The world's first cyberstate embraced austerity without whining
even though its Soviet-era memories are still fresh.
An 82-foot-high billboard wrapping Estonia's finance ministry
building in its capital, Tallinn, boasts: "The euro, my money." It
stands just blocks from the city's cobbled, winding medieval streets
and baroque churches, in a downtown where skyscrapers have replaced
Russian bunkers, as a symbol of Estonia's transformation from poor
Soviet republic to the European Union's rising star.
When Estonia was accepted into the eurozone in January, seven
years after joining the EU and two decades after the fall of the
Soviet Union, it was another big step for the small Baltic nation
away from its imposing neighbor to the east, Russia.
Over the next five years, it's expected to have Europe's fastest-
growing economy. It emerged from the global financial crisis
wounded, but has rebounded after adopting austere measures few other
countries would accept. It's given the world Skype and the only
national volunteer cyberarmy, and is adding to the EU a rare sense
of determination at a time when pessimism about the euro prevails -
a consequence of the debt crises that have hit Greece, Ireland, and
Portugal and the bailout plans that followed. Indeed, Estonia, which
is still Europe's poorest country, has emerged as the darling of its
"We are very poor but very optimistic," says Jurgen Ligi,
Estonia's earnest finance minister, sitting in a sparse office under
a portrait of Estonian President Toomas Hendrik Ilves. Mr. Ligi, a
dedicated triathlete, brings a rigid sense of discipline to his
office. In many ways, he's been the chief overseer of Estonia's
aggressive capitalism - flat tax rates and no corporate income tax
on reinvested profits. That's been paired with cost-slashing
austerity: pension cuts, reductions in benefits for civil servants,
shortened maternity leaves, and even streetlights that don't stay on
But in Estonia, where most remember the harsh lives under the
USSR (roughly 10 percent of its population was deported to Siberian
gulags), those cuts haven't resulted in any major public outcry. "We
have seen much harder times," says Ligi.
In fact, Estonians overwhelmingly supported their government's
austerity measures: In March they reelected the government of Prime
Minister Andrus Ansip, making him the first post-Soviet era prime
minister to win a second term.
The Estonia example shows that "it is possible to undertake
serious fiscal adjustment in a short period of time, and be
popular," says Anders Aslund, senior fellow at the Peterson
Institute for International Economics in Washington. "When you do
what you have to do - cut expenditures and have a clear aim of your
policy - you get reelected."
Estonia's fast break from communism
Estonians benefit from emerging from the Kremlin's yoke without
the ethnic and political turmoil that has weighed down other post-
Soviet states. When it broke free of communism, it started over with
a crop of young entrepreneurs and idealistic leaders. "Because we
started anew, we got new laws, new leaders, and new technology,"
says Jaan Tallinn, one of the founders of Skype, the Internet phone
company that was recently sold to Microsoft for $8.5 billion. "The
big winners were the start-ups."
Skype got its start in a grim Soviet-era complex on the outskirts
of Tallinn, where the USSR secretly assembled its first computer. …