BONJOUR L'ESTONIE

Estonia drafts budget, insists it balanced

Reporting by David Mardiste, editing by Mike Peacock

TALLINN - Estonia's government said on Thursday it had delivered a balanced budget as promised to parliament, although it had a small gap between revenues and spending.

The bill sent by the Finance Ministry to parliament showed spending set at 98.720 billion Estonian kroons ($9.25 billion) and income at 97.843 billion, a shortfall of 0.88 billion kroons.

Despite this gap, the government said the bill was 'derived from a balanced general government sector budget position'.

'It is not correct to say there is a deficit of 0.9 billion kroons as there are different types of accounting (accrual and cash accounting) used in accounting state budget and in calculating the deficit,' the Finance Ministry said in a statement.

'As the Estonian budget is made in one accounting 'style', Eurostat measures in another method,' it added, referring to the European statistics agency, which measures whether countries meet EU budget rules.

Local media disagreed.

'The government has still made a negative budget,' said a headline on the website of daily newspaper Postimees, a view echoed by other newspapers in the country.

The media also said Prime Minister Andrus Ansip had become the first Estonian leader since the Baltic state regained its independence from the Soviet Union in 1991 to send a deficit budget to parliament.

The coalition, led by Ansip's Reform Party, had to drop vows to cut 2009 personal income tax to 20 percent from 21 percent.

The coalition of the Reform Party, the Social Democratic Party and the Pro Patria/Res publica party, held tough talks over whether to cut spending or raise taxes.

Estonia is small and competition is tight !

Juhan Tere

Andrus Aljas, a President and Member of Board of Estonian national airline Estonian Air, told during company’s seminar that Estonia is too small and competition is tight, the Baltic Business News Channel reported.

According to him, the competition is tight because Scandinavian airlines and national carriers compete in Tallinn ; moreover, there are some hubs not far from Tallinn – Riga, Stockholm, Helsinki and Petersburg.

'At the moment, there are four key questions in Estonian aeronautics. The first is deterioration of economic environment, additional expenses due to rising fuel prices and environment protection. Price of fuel has come down, but what has rose once, might as well do it again. When it comes to fuel, we can't talk about relation between supply and demand. It's difficult to forecast," Aljas said.

Fuel makes 30% of total expenses, and if the price doubles, it is hard to come by.

Secondly, Aljas pointed out consolidating since Air France and KLM together form one very powerful company, Lufthansa did some take-overs, and British Airways took over Iberia.

"The third important issue is revolution of cheap flights and open sky," Aljas told explaining that negotiations are going on between EU, USA and Asia to lose today's restrictions.

79% of airlines, operating in Tallinn, are traditional and 21% perform low-cost flights. In Riga the relation is 14 and 86%, respectively, and in Vilnius the percentage makes 20 and 80%.

"It is so because Estonian market is small, the potential of clients is limited. Low-cost airlines haven’t entered the market aggressively," explained Aljas, noting that prices at Tallinn airport are competitive.

"Estonian market is one of the smallest in Europe, only Malta, Cyprus and Luxembourg are smaller. But to have a point in flying to destination three times a week, it needs 25,000 passengers a year," Aljas said and added there are few profitable destinations.

He said one sign that the market is small, is that SAS and LOT will end their flights here and easyJet will end flying to Berlin.

That is why the company is trying to be more flexible. They will get themselves smaller planes, Saab and CRJ900s, and they focus on the local market.

"We have focused on local niche, for example, on October 2 we will start flying between Tallinn and Kuressaare. There are more plans to come. The vision is to serve the entire Estonian market, fly to Kuressaare, Tartu, Helsinki and Vilnius," Aljas commented the company's future plans.

Recovery in Estonia to take longer than predicted

Kaja Koovit

It will take 2-3 years to see the real estate asset prices bottoming and go up again in Estonia, Paul Oberschneider, the CEO of Häuser-Oberschneider OÜ said at Business Plan 2009 conference while answering whether he agrees with Erkki Raasuke, the CEO of Swedbank Baltics.

This is too optimistic," Oberchneider commented the words of Erkki Raasuke that the situation is going to improve starting from 2010.

Oberschneider said he is not pessimistic about the change in residential values. He is more pessimistic on the objects what are not built yet, what are in the process on detailed planning.

According to Oberschneider the expectations of owners of these objects are still far too high. "Those expectations have to change. It’s because of the cost of capital,“ Oberchneider said. The cost of capital has changed so much, that the real estate prices have to decrease by another 20 pct to get investors interested, Oberchneider said.

"It’s worse than most people think,“ Oberschneider said while commenting the current situation at the international money and financial markets.

And the bad thing is that nobody knows what is going to happen. The specialist’s message right now is- don’t ask me anything right now. Come back at the end of the year.

PM : unemployment will go up in Estonia

Sandra Taimre

Estonian Prime Minister Andrus Ansip said that it is likely that the unemployment will increase in Estonia, ERR News writes.

Ansip said at government press conference that the unemployment has been the lowest, totaling 4 pct in the second quarter but we have no reasons to believe that it will stay that low.

“Real estate bubble has burst and there are not so many orders for construction workers anymore even though the number of constructors has doubled during the last three years,” he noted.

In connection with that, Ansip finds that the unemployment insurance fee should be raised. This way we would have more resource in Unemployment Insurance Fund reserves, he said.

“I really hope that it will not go that way but if the unemployment rate reaches 14 pct it is too late to collect money in the reserves,” Ansip said.

Estonia overdue loans rise to 6.6% in August

TALLINN - The level of overdue loans and owed interest in Estonia's banking system rose to 6.6 percent of the total loan portfolio in August from 6.2 percent in July, the central bank said on Tuesday.

It said outstanding loan stock plus owed interest increased to 17.16 billion kroons ($1.61 billion) from 15.9 billion kroons a month earlier.

The banking system is 95 percent controlled by four Nordic financial groups with Swedbank (SWEDa.ST: Quote, Profile, Research, Stock Buzz) being market leader and SEB (SEBa.ST : Quote, Profile, Research, Stock Buzz) in second place.

A rise in bad debt has been widely expected as the economy slows sharply, moving into recession in the second quarter.

The central bank said loans overdue without interest remained stable at 1.2 percent of the loan portfolio in August, the same as for the last three months.

The total loan portfolio increased to 261.1 billion kroons in August from 258.3 billion kroons in July.

Loans overdue for more than 60 days rose to 5.3 billion kroons in August from 4.3 billion in July.

Overdue housing loans rose to 5.76 billion kroons in August from 5.1 billion in the previous month.

Reporting by David Mardiste, editing by Mike Peacock

Estonia catches her "First Spy"

Estonian police have arrested a high-ranking member of the Defense Ministry Herman Simm on accusations of espionage.

His wife Heete Simm, a police lawyer, faces similarly charges. Estonian authorities have not named the country the couple were providing information to, but Estonian media and local experts claim it was Russia. Herman Simm, 61, was responsible for military secrets. In spite of several earlier claims by the government of Russian espionage operations in the country, this is the first spy case in the modern history of the country in which an actual agent has been identified.

www.kommersant.com

The Simms were arrested on Sunday after the state prosecutor petitioned the court. The investigation is being carried out by the Estonian state prosecutor, security police, information department (foreign intelligence service) and Defense Ministry.

Herman Simm began working for the Estonian Defense Ministry in 1995 as head of the information analysis bureau. In 2000, he became head of the newly created service responsible for guaranteeing secrecy at the ministry. Simm’s activities may have damaged interests other than just Estonian. From 2001 to 2006, he was the authorized state security representative and regularly conducted negotiations on the protection of secrecy with NATO and EU member states as head of the Estonian delegation. He was issued a diplomatic passport in 2003. He left that position in 2006 but continued to work as an advisor to the Defense Ministry and continued to have access to secret information.

If convicted, the Simms face prison terms of 3 to 15 years.

I expected Estonia to fall in the corruption standing

Sandra Taimre

Tarmu Tammerk, the chairman of the association Corruption Free Estonia, said that he personally thought Estonia’s ranking in the standing of corruption will be worse than last year due the several corruption cases in the country during the year.

“But it came out that those cases have not taken us down in the standing of corruption perception,” Tammerk said and added that probably the Estonia’s anti-corruption strategy for 2008-2010 was considered more important, postimees.ee writes.

Tammerk noted that the new corruption cases, inadequate control over rural municipalities finances and public tenders, and poor supervision of parties’ financing may lower Estonia’s position next year.

Estonia has been hit by a certain strike back in the corruption perception index. In 2006, Estonia was ranked 24th. This year Estonia rose one position to 27th.

Not a single excise tax will rise in Estonia

Marge Tubalkain-Trell

Estonian Minister of Economic and Commiunication Affairs, Juhan Parts, said that not a single excise tax will rise, but more dividends will be taken out from state owned companies, writes arileht.ee

Not a single excise will rise, differences in VAT will go to 9 pct from 5, VAT on culture will be 18 oct, lowering the income tax will be postponed," Parts said about incomes in budget agreement made last evening.

Parts pointed additional income is wanted from certain financial instruments, for example Estonian Railroad's holding in investment to Koidula border point will be larger. Little more contribution is wanted from state owned companies : State Forest Management Centre, Tallinn Harbour, Air Traffic Service, Estonian Energy, but not Estonian Railroad.

These are not big amounts," Parts said.

On the expenses side, education got an extra money.

Estonian Prime Minister wants introduction of stricter punishment for high treason

AIA reported yesterday that a high-ranking officer of Estonia’s Defence Ministry had been arrested for spying in favour of a foreign country. The former Chief of Estonian Defence Ministry’s State Secret Protection Department, Herman Simm, reportedly gathered confidential materials and delivered to one of the foreign states.

The Prime Minister of Estonia, Andrus Ansip, said in this connection that the maximum punishment of 15 years of imprisonment established by the Estonian legislation in case of high treason was not enough.

«Naturally, no state wants recurrence of such cases, but we together with our partners have done good teamwork», Ansip told the daily Postimees. According to Ansip, only a small part of work has been done and more efforts are needed to find out the amount of the caused damage and to plan actions to avoid similar episodes in future. He said security of Estonia had been strengthened already by the fact that possible high treason had been neutralized.

Having emphasized that he would not like to act in a role of the judge, the Prime Minister said that 15 years of imprisonment for high treason is too soft punishment. Ansip does not consider that the present Minister of Defence is politically responsible for the occurence and there are grounds for his resignation. «If we have revealed high treason and have found the suspect I would rather name it more likely an achievement than a failure of the Minister of Defence», Ansip said. He added that the investigation would show whether someone else should bear responsible for Simm’s activity.

The President of Estonia, Toomas Hendrik Ilves, has highly evaluated actions of the Security Police and other agencies in disclosing of the given case and expressed hope that final conclusions will be made following the judicial procedure. « However, I consider preventive work even more important to not allow recurrence of similar cases in the future», Postimees cites Ilves.

State to pay millionaire businessmen EEK 0.25 million interest/day

A Funny "old world" where everything is money  ..... Get it where you can, no matter what !

Toomas Hõbemägi

The ongoing dispute between the Estonian Tax Board and former owners of Sylvester forestry group means that the latter are earning EEK 250,000 in interest every day.

Äripäev writes that former controlling shareholder of Sylvester Mati Poll alone is earning EEK 53,000 in interest a day.

The reason is that after the tax board filed its tax claim against former owners of Sylvester for allegedly evading payment of income tax on sale of Sylvester to Stora Enso in 2002, the shareholders quickly paid EEK 385 million kroons to the state and then filed a claim in court in which they disputed it.

If the court rules that the tax claim was unjustified, the state must pay back the main amount plus interest at a rate of 0.06 pct a day and 22 pct a year.

Mati Poll alone who faced an EEK 85 mln tax claim has by now earned EEK 30 mln in interest. The total interest claim against the state is about EEK 137 mln kroons.

The total claim of the tax board against former shareholders of Sylvester was EEK 401 mln, of which EEK 385 mln was paid.

In June the Tallinn Administrative Court already ruled in favour of Polli and his business partners. Since the tax board appealed to the second instance court, the sage will continue.

From 2005 to 2007 the tax board had a similar tax dispute with Tõnis Palts and Toomas Peek who had sold their Levicom mobile operator to Tele2. Both were claimed around EEK 13 mln in back taxes, but after the court ruled in favour of the businessmen, the state paid both EEK 11 mln plus EEK 6 mln in interest.

Swedes launch campaign to hire Estonian doctors for hospitals

Toomas Hõbemägi

The Gävleborg county in Sweden has launch a campaign in Estonia for hiring Estonians medical doctors to its hospitals.

A representative of Swedish hospitals told Eesti Päevaleht that the campaign will be carried out in all three Baltic countries.

“We need about 20-30 medical doctors,” said Gunnar Jansson, head of recruitment services of the Gävleborg county that is located about 2 hour drive from Stockholm.

Jansson says that the county has a regional and a central hospital that employs over 4,000 people. “We have already had Estonians working for us,” he said.

According to Swedes, the interest of Estonian medical personnel towards working in Sweden has been growing year by year. “Estonian doctors are very good, this is why we are launching this campaign in Estonia,” said Jansson.

Chilling out with a Baltic spa experience

If you're looking to pamper yourself this autumn, a spa trip to the Baltics could be just the ticket, writes Alannah Eames.

”Go, go, now, now, quick, quick,” screams the middle-aged attendant in broken English before trying to shove me through the heavy iron door of something which resembles a nuclear bunker … except inside it’s -115 degrees Celsius.

Along with four elderly hotel guests and a fellow journalist, I am dressed in the mandatory costume – swimsuit, woolly hat, woolly gloves and thick socks. Not for the first time I wonder why I got out of my warm bed at 7am for this cold room therapy treatment which promises to alleviate aching joints and arthritis through a “pleasant burning biting feeling.”

I’m on a spa trip to Estonia and Latvia, and am currently in the clinic-like SPA Estonia in the seaside town of Pärnu, two hours south of Tallinn. A town of 45,000, Pärnu is filling up with large glass four-star modern hotels as it tries to establish itself as a “spa destination”.

Baltic states don’t need to worry about external threats

Nina Kolyako

The Baltic states, being full members of NATO, in theory need to worry about external threats no more than any other NATO member, and if they come under threat from, say, Russia, they are entitled to exactly the same protection under Article IV (political support) and Article V (military support) as any other country in the alliance, The Economist reported.

Still, viewed from Estonia, Latvia and Lithuania it does not quite feel that way. Baltic officials have been privately and semi-publicly urging NATO to increase its visible presence in the Baltic states, both in terms of planes, ships and soldiers, and through high-profile visits. If the response is cool, they question the alliance’s resolve.

It is true that the permanent NATO presence in the Baltic consists merely of a few warplanes, provided on a rota by NATO countries that, unlike the Baltics, have real air forces. NATO contingency-planning regards any military danger from Russia as a taboo. So formal threat-assessment gives no basis for the alliance to plan how to reinforce its north-eastern members.

All that is going to change, slowly. NATO’s Military Committee 161, which deals with threat assessment, will shortly consider how to rejig the bureaucratic basis for military planning. Other work is already under way.

But there is little to be gained, and much to be lost, by panicky talk in the Baltics about the need for more NATO support. It creates the potentially dangerous impression that the Baltic states are "lite" members of NATO. The alliance’s secretary-general, Jaap de Hoop Scheffer, said rightly last week in Riga that there was no need to show "special solidarity" or create extra "NATO bases": every Latvian military base was a NATO base, he noted.

Estonia arrests senior official for spying

By Rikard Jozwiak

Former top security figure in Estonia's defence ministry is accused of passing on classified information.

The former head of security at the Estonian defence ministry has been arrested on suspicion of providing an unnamed foreign country with classified information.

The official, Herman Simm, was responsible for organising the protection of state secrets, working closely with EU and NATO officials to protect classified information provided by international organisations and foreign partners.

Simm's wife, a lawyer at Estonia's National Police Board, was arrested at the same time, on 21 September, on charges of aiding and abetting him.

There is speculation in the national media, but no confirmation from officials, that Simm gave the information to Russia.

The 61-year-old Simm had enjoyed a glittering career at the ministry, whose security operations he headed between 2000 and 2006 and, at the time of his arrest, he was still serving as a security adviser to the ministry.

Simm is the first person suspected of treason since Estonia gained independence from the Soviet Union in 1991. According to the country's penal code, treason is punishable by a prison term ranging from three to 15 years.

Bravocom invests EEK 150 mln in its mobile communications network

Sandra Taimre

Estonian virtual mobile operator Bravocom promises to open its own mobile communications network in Tallinn by the end of 2008.

“The testing network is already operating. By the end of this year we will cover Tallinn and its environs with a 3.5G network and open it for commercial use,” Jaanus Kikas, board member of ProGroup Holding that operates the virtual mobile operator, told Eesti Päevaleht.

Kikas said that building a 3.5G network in Tallinn costs about EEK 150 mln. “As for future plans we will sit down and think,” he added.

ProGroup has said that it plans to increase the current number of customers from 35,000 to 150,000.

Tallinn’s traffic congests fast

Sandra Taimre

Traffic expert Aarne Rentnik said that the traffic in Tallinn congests fast and a car ride from home to the office may take twice as much in four years.

Rentnik noted that the average speed during rush hour decreases 2 km/h in a year. For example, if now it takes 30 minutes to drive from home to work then in four years it will take an hour, postimees.ee writes.

“In Tallinn, period with the so-called intense traffic lasts about two hours. Pretty soon we will reach the situation where the rush hour in the morning lasts three hours,” he noted.

Rentnik added that the smoother roads and new crossroads would not solve the problem, as they will be congested by the cars in four-five years. 

However, Rentnik said that one of the solutions to that problem could be to attract people to use the public transport more.

Kirsipuu (not an old man yet !) wins Tartu Rattamaraton

Jaan Kirsipuu from Estonia proved the fastest man at the 11th SEB Tartu Rattamaraton when he took his third consecutive win. His time over 89km was 2.42.49. Second place went to the young Martin Loo from Estonia at 2.42.50. Ivan Seledkov from Russia finished third in 2.43.17.

Kirsipuu, the retired professional road racer, took the highest place after a sprint finish with Loo. The pair held a safe lead over the rest of the chasers for the last quarter of the race.

Tartu Rattamaraton is the biggest mountain bike event in Baltic States. This year more than 4,700 people registered for 89km race. The race is organized by the Club Tartu Maraton. The same club will host the European Championships in Mountain Bike Marathon in 2009.

In France, we love you Jaan ! Carry on showing .... you are great ....

The birthplace of the Head of State Jaan Teemant will be marked

Stenbock House – On Wednesday, 24 September, a memorial stone will be dedicated at the birthplace of the Head of State Jaan Teemant, in Pärnu County.

At the dedication of the memorial stone in Paatsalu Village, Varbla Rural Municipality, at 14.00, President Arnold Rüütel, State Secretary Heiki Loot, Varbla Rural Municipality Mayor Sivar Tõnisson, and the representative of the family, Mari Adler, will speak.

At the gathering following the dedication of the memorial stone at the Varbla culture centre, Jaan Teemant will be recalled as a lawyer, statesman, prosecutor and citizen, by Professor Peeter Järvelaid, Chief Public Prosecutor Norman Aas and Kaire Veeroja, the researcher of the family tree of Jaan Teemant.

24 September is the 136th anniversary of the birth of Jaan Teemant. Jaan Teemant was born on 24 September 1872, in Illuste, in Lääne County. His childhood, however, passed in Kohila Rural Municipality, in the present Priidiku-Teemanti farm, which will also be marked with a memorial stone.

Jaan Teemant was the Head of State from 15 December 1925 to 9 December 1927 and from 19 February to 19 July 1932.

Teemant was also a member of the Estonian Province Assembly and the Constituent Assembly and was the Prosecutor of the Republic of Estonia.

In the anniversary year of the Republic of Estonia, the State Chancellery will mark the birthplaces of the Estonian heads of state which have not been marked yet. Earlier during the anniversary year, the birthplace of the Head of State August Rei, in Pilistvere, the birthplace of Aleksander Warma, the Prime Minister acting as the President in exile, at Viinistu, the birthplace of the Prime Minister and Head of State Otto Strandman in Kadrina Rural Municipality, Vandu Village, and the birthplace of the Chairman of the Estonian Province Assembly and Prime Minister Ado Birk, in Tarvastu Rural Municipality, Mõnnaste Village have been marked.

Read more about the biography of Jaan Teemant at :
http://www.president.ee/en/estonia/heads.php?gid=81969

Riina Soobik
Government Communications Office
Tel: +37253400736, 6935950
E-mail : [email protected]
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Government to submit a balanced budget to the Riigikogu on Thursday

Stenbock House – At yesterday’s meeting, the government cabinet came to an agreement on the balanced budget, which is planned to be passed to the Riigikogu on Thursday.

The total volume of the state budget expenditure is EEK 98.8 billion. The balance was struck mainly by economising costs. The government has decided not to pursue tax increases, which had been under consideration. Next year, the overall tax burden will be at the level of that of 2008.

It has been agreed that by today, the ministries will submit to the Ministry of Finance draft budgets as amended, as well as related draft regulative amendments. The Ministry of Finance will put together the final budget by Wednesday evening. According to the plan, on Thursday at 8:00, the government will approve the draft budget and at 10:00, the government will submit the state budget to the Riigikogu.
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Expat Russians gaining confidence

The recent fighting in Georgia has given Russian minorities in other former Soviet territories greater prominence and confidence, as Humphrey Hawksley reports from Estonia.

Juri Mishin walked purposefully across the room to greet me.

Dressed in a neat, light grey suit, he was a short energetic man and he ushered me to a seat, keen to explain his position in the new global order.

We were in the offices of the Union of Russian Citizens, a political organisation that said it spoke for Russians living the tiny Baltic state of Estonia.

A quarter of the population is Russian and in the border town of Narva, where we were, just about everyone was Russian.

The room was decorated with busts of Stalin and Lenin.

A red Soviet hammer and sickle flag stood furled in the corner and, from the window, there was a view down to the Russian border.

The Narva River marks the line and, with castles on both sides and their flags flying in a strong wind, it looked like a scene from a medieval epic.

Russian support

Mr Mishin explained that he was also an official adviser to the State Duma, the parliament in Moscow, his mission to alert the Kremlin as to how its citizens, living outside their country, are being treated.

Since Russia invaded Georgia in August, ostensibly to protect its own citizens, this has become a highly sensitive issue.

"Russia isn't the weak, collapsed state it was 10 years ago," said Mr Mishin. "It's risen from its knees and it's now a country that we can rely on. As Russians, wherever we live we can now ask for its support."

As if to prove his point, he introduced me to Bargrat Djikayev, a 75-year-old former Soviet soldier who originally came from the breakaway Georgian area of South Ossetia, the scene of the August fighting.