What is the current economic situation in Estonia?
The macroeconomic numbers could not be better: indeed, they are almost too good. For example, the state debt to GDP ratio is only 5% - the lowest of all the accession countries and well below the 60% cap set by the Maastricht treaty - because the government has issued virtually no bonds. It is the national equivalent of a homebuyer refusing a mortgage and paying with cash.
What seems to be the cause?
1. They decided that IT was the way forward, and founded the Tiger Leap project to make sure that there was a computer in every schoolroom. Within a few years, Estonia has become the most intensely wired country in the world. Banks have closed branches because so many customers prefer to do their household accounting online.
and 2. Less frivolously, the government has been busy implementing one of the most radical economic policies in the EU with huge (and unexpected) success. Estonia was the first to follow Ireland's lead in slashing direct corporate taxes to the bone, shifting the burden to indirect taxes such as VAT. The government expected tax revenues to take five years to recover to pre-reform levels - instead, it took 18 months.See the article in The Guardian.
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