Ladies and Gentlemen,

It is privilege to speak here at the Carnegie Endowment for International Peace. The Carnegie Endowment has been home to several of Estonia's greatest friends, and in 1931 my father, Georg Meri, was a fellow of this institute. So it is my special pleasure to see so many old, and I hope many new, friends in this audience.

Ladies and Gentlemen,

I would like to speak to you today about Baltic security. This morning, I met with your Vice President, Mr. Al Gore. We talked at length about security issues, and I will tell you what I told him, not everything, of course. If during the Cold War, the fate of Berlin became a kind of litmus test for Western security, then the Baltic states play that role now. I would posit that in today's post-Cold War world, we cannot speak of European, or, to be more exact, trans-Atlantic security without also articulating a policy on the security of the Baltic states. The two are inseparably linked. Just as any threat to the freedom of Berlin then meant a threat to the West, any potential to challenge the sovereignty of the Baltic states now would challenge the very security of the trans-Atlantic community.

We in Estonia are seeking to enhance our security in two ways. The first of these is integration into Europe, more specifically into Western security organisations.

There has been a lot of discussion about the integration of Estonia and other Central European countries into Europe. We have belonged in Europe for more than 700 years already, we can, of course, go even further back, how could we possibly integrate into an entity where we have essentially established ourselves over the centuries?

When one walks about the Old Town of Tallinn, the capital of Estonia, one can feel Europeanness radiating from the architecture, from every medieval house and every church steeple. Not only was Tallinn one of the most notable Hanseatic cities: in the present state of affairs it is one of the best preserved cities of the whole merchant league. The poetry of stone perpetuates history.

As for society, it is perpetuated and maintained through the legal system. Ladies and gentlemen, Estonia has been part of the Roman-Germanic legal system for over 700 years. This legal basis is even more important than well-preserved Gothic style or Classicism. This legal basis, my friends, is a nursery where everything else springs up; it is the prerequisite, the basis and the very guarantor of the survival, the development and the success of our modern state, and from time to time when I hear speaking about the NATO umbrella, I am telling to the audience that we have had our own umbrella -- the legal system. When we think why perestroika took such a direction, and was not a tragic collapse or a civil war -- the legal system has shaped also the Estonian way of thinking: the paragraph, even in international relations, has some meaning. A little naive, of course.

So we cannot speak about integration into Europe. What we can speak about is integration into all-European security and economic structures. And that does not mean creating a new situation, but rather restoring a normal Europe. It is not so much an economic or security issue as it is a matter of political judgment. Europe needs strong democratic leaders of the caliber of de Gaulle and Adenauer, who, decades ago, were able to make far-reaching decisions, who were not afraid to decide.

When we speak of integration with all-European structures, we have the European Union and NATO in mind. These two organizations are like flip sides of the same coin: the one side tells us the currency, and the other the name of the state holding and protecting that currency. We see the EU and NATO as complementary and mutually perfecting each other. The hallmark of the EU is prosperity, and that of NATO is security. What they have in common is stability. Shifting into a world of mathematical terms, stability is the intersection of the EU and NATO. In view of this mathematical image, Estonia's aim is obvious: entrance into both NATO and the EU, which should happen as early as possible and as late as necessary.

I would turn now to the second way we are seeking to enhance our security, and that is by normalising relations with Russia. Normalization for us means establishing the same kinds of relations with Russia as we enjoy with the United States, or Germany or Sweden.

We have made considerable progress toward normalization during the past year. In 1940, the Soviet Union occupied Estonia, and Tallinn came under foreign rule in the very days in which the same fate befell Paris. Last year in August, in an historic deal that was brokered in part by the United States, the Russian Federation withdrew the last occupying troops from my country. Some problems associated with the withdrawal remain, but we are working them out through regular dialogue with our counterparts in Russia. Now we feel the same sense of enhanced security and elation--some would say bittersweet elation--that France, too, felt after its liberation.

Some problems, including the border, remain. I am confident, however, that despite internal developments in Russia, and with the help of the West, Estonian-Russian relations will take a turn for the better.

I have spoken of enhancing security by way of integration with Europe and normalisation of relations with Russia. There is another way that we are working to feel more secure, and that is by strengthening our economic potential. As far as we see it, every dollar invested in Estonia is a dollar spent on defense.

You have all heard about our economic reform program hailed by the IMF and the World Bank as among the most successful in Central Europe. It is no wonder that some observers refer to Estonia as a modern Wirtschaftswunder.

On a foreign economic front, we have earned the justified reputation for free-wheeling liberalism. We Estonians are a modest people, so we prefer to refer to ourselves using a term coined by Newsweek magazine not long ago as The Little Country That Could. Perhaps we are not so modest after all. Others say that our economic policies would make even Milton Friedman blush.

These policies have borne fruit. Foreign investments are up, as are exports. This year, in fact, Estonia ranks fourth among central European states in direct foreign investments per capita. Trade has also reoriented. If in 1991, when we reinstated our independence, some 90% of our trade was with the East, then today, 65% of our trade is with European Union and other western states. Our currency is among the most stable in Scandinavia, and our foreign currency reserves have more than tripled since the kroon was introduced in 1992.

Our internal reorientation to a free market economy is going well. Over 70% of all state enterprises have been privatised. We have a balanced state budget and actual growth in the GDP, 6% this year to be exact. Estonia has a flat 26% income tax, and personal incomes are rising steadily, a statistic that you can see most clearly in the smiles on peoples' faces. We also have full repatriation of profits for foreigners doing business in Estonia. Tourism is also growing phenomenally--in the second quarter of this year, tourism-related companies served twice the number of tourist than in the same period last year. I invite you to join them, I invite each and every one of you to come see our little miracle for yourselves.

Thank you, I am ready for your questions and to be crucified.

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