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Estonia's EU Preparation

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Alexander Nevsky Cathedral, TallinnAlexander Nevsky Cathedral, Tallinn
Our Business Correspondent Greg Wood reports from Tallin, the capital of Estonia, which is one of the ten countries set to become new members of an enlarged European Union.

LISTEN
Hear the views of some of the Tallinn population, plus Eesti Pank's Deputy Governor Marten Ross. Greg also speaks to the British Ambassador to Tallinn, Nigel Haywood, who give us his insight into the Estonia's business opportunities (20/01/04).
LISTEN
Greg Wood in Estonia, speaks with the country's Prime Minister Juhan Parts (20/01/04).
LISTEN
Social division in Estonia ... Greg investigates (20/01/04).
LISTEN
Jason Clark, PNJ Eesti's Plant Director, on doing business in Estonia. Plus the Head of Research at local investment back Eesti Uhispank, Sven Kunsing. Also, hear from Peter Priisalm, Chief Executive of MicroLink, the biggest IT company in the Baltic States (21/01/04).
LISTEN
Katrin Tiitus and her husband Yuri recently opened a golf shop in Tallinn, plus Anneli Pille from the computer software company Proekspert, who says there are good reasons for Estonians to stay in the country (21/01/04).
Greg Wood and Estonian PM Juhan Parts

Greg meets Estonian Prime Minister Juhan Parts.
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The Old Town Square, Tallinn

The Old Town Square in Tallinn.
Sven Kunsing from Eesti Uhispank

Sven Kunsing, from Eesti Uhispank.
Peter Priisalm, CEO of MicroLink Estonia

The CEO of MicoLink Estonia, Peter Priisalm.
Jason Clark from PNJ Eesti

Jason Clark from PNJ Eesti.
Estonia is a country of just 1.3 million people at the northernmost end of the Baltic Sea. But on the first of May it will play a central role in the biggest single change to the community of Europe since its foundation more than fifty years ago.

Ten new states will join, and people here will become part of a single market of 450 million inhabitants, with the right, in principle, to sell their labour in whichever EU country they choose. We came to Estonia to find out how the change will affect them, and how our lives will change too.

Uppermost in the minds of many people here is the worry that prices will rise. Inflation in Estonia is low at the moment, just 1.3%. The local currency, the Kroon, was introduced in 1992 and it has been very stable.

The job of keeping the lid on inflation belongs to Eesti Pank, Estonia's independent central bank.

A scattering of businesses already have a presence here in Estonia, attracted by its low labour costs and well-educated workforce. Average wages are roughly a third of the UK level, literacy is very high.

This Baltic state is one of Europe's fledgling democracies. It's just 13 years since the fall of Communism here, but once Estonia joins the EU it will begin the process of adopting the single currency.

Estonia wants to be the first of the new entrants to join the Euro, and I asked the Prime Minister Juhan Parts, who leads a coalition of centre right parties, why he was so confident about adopting the single currency.

Although Estonia will be joining its larger Nordic neighbours Finland and Sweden in the EU, they don't always see eye-to-eye. In fact they've just had a bad-tempered row about tax.

Unlike the other two, Estonia is a low tax country. Income tax is 26% on all levels of income, with plans to cut that further to 20%. Duty on alcohol is low too Estonia has its own "booze cruises". Every year, four and a half million Finns make the 50 mile ferry trip from Helsinki to buy cheap Estonian vodka.

Companies also get tax breaks if they plough their profits back into the business, they don't pay any tax at all. It's designed among other things to attract foreign investment.

The stock market in Estonia is not large. There are just seven shares on the main list and most of the value of the TALSE index is accounted for by two companies, Eesti Telekom - the Estonian equivalent of BT - and Hansabank.

The TALSE index, which was set up in 1996, rose strongly at first. But there was a crash the following year when Russia defaulted on its foreign debt. Things have recovered steadily since then.

Estonia's information technology is more advanced than any other of the new EU states it even beats many of Europe's larger established economies. Estonia has more Internet users per head of population than Spain all Estonian schools are connected to the web and government cabinet meetings are paperless, with documents displayed for ministers on individual computer screens.

Some people in existing EU member countries, including Britain, are concerned about the prospect of mass immigration from the Baltic States and the other new entrants once they join the EU. There are effectively no restrictions on people coming to the UK, though some countries like Germany have imposed temporary limits.

What will stop migration is if new jobs are created here in Estonia, and that is beginning to happen. Unemployment is down from 13% three years ago to around 10% now, and there is a real sense of enterprise among people here.

It is a big, and young, industry here and small businesses set up 10 years ago are now much bigger. Anneli Pille from the computer software company Proekspert, which was set up a decade ago by six graduate friends, says there are compelling reasons for Estonians to stay in their own country.

Listen to Greg’s interviews and reports from Estonia (including his interview with the Prime Minister) by clicking on the links in the right-hand column of this page.


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