Former PM: Austerity measures boost confidence, not the opposite
28.07.2010 | Mart Laar | English news
While some EU governments have adopted wide-ranging austerity programmes to redress their economies, more needs to be done to tackle imbalances and leaders should stop thinking such measures make government approval rates plunge, Mart Laar, former prime minister of Estonia, told EurActiv in an interview.
Former Estonian Prime Minister Mart Laar is leader of conservative party Pro Patria and Res Publica Union. He was speaking to EurActiv's Managing Editor, Daniela Vincenti-Mitchener
Mr. Laar, You were the first prime minister of Estonia after the Soviet era and implemented wide-ranging economic reforms at the time. You then returned as prime minister before Estonia joined the European Union. Do you think Europe is opting for the right reforms to get out of the economic crisis?
How well Europe will do depends on all of us. It depends on how strong and united we are and the answer is of course always that we aren't united enough. We are moving in the right direction now, however, and that is a positive thing.
There are a lot of things to be done: the main thing is that national states must leave their debt crises. In a way, a crisis can be good to learn from - it has demonstrated that Europe couldn't go on with its policies as they were not sustainable. If we do not do something, then the crisis will be far worse in 10-15 years' time.
There are many tools a country can use. Do you think enforcing austerity measures is the right approach?
They are absolutely the right approach. We have lived above our means for decades, and this became a problem. All finance ministers have understood that our situation is not sustainable. We need to start thinking of the future and the privileges Europe has created for its citizens, and ask whether we can sustain them. And if we cannot do so, we must make the system significantly more effective - making a lot of reforms - if we want to keep our social protection model.
Estonia is clearly a country that can be showcased, as it has now successfully achieved the right reforms to join the euro. Do you think other countries can learn from Estonia? How exactly?
I think other countries are learning. I don't know if they are learning that from Estonia alone, but maybe we have shown that cuts are possible. This doesn't necessarily mean that it will make the government unpopular - for example, we cut our budget by 20% last year but have one of the highest government approval rates.
Of course, Estonia has maybe been in a different position as our memory of communism is so fresh.
One of the arguments coming across from the Atlantic is that huge savings and budget cuts will negatively affect demand and growth. Don't you think this is the case?
There are always two theories in economics. We are looking at a theory that worked very well during the crisis in Europe and we'll see the same result in the US as well: finding a short-term solution instead of a long-term one is to ignore the sustainability of the economy.
I cannot say that I am optimistic as to what will happen on the world stage, as the European debt crisis will eventually spread to the US, but we can now say that the creation of demand was just a waste of money. When you have such high debts, at some point taxes must be raised.
One of the things the EU is thinking of doing to boost demand is accelerating the transformation to a low-carbon economy, boosting infrastructure for clean technologies and creating a European energy community. What is your feeling about this?
They are quite positive ideas. Of course, it is difficult to say exactly what it means. On all issues, Europe must cooperate. If not, we will fail. We must have the same policy, including for energy. It doesn't exist at the moment, however. We are not united.
There are those building South Stream, and others building Nabucco: it's a big mess and when we can find a common approach it will be much better.
What do you think about the Nord Stream project, which is already under construction, and the South Stream pipeline, built with the same design in order to bypass countries denounced by Moscow as being 'unfriendly'?
We are not affected by either. When we want gas it comes directly from another pipeline. The way the South Stream project was done was not very clever and is a reason why Eastern European governments are not very fond of the idea.
Economically, people are afraid of what it means for the Russian economy. When looking at Russian gas reserves, they are not as good as is presented and require huge investment.
My Russian friends in top positions in the current administration are asking only one question: 'where will the gas come from?' That is a very open question and is very hard to answer. The money, in my view, is wasted in building this project, especially as Ukrainian relations are good again and there is a real need for it. It is clearly a political rather than economic project for Russia.
Do you think the EU is neglecting transatlantic relations?
No, I don't think so. The main problem is to ask what the common approach is. I don't think that the EU as an institution is neglecting it. The problem is us - can we cooperate and have a common position? I think that the Lisbon Treaty helps in creating the 'one number to call' and making us a more reliable partner.
Do you think we need more economic coordination?
I don't believe very much in economic regulation. We don't need big institutions to build coordination. We just need to sit down and find a common position. This also doesn't take much money.
Take as an example the common position agreed to stop the Georgian war in 2008. That was not just putting words together, but they have been shown to work.
With the Franco-German axis position increasingly emerging before summits, do you see a change in the way European consensus is being formed?
I think this has always been the case, but whereas before it was kept hidden we are now informed as to their position beforehand, which is different, as we can now be part of decision-making as well.
Smaller member states have also been shown to have their word to say. Maybe the problem between the big countries is that positions have often been very politically correct when this wasn't necessary, and so their words effectively mean nothing.
You are party leader in the Estonian parliament. You mentioned the Lisbon Treaty, in which national parliaments have an increased role. Do you see your parliament having this increased role or is it just trying to find its way in the dark?
I think that it will take time. In one way it works well in that we are informed of the decision-making, but of course the role of national parliaments can always be bigger. We are interested in playing a bigger role.
It depends on how prepared we are and if we are prepared to not be politically correct. I am a strong supporter of parliaments. From my point of view, the stronger both the European and national parliaments can be, the better for Europe.
In your book you look back over the past twenty years. If you were to predict what kind of Europe will exist in twenty years' time, what would it look like?
I hope for a very good Europe. There is every chance for Europe to be very effective, but our future depends on ourselves. The biggest problem is that we don't trust ourselves; we don't believe in Europe and don't believe how good our possibilities are, and are thus afraid to use them.
It has not been understandable for me to see how national governments use the EU to attack others after making a stupid domestic decision and of course this creates a negative image for Europe, but of course Europe is actually more effective.
If we can stop blaming Europe for our own mistakes, Europe has an excellent chance for the future. Political will and leadership are very important things for Europe's future.
Source: EurActiv.com
