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Estonia Says It's Ready to Stand on Its Own Feet

Baltics: U.S. agency trumpets the cutoff of aid as proof of the country's successful free-market reforms.


TALLINN, Estonia — Do this to almost any other country and you'd expect a burst of nationalist indignation. Maybe an insult about Yankee imperialism or a few choice words for the American ambassador behind closed doors. But not here. When the United States cut off aid Monday for the first time to a nation of the former Soviet bloc, Estonia threw a party.

"I would like to express my heartfelt thanks," Estonian President Lennart Meri told smiling American dignitaries at a ceremony in Tallinn's 14th century town hall, next to a banquet room with champagne on ice. "This day means we are finally standing on our own feet."

Officials of the U.S. Agency for International Development, which distributes most of America's foreign aid, said the cutoff was meant in part to highlight the success of Estonia's radical free-market reforms and to encourage others to follow its example.

Since breaking away from the Soviet Union in 1991, this tiny Baltic nation of 1.5 million people has embraced such hard-nosed monetary policies as a constitutionally mandated balanced budget, a flat tax and an elimination of all trade tariffs.

The numbers indicate that the Estonians have done it right. Annual inflation has been slashed from more than 1,000% in 1992 to about 20% today. The private sector, banned in 50 years of Soviet rule, now accounts for 65% of all economic output. Estonia has become one of the former Soviet bloc's most attractive places for foreign investors, who have brought in about $750 million.

An economic boom is underway in this seaside capital, with new office towers springing up and old buildings being stripped and refurbished on almost every block.

The United States has been one of Estonia's leading donors, providing about $50 million in aid over the past five years. It has paid for projects to build free-market and democratic institutions and to clean up the Soviet-fouled environment.

U.S. officials say Estonia is now more advanced than the nations usually touted as tigers of reform in Eastern Europe. For example, they say, the Czech Republic isn't due to graduate from U.S. assistance for a year or more.

Not only did the Estonians accept the U.S. cutoff, they encouraged it. Explaining why, Foreign Minister Siim Kallas sounds like an enlightened--if unlikely--teenager who tells his parents he doesn't want the new sports car they offered him because he knows he'll be a better person if he earns it himself.

"You see, if aid is made so easily available, a country gets lazy and it postpones radical and painful decisions," he said in an interview. "You always know that big brother is there with a big wallet."

Others doubt the wisdom of giving up American aid so soon. Estonian bankers and entrepreneurs may no longer need U.S.-funded training, some argue, but doctors, police and civil servants could still use such help to raise their standards to Western levels.

An American close to U.S. aid projects questioned the motive in cutting off Estonia. Rather than using economic criteria, he said, U.S. AID is rushing to make a political point to the Republican-controlled U.S. Congress: that foreign aid doesn't have to be forever. "They wanted to show that countries could be weaned off aid programs," he said. "And they picked the smallest, least politically sensitive country to supposedly prove it."

The aid cut did prompt some Estonians to broach an uncomfortable question about membership in the North Atlantic Treaty Organization--a top goal for Estonia and its Baltic neighbors, Latvia and Lithuania, since they gained independence from Moscow.

While Washington insists the door to NATO is open, the Baltic nations believe the U.S.-led alliance, in deference to Russia's objections, has put them at the bottom of the waiting list.

But as the United States pats them on the head as star students in economics, Estonians see a contradiction: If we are good enough to graduate from U.S. aid programs, they ask, why aren't we good enough for NATO?

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