ardo hansson : celebrating the tenth anniversary of estonia ’ s accession to nato and eu opening speech for europe day by mr ardo hansson, governor of the bank of estonia ( eesti pank ), at the seminar on the impact of the european union on estonia, eesti pank, tallinn, 9 may 2014. * * * today we are celebrating europe day. we have just passed the tenth anniversary of estonia ’ s accession to the european union, though the move towards europe had started when the country regained its independence and linked the estonian kroon to the german mark. to people in estonia, being part of europe means democracy, freedom, security and well - being. closer integration with the european union has been driven by the desire to ensure that these benefits are maintained. these core european values remain more in the background in our everyday life as we take them for granted, but events in ukraine have given a sharp reminder of their importance. accession to the eu has increased estonia ’ s influence on the world. estonia ’ s voice is heard better in europe than ever before and estonia is involved in setting the joint economic policy of europe and the euro area. this gives us the power to affect processes ourselves, and the responsibility to do our work as well as possible and to answer for the results. as the central bank of the republic of estonia and a member of the eurosystem, eesti pank has also contributed to the sustainable development and increased prosperity of the estonian economy. it is our job to ensure that companies and households can make transactions and calculations using a currency with stable purchasing power. during the time estonia has been a member of the european union, the well - being of the people of estonia has improved. eu membership has meant our economic environment has been more stable and deserving of confidence. in the past ten years, economic growth in estonia has surpassed average economic growth rates in the european union, so that estonian gdp in purchasing power terms has advanced from 55 % of the eu average in 2003 to 71 % in 2012. the incomes of residents of estonia have also increased, with real wages up more than 40 % in the past decade. eu membership has brought both opportunities and risks. it is the job of those setting national policy to make sure that risks are minimised and that we are best able to profit from opportunities and i am sure that the analysis provided here today by my colleagues will help in guiding the decisions behind that policy. the presentations we will hear today

may be replaced by labour shortages if the people who do not have a job stop looking for one and certain important skills and knowledge that companies particularly need are lost. a short - term downturn in the economy can in this way make it harder to access capital and skilled workers. the sharp rise in the price level in estonia in recent years has caused companies here to become less competitive on price. consumer prices in estonia are 35 % higher than they were in 2019, before the pandemic and the other crises, and producer prices in manufacturing are 40 % higher. in the european union meanwhile, consumer prices are up 21 % and producer prices 33 %. the price level in estonia's main trading partners has also risen, but much more slowly. 3 / 6 bis - central bankers'speeches prices rising more quickly than those of competitors does not automatically mean that competitiveness is being lost, as long as better goods and services can be provided for those higher prices. right now however, the rapid rise in prices has been accompanied by a steep drop in export volumes. estonian companies have had to cope with their cost bases increasing faster than those of competitors in the nordic countries and western europe, and they will probably have to continue coping with this in future, since the price and wage levels here are lower than those in wealthier countries, and prices and wages in estonia may be expected to continue rising relatively fast. wages rising fast in estonia has so far been facilitated by growth in corporate turnover and in the longer perspective by labour shortages. labour costs per employee are around 30 % higher in estonia than they were in 2019, while the average increase of 15 % in the european union is only half that. labour costs are an important part of production costs and it can make exporting companies less competitive if they rise fast. the rise in labour costs in manufacturing from what they were before the pandemic has not however been noticeably larger in estonia than in latvia and lithuania, and it has been smaller than the rise in costs in poland and some other countries in central and eastern europe. this is of course of no comfort to those exporters that compete with companies in the nordic countries or western europe. prices for energy and fuels have come down from the peaks they hit at the worst of the crisis, but there remains a lot of uncertainty about them. limits on the amounts of electricity that can be generated and supplied have caused prices on the electricity exchange for the baltic and nordic region to diverge ever further apart since 2020. the