Mike Collier in Parnu, Estonia -
Maybe it was the fact that the sun was shining, the beach was empty and the sea was a shimmering blue that created the positive vibe at the inaugural Financial Conference held in Estonia's summer capital, Parnu on April 15-16.
Or maybe it was the troupe of little girls who got the conference started by performing a surreal, but charming, dance holding up speech bubbles saying "Bla bla bla" - a well-timed warning to speakers and delegates alike not to waffle.
But more likely the upbeat atmosphere was simply a result of knowing that Estonia is emerging with more credit than most countries from the global economic crisis. Not even the "Muua" (For sale) signs adorning beachfront second homes in Parnu could dampen the traditional Estonian belief that the small Baltic state is probably the best country in the world.
Once the dancing girls had gone back to school and after a brief interlude from a lighthouse keeper delivering a riff about stormy seas and fair winds (a two-metre tall lighthouse and artistically draped fishing net remained on stage at all times with sea shanties played during interludes), the conference proper got underway with an assured and provocative overview of emerging markets from Nenad Pacek of Global Success Advisors.
Pacek identified a series of post-crisis "megatrends" that may not have been particularly surprising, but were worth seeing lined up. They include the emergence of purchasing power parity between the developed world and emerging markets, a much tougher competitive environment, and lending that will be subdued. After a meeting with bankers in Frankfurt, Pacek noted: "I walked away from that meeting thinking there will not be much lending in Eastern Europe for the next few years."
But Pacek's main value as keynote was in challenging cosy notions that with the crisis nearly over and euro adoption on the way, Estonians could afford to relax. "It think it is totally counterproductive to rush into the euro in 2010," he said, "but it will be good for stability and foreign-denominated debt."
"All of [the existing Eurozone members] should step out as none of them fulfill the Maastricht criteria. By the time it joins, Estonia will probably be the only country meeting the criteria. You can start spending more as soon as you are in, because no one can do anything about it," Pacek joked, drawing attention to the very different reactions to austerity in Estonia and Greece, which could wreck the euro in a worst-case scenario involving mass social unrest.
Perhaps surprisingly, there was less talk about euro accession than might have been expected given that the European Central Bank (ECB) is due to give the thumbs up or thumbs down to Estonia on May 12. Even the Estonian Finance Ministry's Lemmi Oro refuse to fret about a report that Estonia may be prevented from joining the Eurozone. "Some wise guy said in the papers today that we won't even get the euro," she said with commendable sang froid.
After so long spent looking inwards at the microscopic details of Estonian statistics in order to prove that it qualifies for the euro, the appetite today is for broader horizons such as getting the small Baltic state to step into Asian and other emerging markets. With that in mind, the crisis may have actually done Estonia a few favours, according to Andres Arrak, director of the Entrepreneurship Institute at the Mainor Business School. "We caught the consumerism boat too late and got caught halfway," he tells bne, developing the maritime theme, "But the advantage is that we didn't have time to build up a high tax rate and a big welfare state.
"According to the director of a major Finnish company, Estonia's Nokia is its labour unions," Arrak said, pointing out that higher unemployment rates are not necessarily bad, avoiding the previous situation where employees could hold bosses to ransom by threatening to leave for Finland or the UK. "If you could breathe and hold a hammer, you could be hired at a construction site. The crisis is good, because it shuffles people back from bad businesses to good businesses where they belong."
Similarly, a discussion involving resolution specialist Justin Jenk plus bosses from Swedbank and Danske suggested the crisis had made banks and borrowers communicate in a way they never managed to during the boom.
But the euro did return to the agenda towards the end of the conference when the central bank's Martin Lindpere spoke about "when" rather "if" Estonia gets the thumbs up from the ECB. His mention of "truckloads of coins" ready to roll into the country from Finland must have been music to the ears of Vallo Tonsiver whose company 7kohvipoissi supplies coffee machines to offices, fuelled the conference with its excellent brew. "People don't walk around with pockets full of kroons. Because a kroon is worth so little, we pay mainly with paper notes which are no use for vending machines," he tells bne. "But when the euro comes, people will finally have coins in their pockets!"
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