No. 29




The Beauty and Pain of European Money

  • Urmas Varblane

    Urmas Varblane

    Member of the Academy of Sciences, Professor in International Entrepreneurship, Academician, University of Tartu

The article deals with the role of foreign support in the state budget of Estonia and more broadly in the development of economy during the last decade.

Estonia’s position in getting subsidies from the EU is compared to that of other new member states. The importance of the use of foreign resources is analysed from the standpoint of Estonian state budget. The positive results accompanying the subsidies that have helped to balance the state budget and made coming out of the economic crisis smoother are pointed out. But the possible negative impacts of such subsidies, or the emergence of the so-called support addiction, are also discussed. And finally the article calls to discuss the strategies of overcoming support addiction.

The importance of foreign support has continuously increased and has become an indispensable part of financing the activities of the state. We have tried to compensate our country’s small capacity for generating revenues with foreign support. Foreign support has become the main source of investments in the state budget of Estonia, covering nearly three fourths of them. Thanks to foreign support, it is possible to continue the existing economic policy and it has been possible to postpone several changes by waiting for the resources from the EU structural funds. The Estonian society has to become aware that support addiction is a problem. In order to solve that, it is necessary to use the subsidies of the EU structural funds for the period of 2014–2020 very efficiently, applying problem-centred approach. For that, the cooperation between ministries has to be better than it has been so far, the level of coordination across them has to be strengthened. The main way for overcoming support addiction is increasing the level of revenue and increasing productivity. It would enable to achieve the necessary financing capacity of the state already during the next decade, so that in 2022 it would be possible to invest without support from Europe.

Full article in Estonian