Central Europe Review The International OSI Policy Fellowships (IPF) program
Vol 2, No 27
10 July 2000
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Interview with Estonian Prime Minister Mart LaarNo Turning Back
An interview with Estonian Prime Minister Mart Laar
Mel Huang

There were high expectations in Estonia in March 1999, when Mart Laar strolled back into the prime ministerial chair. Many wondered what he could do with a solid three-party majority coalition, especially in terms of trying to take Estonia out of the economic crisis caused by the Russian collapse. Though difficult, one of the key pieces of legislation passed early on was a negative supplemental budget, which cut spending early, allowing the government to adjust early on to the effects of the crisis. Riding on a strong mandate, Laar and his government set Estonia on the road out of economic stagnation, as high growth returned by the first quarter of 2000.

Laar has been seen as the "golden boy" of Estonian politics since his entry a decade ago. Leading his coalition to election victory in the autumn of 1992, the then 32-year-old Laar compiled a youthful government to push through many of the most difficult "shock therapy" reforms, guided by an extremely liberal economic outlook: flat 26 per cent income tax, no trade restrictions, balanced budget required by law, massive deregulation and so on.

Though as he alluded to in his interview with Central Europe Review, that first term did not flow very smoothly politically. Dogged by several scandals, the government collapsed about six months before the end of its term. However, during the years between his prime ministerial stints, Laar developed from the energetic, sometimes brazen, politician into a charming, more mature diplomat. At 40 years of age, Laar has a long future in Estonian politics ahead of him.

Mart Laar, a historian, has also contributed to academia. His book about the metsavennad, or the "forest brothers" resistance movements following the Soviet occupation, filled a large gap in Western historical study [see CER's review of War in the Woods: Estonia's Struggle for Survival, 1944-1956].

Central Europe Review: It has been a little over 15 months since you returned to the prime minister's position. It has been a busy year for you. What would you say have been the high and low points of the past 15 months?

Prime Minister Mart Laar: Actually, the high point was that we got out from this quite difficult economic situation where we were at just at exactly one year ago, that we now have a growing economy - a fast-growing economy. I think that's the best point.

I couldn't even say where the low point has been, because this year has been very successful not only for Estonia [as a whole] economically or politically but looking at the government parties' ratings, I think this has been a surprisingly positive year politically [in those terms] as well. If the elections were to take place now, the results would be the same; in the meantime, we won the local elections [October 1999, ed] as well. So I think this has been a remarkably good year.

There are little differences, if I remember, from the first time I was prime minister, where politically it didn't go so well.

CER: Do you feel that some of what you are doing now is undoing what you did several years ago, when you were last prime minister; for example, customs tariffs?

Laar: No, actually I just think the situation has changed. In my first term as prime minister [September 1992 to October 1994, ed], we created all the chances and possibilities for successful development, not only my government of course, but I think all Estonian governments have followed mainly the same path, the same policy, which has allowed Estonia to be quite successful. And I think this is a good point: that we have really quite steadily worked towards that success with all political parties and all different governments.

In some ways situations just change, and in countries as well. It was the right decision not to pass customs tariffs when I was prime minister for the first time, but I think now it was the right decision. You can't follow exactly the same policies all the time. You have main areas, such as macroeconomic stability, low taxes and so on, but to follow the exact same policy can be a critical mistake. I would not suggest it to any government.

CER: As you have the first fifteen months behind you, what are the main policy priorities for this year, next year and for the remaining term of this government?

Laar: I think that a large priority is to create the conditions for the successful development of Estonia, which means that we must create a competitive society that provides lots of work in different fields. First of all, during my first time in office, we turned Estonia from the East to the West. Now, we must make this turn irreversible. And this is possible by joining and integrating Estonia into European and Trans-Atlantic structures, which is without a doubt a priority for Estonia.

The second thing is of course to now work more seriously on social reform, such as family policy, pensions reform and so on. The third thing, we have found to be very important if we are to have a competitive
first... we turned Estonia from the East to the West; now, we must make this turn irreversible
society is education. And at the same time, also administrative reform, in order to have lean government. So those are some parts of it.

We also know that Estonia has been a highly successful country in terms of IT development. We are using modern technology in all those fields to be as successful and competitive as we can.

And the results are there [to see], I think. In two days the new Human Development Report from the United Nations will be published [published on 29 June, two days following the interview, ed]. I don't know exactly where Estonia lies [in the Report], but I know that we have made very good progress. We probably can count ourselves for the first time amongst the developed countries in the world, which maybe for other countries that have been there for a long time sounds not so important. But for us, who started from a very, very different position in this Human Development Report, I think it can be quite good news. But we'll see - in two days [indeed Estonia did reach the level of "highly developed" country, rising eight places to 46th, ed].

CER: Looking at policies, one of the things that comes up often is the integration of the Russian-speaking population. Recently, you were in Ida-Virumaa [the industrial north-east county of Estonia] speaking to regional and community leaders. Are there going to be new initiatives for integration?

Laar: No. That's not necessary. Estonia is working without such "big-bang" initiatives. We're doing our everyday work, and we're doing it well. Estonia has passed the integration plan - covering 1997 to 2000 - under which an integration report is published annually which gives an overview of what we have done. And Estonia has made very remarkable progress, building a society from a divided one to a society fully in peace, and, really, moving much faster than we sometimes would have believed possible toward positive integration.

If you look at the last poll and the attitudes of non-Estonians towards Estonians, the Estonian state, the Estonian language, and at the same time at the attitude of Estonians toward non-Estonians, I think there has been very positive improvement.

On political or social questions, more and more people are becoming more similar. There are not such large differences anymore between the Estonian-speaking and non-Estonian population. This is very good progress. And in this context I can only agree with the words of Prime Minister Poul Nyrup Rasmussen, the Danish prime minister, who said in Estonia some months ago that Estonia, by its successful integration policies, is not only an example for the countries in Central and Eastern Europe, but that we are an example for some Western European countries as well, because everybody is having more or less different degrees of a similar problem. So I think it is not a very big problem.

Actually, in Ida-Virumaa I didn't talk at all about minority policies. The problems were connected with unemployment. To your question, I'm starting to think that there was a huge difference there in 1993, 1994 and 1995, when we talked about minority policies. But now we didn't talk about it. I must say we talked about very practical matters - social problems and so on - but nothing about this [i.e. minority issues] anymore. This is a sign as well. I even didn't notice it myself, I must say!

But of course, there's a lot of work to do in Estonian training and so on, but I think things in all kinds of fields have moved very positively. And one sign of course of this is that Russia is not talking much about the violations of human rights in Estonia anymore; they are looking to other topics now.

CER: You answered exactly my next question, because I was going to say that seemingly people are not talking about basic integration policy anymore. They're talking about regional issues, such as closing of mines, unemployment, the type of things that affect Ida-Virumaa more, because it was such a heavily industrial area and has not transformed as fast as Tallinn and perhaps some other areas. Is the government planning any initiatives with regional reform for Ida-Virumaa?

Laar: There are lots of things we must do, and this is a little part of administrative reform. But regional policy in Estonia must be strengthened, no doubt. Ida-Virumaa - some people call it a programme - I see it as a good possibility for a lot of good developments, having a skilled labour force and good tradition for development of industries. And if you look at the free zone in Sillamäe, you can see it is really going well in the places the government has supported. There is good co-operation between businessmen, the trade unions and the local governor, who represents the Estonian state. Maybe there are even more possibilities like this. We have lots of initiatives, we have special training programmes.

But again, one part is education, building different schools. We're developing the Narva College of Tartu University. We're supporting that as much as we can. There are lots of things like that [that we are doing] in order to give more skilled workers to new companies, as the demand is there. There is not just unemployment; there's also a demand for a skilled workforce as well.

CER: Keeping on the regional theme, I applaud you on the idea of decentralisation. But you did create a little stir in the press in a Postimees interview (2 June), in which you suggested the possibility of having the administrative capital of the country in Tartu. With the Education Ministry moving to Tartu, the government has already taken a step towards decentralisation. Is the government seriously interested in moving the capital in the next few years?

Laar: No. I don't think the moving of the capital will be the main question for the government in the coming few years, but I think at one point it must be decided. If we move some more ministries to Tartu, then the question will come. I must say that there are quite serious supporters of the Prime Minister's idea, even to my own surprise, because it was, of course, a little provocative to wake up people to discussing regional policy. We can talk lot of nice words about regional policy, but we must at some point implement it.

And decentralisation on the Estonian scale is the answer,
I don't think the moving of the capital will be the main question for the government, but at one point it must be decided
and I think we have made some noise in neighbouring countries. I know some of my colleagues have been very interested in my idea, because there is huge resistance; nobody wants it. In the end, you'll be criticised heavily. But I know at least one of my colleagues who is dreaming a little of doing the same thing, starting with some ministries, of course. This is just an effective tool of regional policy, especially in Estonia, which is so small.

But from another point of view, this is not the highest priority for the government; my idea was to provoke a good discussion. I have done it, and I think the discussion is so good it's moving along without me!

CER: A quick aside to this, I remember several years ago there was talk of moving the Cultural Ministry to Viljandi...

Laar: Yes. But no, actually, the idea is now, having studied it and looking at the ministries, that they can be in two places - not more. So we can look at some other administrative units that can be moved to other cities possibly but not to divide all the ministries in the country. It would not be very practical, even using the information technology that we will use and even on the scale of Estonia. So, we'll build up the second centre of Estonia, so that Estonia can stand on two feet.

CER: Switching over to European Union integration, I've noticed that the rhetoric has changed a bit. I remember, about a year ago that Foreign Minister Toomas Hendrik Ilves was criticising the Riigikogu for not doing much. Now, it seems that Estonia is doing its "homework" and all the harmonisation work that is required by the EU. With regard to Estonia being ready by 2002...

Laar: 2003.

CER: Oh, end of 2002, start of...okay.

Laar: First of January![laughs]

CER: How strong is Estonia's position right now on the road to the EU?

Laar: I think we are quite strong. Of course, we lagged a little bit behind one year ago. There were lots of reasons to be a little bit worried. We made lots of promises in earlier years, but Estonia was maybe not the most active in fulfilling those promises. Now, as it has happened always, the government has to do its work. So we have sped up significantly our EU integration. This has been possible due to very good co-operation inside the government, inside the ministries, and within the Riigikogu - the parliament - so it's really working well. Of course, we can always do better, but looking at the results, this is quite a good situation, and we can be quite proud of what we have achieved this year. Estonia has moved very fast.

First of all, we just made ourselves - our government officials, our parliament, and people - understand that what we're doing for European integration is not for Europe but that we're doing this for ourselves. Those laws, those institutions, they're not necessary so much for European integration, but they are necessary for us. And if we have such an understanding, I think lots of things will go faster and easier.

And our experience with the negotiations with the European Union has been very positive. We are very satisfied,
we made ourselves understand that what we're doing for European integration is not for Europe but for ourselves
as we were one of the first countries to achieve a new agreement on agriculture. This enlarges significantly our possibilities in European Union markets, which, of course, is very good news for Estonian farmers. Only now, I think Estonian farmers will understand just what it is to be in the European Union, what possibility that offers. And I think this can, we will see of course from the first reaction, mean quite clear political change in attitudes as well. Of course, we will see, but we can already see some positive changes of attitude.

The second thing, of course, is that we can now do lot of things with a majority in Parliament. We have the local government under the same political programme, so we can unite our efforts more effectively on EU integration. It allows us to move faster as well.

Whereas one year ago we were the last in terms of closed chapters [of negotiations with the EU, ed], now we're first. We have done quite well, and we are satisfied with how the negotiations have progressed. We don't think they have been slowed down. For us, it is most important that it continues in the same reasonable and practical way. I think that's the main thing.

CER: Moving towards domestic politics, 15 months later, how solid is the ruling coalition? There have been some fights in the press - the VAT on heating - and little things here and there. Even this NRG privatisation deal...

Laar: In today's government session [27 June, day of the NRG privatisation decision, ed, see last week's Amber Coast for more details], with such a difficult question as the NRG privatisation on the table, there was a unanimous vote. Everyone supported it after the discussions. I think it is very hard to find another sign that the coalition is working really well together. I think I am very satisfied on all sides with the spirit of co-operation that I do see in the government and governing coalition.

Of course, you can have different opinions and, of course, you can even sometimes vote differently in Parliament. But not on the main questions which are part of our coalition agreement, and if we do something, we will discuss it beforehand. We discuss a lot of things. We can have different opinions; nobody is saying that this is something bad. I think this has worked really positively from my point of view, and as prime minister, I am very satisfied with this good working spirit we have seen.

Look at today's government session, which was one of the most difficult questions for the government to resolve. Sometimes there are good solutions, and this process has lasted for four years and had a bad start. And now it was concluded by the clear decision of the government. All of us were
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understandably under enormous pressure; this was an issue on which everyone in Estonia probably has a different opinion from that of the government. It is very popular to have that different opinion, to say what not to do; we, unfortunately, must always ask what is the alternative, and we made our collective decision. It was a very positive experience, today's session.

CER: A final question: is it too early to speak about the presidential campaign next year?

Laar: Oh yes. It's too early.

Mel Huang, 27 June 2000

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