No. 24

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Frightened Money

  • Helle Ruusing

    Editor-in-Chief, Information Adviser of the Chancellery of the Riigikogu

Money is looking for a refuge. Government bonds that until now were reliable are not trusted any longer; the bonds of some European states have been declared trash by rating agencies.

The investors have panicked and the measures meant for calming them down in some cases last only for twenty four hours. It is thought that Europe is going through one of the most difficult periods since the end of World War II. With the help of the media, the panic is even more intensified. It is said that the euro will disappear and the EU will disintegrate. General decline of Europe, decrease of competitiveness, new economic and political centres, growing markets are also spoken about. The fearful picture is somewhat exaggerated. European economy is still the second largest in the world; China’s success story is connected with both the USA and Europe. World economy is global. In shorter perspective somebody somewhere may profit from Europe’s problems, but crisis of trust tends to spread quickly. It is in every-one’s interest to stop it. The failure of public sector to control the finances of states effec-tively is just one of the reasons of debt crisis. At a more human level, the reason was the greed of investors. If somebody somewhere promised an extremely favourable interest upon borrowed money, then why not give a loan. The fact that the lender also risks was forgotten. Unfortunately it is so that the problems of private sector in the situation of crisis very quickly become the problems of public sector, especially as the investor in today’s Europe is an ordinary citizen. The same person who votes at elections.

The issue of the future of the European Union is being discussed. Once again the United States of Europe are spoken about as the most pragmatic solution. But it is not at all clear how to reach it. Fundamental agreements cannot be changed in months or even in a year. In the crisis situation the existing European institutions, like the Council, the Commission and the Parliament, have not achieved much. Decisions are made at the meetings of heads of states and governments. The economic government of Europe is led from Berlin. At the same time the democratic culture in Europe is based on nation states, the governments are responsible to national parliaments. The Europeans are warned about the reduction of democracy and the so-called coup of technocrats.

In Estonia we love to repeat how much our economy is in order, how right we were in mak-ing budget cuts. We are set as an example to other states. At the same time we forget to admit publicly that in our country we did not have to save banks or enliven economy during the economic crisis. Fortunately this was done by our richer neighbours who also solved for us the greatest social problem, the unemployment. The housewife’s housekeeping notebook where all expenses and incomes are nicely in balance has not been used in our households for a long time. Probably there is no household in Estonia that does not have a loan. There is nothing essentially evil in borrowing as long as you are able to pay back the loan. Hoping that the world will return to natural economy would be useless. Considering the future of Europe, we should worry about democracy more than about money. Because the countries where the economy grows faster than in Europe, the countries that are set as examples to us are far from democracy.

Full article in Estonian

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