Igor Rõtov: Estonia dieting at the European meat fest

20.06.2012, 16:14

The following is a column of Äripäev CEO Igor Rõtov that was published in today’s Äripäev.

I would compare Estonia to being the only vegan at a European dinner table. Other EU countries are sitting behind plates filled with sizzling sausages and meat. Chancellor Angela Merkel keeps a short table speech where she recommends Greece and Spain to learn from Estonian prime minister Andrus Ansip who is eating cabbage leaves at the end of the table because it is “prudent and healthy”.

Everybody at the table approve Merkel’s message and then attack meat plates. Ansip, the poor man at the end of the table, also wants to eat meat, but because of pride he must stick to lettuce.

US economist Paul Krugman told everybody recently that although Estonians have a healthy diet, they don’t look so good. This caused an angry outburst from president Ilves, media and other economists.

Estonia was and perhaps is eurozone’s fastest-growing economy. We have almost no foreign debt and we are set as a model for this world’s powerful. The paradox is that we are also eurozone’s poorest member. Our purchasing power is miles behind even those countries who could not care less about deficit and government debt.

We all know that Estonian wages are extremely low in comparison of what doctors or builders earn in Finland. We usually justify our low wages with our Soviet heritage.

My good friend Andrus Vaher with whom I joined Äripäev in 1992 went to work in Russia in 2002 to run the local business newspaper.

In 2002 the living standard of Estonia was considerably higher than in St. Petersburg and Äripäev journalists were earning around 30 percent more than in Russia.

Ten years later Estonia is in the European Union, Schengen and eurozone, while Putin’s Russia seems to be crawling backwards, at least in terms of democracy.

However, when I asked Andrus he told me that journalist salaries in St. Petersburg have not only caught up with Estonia, but are now 25 to 30 percent higher than here.

Today, a good journalist in Estonia is earning about 1,000 euros in gross wages a month, way below the salary of their Russian colleagues. There are similar gaps in other professions. Moreover, Russians enjoy cheaper fuel and communal costs and high-earners have regressive social tax rates.

According to tax authority, median wages were 757 euros per person in the first quarter before deducting income tax.

The corresponding average figure in the developed Europe is between 2,000 and 4,000 euros and in some branches the gap is evern bigger than that.

We are far behind in comparison with wages paid in most sectors including the energy sector where the proposal to increase the monthly salary of Eesti Energia CEO Sandor Liive from 11,000 to 20,000 euros a month caused a public outcry.
Don’t be agraid, I have not become a Social Democrat and am still publisher of Äripäev.

But I am not preaching the low wages as the competitive edge of our exports. I want everybody to be paid more.

We praise our exporters, but we forget that we are still living in Estonia and want to see new buildings built, new companies founded and want to consume in the same way as the rest of Europe.

Unfortunately, low purchasing power and small and shrinking domestic market is no longer attractive to foreign investors and successful Estonian exporters increasingly incest their profits abroad.

The gap in purchasing power between Estonians and Europeans shrank considerably between 1991 and 2007. Then came the Lehman Brothers crisis in 2008 and since then the purchasing power of Estonians has not come any closer to the European average.

Wages have grown slightly, but it has been eroded by inflation. Wage gap with some of eurozone countries has even increased.