enterprises and their success in reorganising production and activities, considering changes in the world and in the eu market. the task of the state is to create conditions supporting the reorganisation and investment. estonia's economy has, in fact, already displayed a rather good ability to adjust. the main changes include labour market adjustments and decelerating wage growth. this is definitely a difficult, but highly necessary process, which requires state support in the form of both a well - functioning and efficient unemployment insurance system and retraining possibilities. if we rely on strong macroeconomic policy, the principles of an open economy and future - looking investment, estonia will continue to have all the possibilities for defeating the crisis. but what are the national economy level measures the government should take and how should they support the financial system? here i start with a firm standpoint that the fixed exchange rate of the kroon to the euro is the pillar of estonia's economic policy and the accession to the euro area as soon as possible is its logical continuation. the experience of the past half a year show that monetary policy that is based on the fixed exchange rate and the currency board supports economic stability also in more difficult times. but how does the fixed exchange rate help us overcome the crisis? first of all, it helps stabilise inflation expectations and stop price rises. price corrections after the accession to the eu were sharper then we expected. the opening of the labour market and price rises of many goods in the global market had a strong impact on estonia. this stage, which was, in a sense, unavoidable and paradoxically also the result of successful reforms at the start of the century, is now over. the price level is expected to decline somewhat both this and next year. second of all, the currency board arrangement brought about a relatively fast correction in several sectors of the economy, which displayed clear signs of overheating after the accession to the eu. the fixed game rules in banking, the economy and policy arising from the fixed exchange rate and the currency board notably contributed to smothering excessive euphoria already prior to the global crisis. third of all, the fixed exchange rate is the pillar of our financial system as well. as a result of all this, the vulnerabilities of the estonian economy have decreased significantly. this will enable us to concentrate on measures supporting economic growth once the crisis is over. i would like to stress once again that in a small and open economy like estonia

and domestic demand in recent years, mostly great britain, spain and ireland, but also estonia. on the other hand, the crisis has not spared countries that have been focusing on industrial production exports, primarily germany, but also sweden and finland. thus, the political choices of the member states vary as well. different conditions for countries borrowing from financial markets make up an additional problem in the eu. general distrust in the global financial markets as well as growing fiscal deficits, expanding government debts and insecure growth prospects have caused investors to become more risk - averse. as a result, the spread between the yields of government bods in the eu has notably widened. some member states must pay higher interest compared to a couple of years ago when they wish to borrow. this makes it harder to finance state expenditures. based on the above, the eu's economic policy measures to exit the crisis can be divided into three large categories that were agreed upon in the european economic recovery plan at end - 2008. the shorter - term goal is to stop the downturn and to stabilise the economy. in longer term, it is necessary to restore the confidence of enterprises, households and financial markets in the growth potential of the european economy. the short - term economic policy objective to reinforce aggregate demand by monetary and fiscal policy measures belongs to the first category. the ecb has lowered interest rates and considerably increased money market operations, i. e., the total volume of shortterm loans to banks. in addition, eu countries have agreed to support the economy in 2009 and 2010 by raising fiscal expenditure in the total amount of 1. 8 % of gdp. however, this is constrained by rapidly expanding deficits and external debts. therefore it is important that eu member states make already plans for reducing fiscal deficit in the next years. the european commission stresses that in the current complicated economic environment the stability and growth pact is still relevant. the longer - term objective in the eu is to achieve fiscal balance or surplus. second of all, it is extremely important to restore confidence in the financial sector. the minimum rate of guaranteed deposits in the eu was raised to 50, 000 euro already in 2008. thereafter member states have agreed upon common principles to support the banking system. at the end of 2008 member states put the main focus on the banks'liabilities side to ensure banks would be able to finance their operations also in a more adverse market situation. to this end many countries have offered collaterals to loans taken by banks,