Analytics, Estonia, EU – Baltic States, Financial Services

Hansson, who is one of the authors of the monetary reform that Estonian carried out in 1992, told to Eesti Paevaleht that Estonia should use current reserves to overcome the slowdown rather than take an expensive loan.

"Use of reserves is the competitive advantage that should not be wasted. If you don't use reserves at such times as now then what was the point of accumulating them anyway?" the expert told.

Speaking of possible devaluation of the kroon, Hansson noted he had never believed in devaluation speculations: "Our [Estonian] system is on a strong foundation. But it is true that the tension is high all over the world and no-one knows where it is heading to."

The representative of the world-wide organisation said that he would recommend the government to further cut spending and use reserves, but make sure that there is enough money to pay out social benefits.

"Most Estonian governments have maintained a balanced budget or even managed a budget surplus. Reserves that have been accumulated are quite large. Full credit to them who did it. I think that these reserves could now be used. In this way it would not be necessary to increase taxes and we could overcome the crisis with notably lower tax burden. It could be a major competitive advantage for us if others are forced to notably increase their tax burden. We should not waste this advantage," Hansson pointed out.

According to the specialist, simply using reserves without cutting public spending is also dangerous since Estonia could emerge from the crisis in worse condition than it was when the crisis started.

Hansson says that Estonians are accustomed to major changes: "Since implementation of the monetary reform wages have grown 25 times. Average wages in 1992, when we carried out the monetary reform, were about 500 kroons. We have all survived, the economy has been restructured several times".

Hansson joined the World Bank in 1998 as adviser to then Prime Minister Mart Siimann. Since January he has been analysing infrastructure loan projects for China.