President of the Republic on the 456th Schaffermahlzeit in Bremen, on February 11, 2000
11.02.2000

Dear ladies and gentlemen,

As the President of Estonia, I am obliged, entitled, and above all delighted to speak of what connects Tallinn, the capital of the Republic of Estonia and once a free Hanseatic city, to another former free Hanseatic city - Bremen. Of course, there are time and space, and something else that, as you just heard, is hidden behind a great rock. It is hidden in Estonia, if we believe the legend, but it is still hidden in Bremen, if we believe the statistics.

First, about time. Johann Georg Kohl, the Stadtbibliothekar (city librarian) of Bremen, returned from his voyage to America and published an article, in which distances seemed to have disappeared - quite in the modern spirit. In port towns, as you remember, distances did have a different meaning than in the inland areas. In ports, distances were the air you breathed, they were your life. To be brief: your Stadtbibliothekar's article bore the heading ''Livonia, America, and the New Painting at the Bremen Stock Exchange''. And when the painting (by Peter Jansen, an artist from Düsseldorf) was inaugurated on August 3, 1872, the Chairman of the Chamber of Commerce announced with pride: ''What we see here on this painting, is also true today: the tradesmen of Bremen are gaining a firm footing all over the world''.

Both the painter Peter Jansen and those who ordered the painting must have been inspired by the painter Ludwig Maydell from Tartu, whom we know as an illustrator of Estonian fairy tales. In 1839 and 1849, he published ''Fünfzig Bilder aus der Geschichte der deutschen Ostsee-Provinzen Russlands'' (Fifty Pictures of the History of the German Baltic Sea Provinces of Russia). One of these pictures does indeed depict the discovery of Estonia, Latvia and Lithuania by tradesmen, who have reached our coast in their Hanseatic cog. The cog flies a flag with the Bremen key. On shore, there is lively trade going on, as we remember it from the travel books of James Cook or my childhood favourite ''Robinson Crusoe'': the savage ladies are captivated by mirrors, these wonders of the civilisation, whereas men seem more attracted to try the alcoholic beverages. With precision and humour, Maydell illustrates a popular history textbook of his time, where we read, word for word: ''this is how the inhabitants of our native country lived in happy isolation from the rest of Europe, unknown, but also free of envy and happy with the ways of their forefathers''. This idyll, worthy of Rousseau, travelled from textbook to textbook acquiring new details, as if the authors had themselves been present in the twelfth century. The idyll inspired imagination and gave life to new characters. I would not be surprised if, even now, they were busy with their trade amidst their wine-barrels, as the scene originally came from Henrik of Latvia, a fully reliable 13th century chronicler of Livonia. He also inspired Balthasar Russow from Tallinn, the most well-known Estonian historian, who dedicated his book to ''the distinguished, honourable, sophisticated gentlemen, the Mayors and Elders of the Council of the commendable imperial free state city of Bremen.''

We might discard this story as a legend, but a legend, once born, stops being a legend. True, it does not become history, but can still be treated as folklore, which, all in all, means nothing but a fact. As we know, Bremen has played a crucial role in the Christianisation of Northern Europe, and the long life of the legend is thus explained. Adalbert, the Archbishop of Bremen, had appointed Hiltinus (Johannes) to be the Bishop of Birka, and the islands of Findia and Hestia, with the modern names Finland and Estonia, belonged to his bishopric. Yet this presumed the existence of at least one Christian congregation both in Finland and in Estonia. When Adam von Bremen, some decades earlier, visited the Danish court, the King told him with pride of the church built on the Eastern coast of the Baltic Sea, a reference to Estonia as early as in 1070. Yet this is not the limit: In Chapter 45 of his ''Germania'', Tacitus describes the Estonians and the Baltic Sea in connection with amber and agriculture. One of the most comical chapters in the history of the Occident could be called ''Who discovers who?'' The Russian cultural tradition has been very reluctant to accept Challenger's claim that the English discovered Russia. The history of the Baltic Sea discoveries is even more problematic: I have called it the Mediterranean of the North for several reasons, partly also because it has always been there, ever since the beginning of times, which seems quite natural, and also been in active use, which makes its ''discovery'' a questionable issue. Yet the numerous Arabian coins that have been discovered in the vicinity of our harbour cities seem to corroborate to the oldest Russian chronicle, which impressively describes a waterway that circled Europe exactly along the line that meant the outer boundary of Europe already for the Greeks - I mean, of course, the Gulf of Finland, the Ladoga, the Lake Ilmen, and the River Dnieper with the Black Sea and the Mediterranean. We should also mention the early cities, especially Schleswig, and Aldieiubord at Ladoga, on the headwaters of Neva, and of course Novgorod, which are all characterised by a common trait - they were all cities with mixed ethnic content, and their existence was conceivable with one precondition: they were efficiently ruled by ancient law. Thus, the role of Bremen in the history of the discovery of the Baltic Sea acquires a completely new emphasis: if Bremen's earliest contacts with the Baltic Sea were first and foremost related to the Christian mission, and only later, and less, to the maritime trade, - should we not conclude from here that the trade competition on the Baltic Sea was quite tight during the pre-Hanseatic times? And this is what led to the formation of the Hanseatic League in the Middle Ages, and the powerful development of Tallinn, my home city? As you see, I avoid the assumption that Tallinn, Riga, or Tartu were founded by the Hanseatic tradesmen. The colonisation of Europe on the first millennium was so intense that there seem to be virtually no sites founded and inhabited on the second millennium simply by the act of political will. Neither was St. Petersburg erected in the middle of nowhere by Peter the Great, it was built on the site of an old Swedish city. It is quite another matter that some early cities got the town bylaws and some did not. Thus, for me, the foundation of a city does not mean the romantic picture by the artist Maydell, but a legal act: the Hansa created a common legal space, which covered more than a hundred cities and brought Estonia to the European legal space. In Bremen, I have the understandable temptation to list the advantages of the Baltic Sea: throughout history, the East-West contacts have been prevalent. The system of measure that we now call the latitudes was called climates by the Arabic geographers. The East-West contacts did not remain within the boundaries of one climatic zone. The Baltic Sea with its North-South direction and size not too big for primitive sailing ships offered ideal opportunities for movement along the meridians, or in other words, movement through different zones, different cultures and different natural resources. Meridional power lines bear greater tension, and are more productive.

This is how Tallinn, the capital of the future Republic of Estonia, developed into a Hanseatic city, the northernmost on the Baltic Sea, and the easternmost trade centre for Denmark in the early Middle Ages, by the sea of which one of the oldest Italian maps says: there they sail without a compass. This, too, must be understood in the right context: it is only possible to sail without compass when you have grown up with the local sailing traditions.

Now we have to renew what we once have already accomplished. The old Hanseatic League was first of all a common legal and cultural space, a region of common values, and so is the European Union. But the European Union does not repeat the past, does not do so for three reasons.

First, geographical distances are history. The modern mass media and the changed nature of surplus value production have deprived distances of their power. Due to these changes, modern mass media and hi-tech products, Finland for instance has become an important economic agent in the Baltic Sea region, and active also on global markets. This is a result of globalisation based on localisation, which therefore is sometimes also called glocalisation. Regions of minor importance are becoming rare and will soon disappear. Those wishing to assert themselves on a global plane must first be able to do so locally, in many different regions, also on the Baltic Sea, which is becoming the first internal sea of the European Union. At the same time, the economic growth in the Baltic Sea region has become one the most intensive in the world. And even though competition on the Baltic Sea can sometimes be merciless, more and more new competitors find their way here. Considering though, that the economic growth potential of the region is 80%, this no longer seems surprising.

Second: new power lines have emerged. Tallinn has restored its importance of the Hanseatic times. Measured in the number of visitors (nearly five million this year) Tallinn is one of the most popular Baltic Sea ports even today. Our renovated airport now has the capacity to cope with the influx of visitors, which has grown five times in the last four years. Our information technology and communications are, both in quantity and quality, at the top of Central Europe today. Here, I would like to point out an article from yesterday's ''Financial Times'': the number of Internet links of the last quarter of the year compared to the population, illustrated by the respective map. The map looks quite bleak: all the area east of Sweden and Greece is grey, as it used to be at the times of the discovery of the Baltic Sea. Sweden is at the top of the list, Greece has the last place, England is in the middle, and there is no reference to Estonia. Probably because Estonia's place should be somewhere before France, Italy, Portugal, Ireland and Spain, and naturally also before Greece. Our number of Internet links is 21%, which precisely matches the European average. Indeed, gentlemen, the world has changed, it has become smaller, but not of its own accord: there are regions that are racing with time, where politicians are not dealing with politics, but with technology. Next, the railways are to be upgraded. For historical reasons, our railway tracks have the same gauge as the railways in Russia. Hence, our unique competence in the field of logistics. As both Russian and Western businessmen know that the Estonian ports, the Estonian banks and the Estonian State can be trusted, a considerable part of oil export flows through Tallinn. Trust is one of the vital factors of transit trade, and I am proud that Estonia has been able to win this trust. The major transit trade volumes have taught many a lesson to our companies. In the loading of goods from railway to ships and the other way round, we could compete with any other port. The turnover of the ports of Estonia and especially Tallinn constituted 15% of the total turnover of the Baltic Sea ports, and the net profit was 45 million German marks.

And third: every year, I participate as patron in awarding the prizes of the Investor of the Year. Like in the years before, the winners also today offered a cross-section of the global business world. Our neighbours Sweden and Finland were the greatest investors. But the companies of the US and Great Britain followed close behind. And a company from Singapore has been one of the winners for four consecutive years, each time in a new category. In brief, we have created a favourable climate.

How did Estonia do it?

After the restoration of our independence, in 1991, when we freed ourselves from the Soviet occupation, we have had six governments within nine years. And yet our political goals did not change: we have persistently remained true to the principles of free market economy. Our system has been built on simple rules:

Our Constitution requires the Parliament to pass a balanced budget.
Our monetary system is based on a currency board arrangement using a fixed 8:1 exchange rate with German Mark. As a result, the exchange rate has remained stable since 1991 and inflation will not exceed 3% this year.
With trade policy reforms, Estonia immediately established itself as an open and duty-free trade regime, one of the most liberal in the world. Estonia has functioning free trade agreements with the European Union, EFTA, and several countries of the CIS. Estonia has lately become a member of World Trade Organisation.

Our tax system is fair and comprehensive. Estonia has a universal value added tax of 18%, and a flat rate corporate and personal income tax of 26%.
In privatisation, the German Treuhand model has proved feasible. Today, nearly 90% of the enterprises are in private ownership. Private business gives about 70% of the GDP.

There are no restrictions placed on foreign ownership of business, repatriation of profits or ownership of land.

I am often asked whether Estonia offers any special benefits to foreign investors. Of course we do. But instead of filling thousands of pages with various restrictions, we have left them blank. The only ones not benefiting from this situation are the tax consultants.

But even they are not going to starve in Estonia. The international consulting agencies contributed to the investment of seven billion croons to Estonia in 1998. About 330 invested dollars per capita is a considerable sum, but we are trying to surpass it this year.

Last year's largest investment, the purchase of the Hansabank shares, reached Estonia precisely at the time when most of the Western investors were struggling with the Russian losses. In the crisis-worn Central Europe, Swedes saw Estonia as the country to invest in. This was an important step on the way to reliability - and good business for both sides.

Dear gentlemen,

In most respects, Estonia is ready to accede to the European Union today. And I believe we are able to make this true in the near future. What does this mean for Germany?

Allow me to bring the example of Finland: several textile manufacturers have brought part of the production to Estonia. Germany, too, should be able to make use of the atmosphere of creativity and advanced thinking in the field of technology on both sides of the Gulf of Finland. This presumes that the German enterprises would considerably increase their presence is Estonia.
In the era of glocalisation, Estonia does not need gigantic factories. Small ones will do. Young men in Hiiumaa are composing Microsoft software. The software of Hansabank's Internet version is probably the most efficient in Central Europe. Our software designers are creating Internet portals for the Swedish software companies, and their military simulation software is used all over Europe.

On the electronic networks, all the necessary data concerning Estonia is available, as well as huge quantities of other information. The Estonian Embassy and international consulting agencies will have answers to all your questions on investing in Estonia.

Still, I would like to add that the Germans following the events in Estonia a little more closely should not fail to notice our continental culture traditions. They have been influenced by the Nordic, Scandinavian traditions, and have therefore managed to retain their original nature, their local colour better than it has succeeded elsewhere in Europe. I have always been fascinated by this unique link between the modern and the conservative, the Estonians' simultaneous aspiration towards modern technology and conservative lifestyle. The Estonians' eagerness to experiment is also noticeable in the fact that quite recently, we abolished corporate income tax for our enterprises. The enterprises themselves have always been free of tax - otherwise, we should also have introduced tax on solder irons or microscopes. Now, we also give up levying their income, being convinced that this is more in concord with the laws of economy and nature. In brief: Estonia is no longer hidden behind a great rock - if you allow me to recall the words of from the speech of Mr. Hans-Christian Specht. With regret, I must admit that behind that rock, we find the Federal Republic of Germany, who is not among the first dozen of our trade partners. Bremen should rediscover Estonia!

Dear Gentlemen,

I promised to speak of what connects our Hanseatic cities. The city librarian of Bremen was right to connect Livonia with America: the discovery of a new world lessened the importance of old trade routes, and weakened the historical Hansa. The world has always been global, although today it seems to roll faster. Be that as it may, the discovery of America upset the existing balance and resulted in the long and exhausting Russian-Livonian war. But Tallinn, this city-state of Northern Europe, survived all trials and tribulations, thus saving Estonia and maybe even something more: this is what the Emperor Maximilian II thought when he thanked and congratulated the Council of the City of Tallinn, and many European leaders joined him in his congratulations. Politics is an art of creating balance. We had a painful first-hand experience of this, when the Republic of Estonia was occupied for decades by her totalitarian neighbour as a result of Hitler-Stalin pact. The iron curtain cut Europe in two meridionally. But it was even more barbarous in cutting up the history of Europe, burying our past and substituting for it a bunch of lies. At these devastating times we once again found support from Bremen: Balthasar Russow's chronicle, dedicated to the City Council of Bremen, inspired the Estonian writer Jaan Kross, whose eightieth birthday we are celebrating next week. His pen gave new life to Russow's chronicle and its author, the connections between Tallinn and Bremen, the freely sailing ships, all these shared European values, by which Estonia has stood firmly many times, and by which we will have to stand also in the future.

I thank you in the name of all the guests who have the honour to partake of this traditional supper.