common effort. And together, we will certainly manage. What I perceive as the top issue Estonia’s economy faces today is how to find the optimism that prevents anxious paralysis, as a consequence of which decisions are either wrong or absent in the first place. Many of us are driven by dreams and hopes for a future more certain than the present. Pessimists may even be right, but they do not lead life forward. The past shows us that crises come and go, but long-term development will continue,” Karis said.

The president recalled that a couple of tens of years ago, we dreamed of becoming a digital state, and we did.

“The digital state doesn’t merely reflect in the way we do things — it is our economy. Of Estonia’s ten ‘unicorns,’ at least half are now among the country’s top 25 payroll taxpayers. Just as the optimists dreamed two decades ago,” he said.

“We must take the knowledge we’ve gained from our startup companies’ development and use it in other fields to establish new enterprises. One pertinent question is how to foster closer ties between startups and ‘traditional’ industry. We have a fantastic launching point for economic development. Estonia has Europe’s best pupils in addition to a bounty of entrepreneurism, audacity, and good experience in how to run businesses. Our point of departure for economic development is quite strong,” Karis said.

The president pointed out that right here one year ago, he said that one of our greatest tasks in the coming decade must be getting Estonia’s energy sector in order, as it will otherwise become increasingly a detriment to our development. Now is the right time to ask whether the decisions made meanwhile brought us closer to that goal, and if development is fast enough.

“A severed natural gas pipeline and electrical connection demonstrate that although such connections are crucial to us, we cannot place all our hopes on them. Estonia needs diverse, also managed local production and different technologies, including energy-storing capabilities and flexible industry. We will then be better prepared not only for the future, but to guarantee our citizens and businesses energy prices that are comparable to those of our neighbors,” he said.

Karis acknowledged that energy sector investments are long-term and require substantial legal certainty. The same goes for our state budget.

“It was strange to read late last year that promises written into the state budgetary strategy were discarded just a few months later. Strategies aren’t simple fancies, but play an important role in governance and shaping expectations. They matter to our businesses and foreign investors — to anyone with a deeper interest in Estonia and its economy. Estonia’s capability, credibility, and stable development reflect not in keeping track of budgetary balance or national debt, but in the quality of our strategies and our ability to adhere to them,” he said.

“Estonia’s national debt is currently the lowest in the European Union. But is that any cause for celebration? An analysis of our budgetary policy published by the Ministry of Finance six months ago paints a bleak future: if we continue along this path, then Estonia’s national debt will reach 60 percent of GDP in just 13 years and nearly 160 percent by 2070. Although the children born today will be in their prime working years, our birth rate is much lower than what is needed for sustainable development. And they will be the ones who must repay that debt,” he said.

The president also pointed out that Estonia ranks fifth among OECD countries in contributions to family policy, paying 3.3 percent of its GDP towards it. And yet, fewer and fewer children are being born.

“It is a problem that society needs to address. How? We must cease our political struggles and not make birthrate an issue on which political parties compete, nor daunt families with cutbacks to assistance, closing local schools, or warning that war is on the doorstep. Rather, we must offer a sense of security and society’s support,” he said.

“Is the budgetary strategy’s unexplained revenue that will cover expenses, one that hints at a tax increase, a solution to improve the budgetary situation? What is it, exactly? An income tax increase? A temporary national defense tax? Delaying the rollout of a uniform income tax rate? Cutbacks to social assistance? Doing away with free higher-level education? Increasing deductibles in healthcare and social insurance?” the president asked. “I would like to know, too. As well as what one decision or another might solve and what it will mean for Estonia.”

Karis said that when meeting entrepreneurs, he frequently hears the complaint that Estonian politics lacks continuity — rules can change abruptly, making investment too risky.

“We can curb this uncertainty if we speak openly about the obligations that Estonia has taken, explain their impact, and give citizens enough time to adapt,” he said, describing clear rules as being a part of overall political culture.

Source: BNS

(Reproduction of BNS information in mass media and other websites without written consent of BNS is prohibited.)

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