Friday, November 13, 2015

Can't beat them, join them.

One of the most positive aspects of life in Estonia is that the average level of education is so high that you get used to people making good quality decisions. Intelligent, well-thought out government services, innovative and interesting technology and so on.

This is why, when one does encounter Estonian examples of stupidity, it can be rather shocking. 

There are small examples, such as allowing graffiti to get out of hand, which in the end creates far bigger and more expensive problems than an early zero tolerance policy does. There are bigger examples, such as the Estonian Conservative People's Party (EKRE) whose small minded, identity based political world view insults the visionary thinkers, such as Jaan Tonisson, who understood from the beginning that Estonian identity must rest on universal, European values. The identity politics of the barnyard that EKRE, Argentina's Peronist party and the SNP all, to varying degrees promote, can quickly descend into racist or homophobic bigotry- and does.

The biggest mistakes of all, however, also seem to be the most expensive ones. Estonian Air, the national airline of Estonia, was a small, well run and efficient operation. However, at the depth of the financial crisis in 2009 it received assistance from the Estonian government which the European Commission now deems to have been illegal. At the time, the Estonian Government was clearly warned that the actions they were taking needed to comply with EU law. However the then minister, Juhan Parts, failed to recognize the problem. The result is that now, after over three years of consideration, the EC has ruled. The result of that ruling is that Estonian Air had to repay €40 million and has ceased flying and over 300 people have lost their jobs.

Now, however, the Economy ministry is trying to create a plan B: a new airline, Nordic Airline Group, has been created and in due course may take on EA's old route network, but at least for the time being, €40m is available to maintain flights to Tallinn. To be honest the ramshackle start to the new airline makes me think that this is already €40 million wasted. It would now, surely, by far better to inject the money into Air Baltic, the surviving (Latvian) Baltic Airline, and get them to expand their network of flights from Tallinn. EA's demise is already seeing SAS restart their flights to Tallinn, and thus reduce the scope that NAG may have to maintain an Estonian connection to the Scandinavian markets. Meanwhile, Air Baltic too scents an opportunity from Estonian Air's demise. The competitive environment for Nordic will be much worse than for Estonian Air- and that was an only marginally profitable airline. The intelligent solution must surely be to work with Air Baltic, but alas, the Ministry has spoken.

Unfortunately it is the same ministry that seems set to cost the country even more money. They have continued to dispute the pricing regime previously agreed with Tallinna Vesi, the partly British owned water utility. However it is becoming clear that in this arbitration, as with Estonian Air, the Ministry has misjudged. Tallinna Vesi are set to win outright, and with it will come the right to sue the government for around €70 million in compensation for lost revenue. Again the Ministry was warned, indeed I myself personally attempted to find a mediation point. However, again, Juhan Parts disregarded the advice he was being given.

€100 million is a lot of money for a small country, and that the loss was avoidable is very frustrating indeed.

Still, perhaps I should not be too surprised that governments everywhere- even in Estonia- seem to cost more money where they are less accountable. The actions of Minister Parts and his advisers might therefore usefully be the subject of an investigation by the Estonian Parliament- after all lose another €100 million here or another €100 million there and we might be talking serious money next time.    

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