Estonia is a member of the European Union and the eurozone and is an advanced economy, according to the IMF.^[7]

Before the Second World War Estonia's economy was based on agriculture, but there was a significant knowledge sector (with Tartu known for scientific contributions) and a growing industrial sector, similar to Finland. Products such as butter, milk and cheese were widely known on the western European markets. Main markets were Germany and United Kingdom, and only 3% of all commerce was with the neighbouring USSR. The USSR's forcible annexation of Estonia in 1940 and the ensuing Nazi and Soviet destruction during World War II crippled the Estonian economy. Post-war Sovietization of life continued with the integration of Estonia's economy and industry into the USSR's centrally planned structure. Estonia and Finland had about the same GDP per capita before Estonia became a planned economy. By 1987, the capitalist Finland's GDP per capita was 14,370 USD and the communist Estonia's GDP per capita was around 2,000 USD.^[8]

After Estonia moved away from socialism in the late 1980s and became an independent capitalist economy in 1991, Estonia emerged as a pioneer in the global economy. In 1994, Estonia became one of the first countries in the world to adopt a flat tax, with a uniform rate of 26% regardless of personal income. In January 2005 the personal income tax rate was reduced to 24%. A subsequent reduction to 23% followed in January 2006. In 2007 the tax rate was lowered to 22% and in 2008 to 21%. The rate was frozen in 2009. Estonia received more foreign investment per capita in the second half of the 1990s than any other country in Central and Eastern Europe.^[8] Estonia has been fast catching up with the EU-15, having grown GDP per capita from 34.8% of the EU-15 average in 1996 to 65% in 2007, similar to Central Europe.^[8] Estonia is already rated a high income country by the World Bank. The Estonian economic miracle has been termed a Baltic Tiger.

Estonia is ranked 12th of 162 countries in the Index of Economic Freedom 2008, the best of any former communist country from the Soviet Union. Estonia is on bottom of Europe by labour market freedom, but the government is drafting improvements.^[9] Estonia is 17th on the Ease of Doing Business Index 2011 by World Bank Group. The Government of Estonia finalized the design of Estonian euro coins in late 2004, and adopted the euro as the country's currency on 1 January 2011,^[10] later than planned due to continued high inflation. The Estonian kroon was pegged to the Euro at a rate of 1 EUR = 15.64664 EEK.

The Financial Crisis of 2008 seriously affected the Estonian economy, primarily as a result of an investment and consumption slump following the bursting of the real estate market bubble which had been building up during 2004. Estonia had the E.U.'s worst year for unemployment. Unemployment in May 2009 rose to 15.6% from 3.9% a year earlier.^[11]

Nevertheless, long-term prospects for the Estonian economy remain among the most promising in Europe. In 2011, the real GDP growth in Estonia was 8,0%, and according to the projections made by the CEPII, the GDP per capita could rise to the level of Nordic economies by 2025 (Sweden, Finland, Denmark). By 2050, according to the same projections, Estonia could be the most productive country in the EU after Luxembourg and thus be among the top 5 most productive nations in the world.^

Early history[link]

Until the early 13th century, the territory that is now known as Estonia was independent. The economy was largely an agricultural one, but Estonia being a country with a long coastline, there were also many maritime activities. Autonomous development was brought to an end by the Northern Crusades undertaken by the King of Denmark, the German Livonian and the Teutonic military orders. The Estonian world was transformed by military conquest. The war against the invaders lasted from 1208–1227. The last Estonian county to fall was the island of Saaremaa in 1261.

Thereafter, through many centuries until 1920, Estonian agriculture consisted of native peasants working large feudal-type estates held by ethnic German landlords. In the decades prior to independence, centralised Czarist rule had created a rather large industrial sector dominated by the world's largest cotton mill. The new Estonian state inherited a ruined post-war economy, and an inflated ruble currency. In years 1920 to 1930, Estonia entirely transformed its economy, despite considerable hardship, dislocation, and unemployment. Compensating the German landowners for their holdings, the government confiscated the estates and divided them into small farms which subsequently formed the basis of Estonian prosperity.

By 1929, a stable currency, the kroon, was established. It was issued by the Bank of Estonia, the country's central bank. Trade focused on the local market and the West, particularly Germany and the United Kingdom. Only 3% of all commerce was with the U.S.S.R.

The U.S.S.R.'s forcible annexation of Estonia in 1940 and the ensuing Nazi and Soviet destruction during World War II crippled the Estonian economy. Post-war Sovietisation of life continued with the integration of Estonia's economy and industry into the U.S.S.R.'s centrally planned structure. More than 56% of Estonian farms were collectivised in the month of April 1949 alone. Moscow expanded on those Estonian industries which had locally available raw materials, such as oil shale mining and phosphorites. As a laboratory for economic experiments, especially in industrial management techniques, Estonia enjoyed more success and greater prosperity than other regions under Soviet rule. During the Soviet era and especially by the end of it in 1990, Estonia had the highest Human Development Index from all the Soviet states.^[12]

Modernisation and liberalisation[link]

Since reestablishing independence, Estonia has styled itself as the gateway between East and West and aggressively pursued economic reform and integration with the West. Estonia's market reforms put it among the economic leaders in the former COMECON area. A balanced budget, almost non-existent public debt, flat-rate income tax, free trade regime, fully convertible currency backed by currency board and a strong peg to the euro, competitive commercial banking sector, hospitable environment for foreign investment, innovative e-Services and even mobile-based services are all hallmarks of Estonia's free-market-based economy. Estonia also has made excellent progress in regard to structural adjustment.

In June 1992, Estonia replaced the ruble with its own freely convertible currency, the kroon (EEK). A currency board was created and the new currency was pegged to the German Mark at the rate of 8 Estonian kroons for 1 Deutsche Mark. When Germany introduced the euro the peg was changed to 15.6466 kroons for 1 euro. Estonia was set to adopt the euro in 2008 but due to high inflation rates the adoption date was delayed to 2011. On 1 January 2011, Estonia adopted the euro and became the 17th eurozone member state.^[10]

The privatisation of state-owned firms is virtually complete, with only the port and the main power plants remaining in government hands. The constitution requires a balanced budget, and the protection afforded by Estonia's intellectual property laws is on a par of that of Europe's. In early 1992 both liquidity problems and structural weakness stemming from the communist era precipitated a banking crisis. As a result, effective bankruptcy legislation was enacted and privately owned, well-managed banks emerged as market leaders. Today, near-ideal conditions for the banking sector exist. Foreigners are not restricted from buying bank shares or acquiring majority holdings.

Tallinn's fully electronic stock exchange opened in early 1996 and was bought out by Finland's Helsinki Stock Exchange in 2001. It is estimated that the unregistered economy provides almost 12% of annual GDP.

The economy today[link]

Real GDP growth in Estonia.

Estonian economy was one of the fastest growing in the world until 2006 with growth rates even exceeding 10% annually. Despite some concerns both in and outside of the country, the Estonian economy and its currency remained highly resilient and solvent.

Until recent years the Estonian economy continued to grow with admirable rates. Estonian GDP grew by 6.4% in the year 2000 and with double speeds after accession to the EU in 2004. The GDP grew by 7.9% in 2007 alone. Increases in labor costs, rise of taxation on tobacco, alcohol, electricity, fuel, and gas, and also external pressures (growing prices of oil and food on the global market) are expected to raise inflation just above the 10% mark in the first months of 2009.

In the first quarter 2008 GDP grew only 0.1%. The government made a supplementary negative budget, which was passed by Riigikogu. The revenue of the budget was decreased for 2008 by EEK 6.1 billion and the expenditure by EEK 3.2 billion.^[13]

Estonia joined the World Trade Organization in 1999. A sizable current account deficits remains, but started to shrink in the last months of 2008 and is expected to do so in the near future.

In the first quarter of 2011, the average monthly gross wage in Estonia was 792 € (12,392 kroons, U.S. $1,125.2).^[3]

Estonia is nearly energy independent supplying over 90% of its electricity needs with locally mined oil shale. Alternative energy sources such as wood, peat, and biomass make up approximately 9% of primary energy production. Estonia imports needed petroleum products from western Europe and Russia. Oil shale energy, telecommunications, textiles, chemical products, banking, services, food and fishing, timber, shipbuilding, electronics, and transportation are key sectors of the economy. The ice-free port of Muuga, near Tallinn, is a modern facility featuring good transshipment capability, a high-capacity grain elevator, chill/frozen storage, and brand-new oil tanker off-loading capabilities. The railroad serves as a conduit between the West, Russia, and other points to the East.

After a long period of very high growth of GDP, the GDP of Estonia decreased by a little over 3% on a yearly basis in the 3rd quarter of 2008. In the 4th quarter of 2008 the negative growth was already −9,4%. Some^[who?] international experts and journalists, who like to view the three Baltic states as a single economic identity, have failed to notice that Estonia has constantly performed better than Lithuania and Latvia on many fundamental indicators.^{[citation needed]} Still, in 2009 Estonia was one of the five worst performing economies in the world in terms of annual GDP growth rate.^[14] The current account deficit and inflation is lower than in Latvia, the GDP per capita is higher than in Latvia and Lithuania, Estonia's public debt is a very low 3.8% of GDP and government reserves are close to 10% of GDP. The difference is exemplified by the fact that in December 2008 Estonia became one of the donor countries to the IMF lead rescue package for Latvia.

Estonia today is mainly influenced by developments in Finland, Russia, Sweden and Germany – the four main trade partners. The government recently greatly increased its spending on innovation. The prime minister from the Estonian Reform Party has stated its goal of bringing Estonian GDP per capita into the top 5 of the EU by 2022. However, the GDP of Estonia decreased by 1.4% in the 2nd quarter of 2008, over 3% in the 3rd quarter of 2008, and over 9% in the 4th quarter of 2008. The Estonian economy further contracted by 15.1% in the first quarter of 2009.^[15][16] Low domestic and foreign demand have depressed the economy's overall output.^[16] The Estonian economy's 33.7% industrial production drop was the sharpest decrease in industrial production in the entire European Union.^[17]

2009 Financial crisis impact[link]

On July 2009 Estonian VAT was increased from 18% to 20%.^[18] On 9 August 2011, just days after Standard & Poor's downgraded the credit rating of the United States, it raised Estonia's rating from A to AA-. Among the factors S&P cited as contributing to its decision was confidence in Estonia's ability to "sustain strong economic growth."^[19]

Employment participation[link]

Unemployment rate as a percentage of the labor force in Estonia according to the Statistics Estonia.^[20]

People unemployed in Estonia according to the Statistics Estonia.^[20]

Estonia has around 600,000 employees, yet the country has a shortage of skilled labor, and since skill shortages are experienced everywhere in Europe, the government has increased working visa quota for non-EEA citizens, although it has nevertheless been criticized for being inadequate to address skill shortage challenges.

The late-2000's recession in the world, the near-concurrent local property bust with changes in Estonian legislation to increase labour market flexibility (making it easier for companies to lay off workers) saw Estonia's unemployment rate shoot up to 18.8% throughout the duration of the crisis, then stabilise to 13.8% by Summer 2011, as the economy recovers on the basis of strong exports (as internal consumption and, thus imports, plummeted) and cuts in public finances.^[21]

Some of the reduction in unemployment has been attributed to some Estonians' travelling abroad (Finland, UK, Australia and elsewhere) for work.^{[citation needed]}

Sectors[link]

The 20 most valuable companies based on 2007 profit estimates by GILD are: Hansapank, Eesti Energia, SEB Eesti Ühispank, Eesti Telekom, Tallink Grupp, Olympic Entertainment Group, Tallinna Sadam, Tele2 Eesti, Sampo Pank, Tallinna Kaubamaja, Merko Grupp, BLRT Grupp, Elisa, Tallinna Vesi, Transgroup Invest, Eesti Raudtee, Kunda Nordic Tsement, Viru Keemia Grupp, Falck Baltics, and Pro Kapital Grupp.^[22] In terms of 2003 sales, the 20 largest companies included Kesko Food, Stora Enso Timbe, EMT, Elion Ettevõtted, Eesti Põlevkivi, Silberauto, Toyota Baltic, Eesti Statoil, Rakvere Lihakombinaat, Lukoil Eesti, Kreenholmi Valduse, and Eesti Gaas.^[23] Estonian Institute of Economic Research publishes top company awards in various categories, where Estonian small and medium size companies take many top positions.^[24]

Tallinn has emerged as a financial center. According to Invest in Estonia, advantages of Estonian financial sector are low taxes, unbureaucratic cooperation between companies and authorities, and educated people. The largest banks are Hansabank, SEB, Nordea, and Sampo Bank. Several IPOs have been made recently on the Tallinn Stock Exchange, a member OMX system. Estonia is ranked 21st of 121 countries in the Capital Access Index 2005 by Milken Institute, outperforming Austria and Italy among others.^[25] The rent levels of new office spaces in Tallinn starts at 15 euros per square meter or 2000 euro sale price, with demand exceeding supply.^[25]

Estonian service sector employs over 60% of workforce. Estonia has a strong information technology (IT) sector, partly due to the Tiigrihüpe project undertaken in mid 1990s, and has been mentioned as the most "wired" and advanced country in Europe in the terms of e-government.^[26]

Farming, collectivized until 20 year ago, has become privatized, more efficient, and the farming area has increased recently.^[27] The share of agriculture in the gross domestic product decreased from 15% to 3.3% during 1991–2000, while employment in agriculture decreased from 15% to 5.2%.^[28] Mining industry makes 1% of the GDP. Mined commodities include oil shale, peat, and industrial minerals, such as clays, limestone, sand and gravel.^[29] Soviets created badly polluting industry in the early 1950s, concentrated in North East Estonia. Socialist economy and military areas left Estonia highly polluted, and mainly because of oil shale industry in East-Virumaa, sulphur dioxide emissions per person is almost as high as in Czech Republic. The coastal seawater is polluted in certain locations, mainly in East-Estonia. The government is looking for ways to reduce pollution further.^[30] In 2000 the emissions were 80% smaller than in 1980 and the amount of unpurified wastewater discharged to water bodies was one twentieth the level of 1980.^[31]

Estonian productivity is growing fast, and consequently wages are rising fast, with around 8% rise in private consumption in 2005. According to Estonian Institute of Economic Research, the largest contributors to GDP growth in 2005 were processing industry, financial intermediation, retailing and wholesale trade, transport and communications.^[24]

Infrastructure[link]

Railway transport dominates the cargo sector, comprising 70% of all carried goods, domestic and international. Road transport is the one that prevails in the passenger sector, accounting for over 90% of all transported passengers. 5 major cargo ports offer easy navigational access, deep waters, and good ice conditions. There are 12 airports and 1 heliport in Estonia. Lennart Meri Tallinn Airport is the largest airport in Estonia, with 1,73 million passengers and 22,764 tons of cargo (annual cargo growth 119,7%) in 2007. International flight companies such as SAS, Finnair, Lufthansa, EasyJet, and Estonian Air provide direct flights to 27 destinations.^[32]

Approximately 7.5% of the country’s workforce is employed in transportation and the sector contributes over 10% of GDP. Estonia is getting much business from traffic between Europe and Russia, especially oil cargo through Estonian ports. Transit trade's share of GDP is disputed, but many agree that Russia's increased hostility is decreasing the share.^[33][34]

Instead of coal, companies are encouraged to burn oil shale, with stations mainly in Narva making around 75% of the country's energy. Other energy sources are natural gas imported from Russia, wood, motor fuels, and fuel oils.^[35] Wind power in Estonia amounts to 58.1 megawatts, whilst roughly 399 megawatts worth of projects are currently being developed. Estonian energy liberalization is lagging far behind the Nordic energy market. During the accession negotiations with the EU, Estonia agreed that at least 35% of the market are opened before 2009 and all of non-household market, which totals around 77% of consumption, before 2013. Estonia is concerned that Russia could use energy markets to bully it.^[36] The government is considering granting permits to nuclear power companies and there are plans for a shared nuclear facility with Latvia and Lithuania.^[37]

Internet connections are available throughout most of the country and Estonia has a high Internet penetration.

Trade[link]

Estonia exports machinery and equipment (33% of all exports annually), wood and paper (15% of all exports annually), textiles (14% of all exports annually), food products (8% of all exports annually), furniture (7% of all exports annually), and metals and chemical products.^[38] Estonia also exports 1.562 billion kilowatt hours of electricity annually.^[38] Estonia imports machinery and equipment (33.5% of all imports annually), chemical products (11.6% of all imports annually), textiles (10.3'% of all imports annually), food products (9.4% of all imports annually), and transportation equipment (8.9% of all imports annually).^[38] Estonia imports 200 million kilowatt hours of electricity annually.^[38]

Natural resources[link]

See also[link]

• Economy of Europe
• Estonia
• Baltic Tiger

Notes[link]

v t e Estonia topics History Timeline · Ancient Estonia · Livonian Crusade · Danish Estonia · German Bishoprics and the Livonian Order · Baltic Germans · Livonian War · Polish Livonia · Swedish Estonia · Great Northern War · Russian Estonia and Livonia · Age of Awakening · Declaration of Independence · War of Independence · Republic of Estonia · Vaps Movement · Era of Silence · Occupation of Estonia · World War II · Forest Brothers · Deportations · Estonian SSR · Singing Revolution Geography Climate · Counties, municipalities and populated places · Extreme Points · Fauna · Islands · Lakes · Rivers · Outline · Protected areas · Towns Law Constitution · Supreme Court · Law enforcement · Crime · Human rights · LGBT rights Politics Parliament · Government (Exile) · Prime Minister (List) · President · Elections · Political parties · Foreign relations · List of rulers Economy Euro · Bank of Estonia · Tallinn Stock Exchange · Agriculture · Oil shale · Transport · Companies Military Military history · Ground Forces · Navy · Air Force · Defence League · Military ranks · Wars Symbols Name · National flag · Flags · Coat of arms · Anthem Demographics Estonian language · Minority languages · Religion · Estonians (List) · Võros · Setos · Russians in Estonia · Nationality law Media Internet in Estonia (.ee) · Newspapers · Radio · Television Culture Architecture  · Cinema (Films) · Cuisine · Education (Universities) · Literature (Folklore · Kalevipoeg) · Music · Mythology · Sport (Olympics) · Public holidays · Song Festivals · Theatre WikiProject · Portal

Republic of Estonia Eesti Vabariik
Flag Coat of arms
Anthem: Mu isamaa, mu õnn ja rõõm (English: "My Fatherland, My Happiness and Joy")
Location of  Estonia  (dark green) – in Europe  (green & dark grey) – in the European Union  (green)  —  [Legend]
Capital (and largest city)		Tallinn 59°25′N 24°45′E / 59.417°N 24.75°E / 59.417; 24.75
Official language(s)		Estonian1
Recognised regional languages		Swedish
Ethnic groups (2010)		68.7% Estonians, 24.8% Russians, 4.9 % others, 1.5 % unspecified[1]
Demonym		Estonian
Government		Parliamentary republic
-	President	Toomas Hendrik Ilves (nonpartisan, until 1 January 2007 – SDE)
-	Prime Minister	Andrus Ansip (RE)
-	Parliament speaker	Ene Ergma (IRL)
-	Current coalition	(RE, IRL)
Legislature		Riigikogu
Independence		from Russia
-	Autonomy declared	12 April 1917
-	Independence declared Officially recognised	24 February 1918 2 February 1920
-	1st Soviet occupation	1940–1941
-	German occupation	1941–1944
-	2nd Soviet occupation	1944–1991
-	Independence restored	20 August 1991
Area
-	Total	45,227 km2 (132nd2) 17,413 sq mi
-	Water (%)	4.45%
Population
-	2010 estimate	1,340,194[2] (151st)
-	2012 census	1,294,236[3]
-	Density	29/km2 (181st) 75/sq mi
GDP (PPP)		2012 estimate
-	Total	$27.313 billion[4]
-	Per capita	$21,059[4]
GDP (nominal)		2012 estimate
-	Total	$22.225 billion[4]
-	Per capita	$16,636[4]
Gini (2009)		31.4
HDI (2011)		0.835[5] (very high) (34th)
Currency		Euro (€)3 (EUR)
Time zone		EET (UTC+2)
-	Summer (DST)	EEST (UTC+3)
Drives on the		right
ISO 3166 code		EE
Internet TLD		.ee4
Calling code		372
1	Võro and Seto in southern counties are spoken along with Estonian. Russian is still unofficially spoken in Ida-Virumaa and Tallinn, due to the Soviet program promoting mass immigration of urban industrial workers from the USSR in the post-war period.
2	47,549 km2 (18,359 sq mi) were defined according to the Treaty of Tartu in 1920 between Estonia and Russia. Today the remaining 2,323 km2 (897 sq mi) are still occupied and part of Russia. The ceded areas include most of the former Petseri County and areas behind the Narva river including Ivangorod (Jaanilinn).[6][7]
3	Before 2011: Estonian kroon (EEK).
4	.eu is also shared with other member states of the European Union.

Estonia ⁱ/ɨsˈtoʊniə/ (Estonian: Eesti), officially the Republic of Estonia (Estonian: Eesti Vabariik), is a state in the Baltic region of Northern Europe. It is bordered to the north by the Gulf of Finland, to the west by the Baltic Sea, to the south by Latvia (343 km), and to the east by Lake Peipus and the Russian Federation (338.6 km).^[8] Across the Baltic Sea lies Sweden in the west and Finland in the north. The territory of Estonia covers 45,227 km² (17,462 sq mi), and is influenced by a temperate seasonal climate. The Estonians are a Finnic people, and the official language, Estonian, is closely related to Finnish.

Estonia is a democratic parliamentary republic divided into 15 counties. The capital and largest city is Tallinn. With a population of 1.29 million, it is one of the least-populous members of the European Union, Eurozone and NATO. Estonia has the highest GDP per person among former Soviet republics.^[9] Estonia is listed as a "High-Income Economy" by the World Bank and as an "advanced economy" by the International Monetary Fund; the country is an OECD member. The United Nations lists Estonia as a developed country with a Human Development Index of "Very High".^[5] The country is also ranked highly for press freedom, economic freedom, democracy and political freedom and education.

Etymology[link]

One theory is that the modern name of Estonia originated from the Aesti described by the Roman historian Tacitus in his Germania (ca. 98 AD).^[10]

On the other hand, ancient Scandinavian sagas refer to a land called Eistland, close to the Danish, German, Dutch, Swedish and Norwegian term Estland for the country. Early Latin and other ancient versions of the name are Estia and Hestia.^{[citation needed]}

Esthonia was a common alternate English spelling prior to independence.^[11][12]

History[link]

Prehistory[link]

Human settlement in Estonia became possible 11,000 to 13,000 years ago, when the ice from the last glacial era melted. The oldest known settlement in Estonia is the Pulli settlement, which was on the banks of the river Pärnu, near the town of Sindi, in south-western Estonia. According to radiocarbon dating it was settled around 11,000 years ago at the beginning of the 9th millennium BC.

Tools made by Kunda culture, the Estonian History Museum

Iron Age artefacts of a hoard from Kumna.^[13]

Evidence has been found of hunting and fishing communities existing around 6500 BC near the town of Kunda in northern Estonia. Bone and stone artefacts similar to those found at Kunda have been discovered elsewhere in Estonia, as well as in Latvia, northern Lithuania and in southern Finland. The Kunda culture belongs to the middle stone age, or Mesolithic period.

The end of the Bronze Age and the early Iron Age were marked by great cultural changes. The most significant was the transition to farming, which has remained at the core of the economy and culture. Between the 1st to 5th centuries AD resident farming was widely established, the population grew, and settlement expanded. Cultural influences from the Roman Empire reached Estonia.

The first mention of the people inhabiting present-day Estonia is by the Roman historian Tacitus, who in his book Germania (ca. AD 98) describes the Aesti tribe. Tacitus mentions their term for amber in an apparently Latinised form, glesum (cf. Latvian glīsas). This is the only word of their language recorded from antiquity. In spite of this point, the Aestii are generally considered the ancestors of the later Baltic peoples.^[14][15][16]

A more troubled and war-ridden middle Iron Age followed with external dangers coming both from the Baltic tribes, who attacked across the southern land border, and from overseas. Several Scandinavian sagas refer to retaliatory campaigns against Estonia. Estonian pirates conducted similar raids against the Vikings. The "pagan raiders" who sacked the Swedish town of Sigtuna during the early Middle Ages, in 1187, were Estonians.^[17]

In the 1st centuries AD, political and administrative subdivisions began to emerge in Estonia. Two larger subdivisions appeared: the province (Estonian: kihelkond) and the land (Estonian: maakond). The province comprised several elderships or villages. Nearly all provinces had at least one fortress. The defense of the local area was directed by the highest official, the king or elder. By the 13th century the following major lands had developed in Estonia: Revala, Harjumaa, Saaremaa, Hiiumaa, Läänemaa, Alempois, Sakala, Ugandi, Jogentagana, Soopoolitse, Vaiga, Mõhu, Nurmekund, Järvamaa and Virumaa.^[18]

Estonia retained a pagan religion centred around a deity called Tharapita. The Chronicle of Henry of Livonia mentions Tharapita as the superior god of Oeselians (inhabitants of Saaremaa island), also well known to Vironian tribes in northern Estonia.

Viking Age[link]

A Viking ship on the 1 Estonian kroon coin.

The Oeselians or Osilians (Estonian saarlased; singular: saarlane) were a historical subdivision of Estonians inhabiting Saaremaa (Latin: Oesel or Osilia), an Estonian island in the Baltic Sea. They are first thought to be mentioned as early as the 2nd century BC in Ptolemy's Geography III.^[19] The Oeselians were known in the Old Norse Icelandic Sagas and in Heimskringla as Víkingr frá Esthland (English: Estonian Vikings).^{[20][21][22][23]} Their sailing vessels were called pirate ships by Henry of Livonia in his Latin chronicles from the beginning of the 13th century.^[24]

Perhaps the most renowned raid by Oeselian pirates occurred in 1187, with the attack on the Swedish town of Sigtuna by Finnic raiders from Couronia and Oesel. Among the casualties of this raid was the Swedish archbishop Johannes. The city remained occupied for some time, contributing to the decline as a center of commerce in the 13th century in favor of Uppsala, Visby, Kalmar and Stockholm.^[25]

The Livonian Chronicle describes the Oeselians as using two kinds of ships, the piratica and the liburna. The former was a warship, the latter mainly a merchant ship. A piratica could carry approximately 30 men and had a high prow shaped like a dragon or a snakehead as well as a quadrangular sail.

Viking-age treasures from Estonia mostly contain silver coins and bars. Compared to its close neighbors, Saaremaa has the richest finds of Viking treasures after Gotland in Sweden. This strongly suggests that Estonia was an important transit country during the Viking era.

The superior god of Oeselians as described by Henry of Livonia was called Tharapita. According to the legend in the chronicle Tharapita was born on a forested mountain in Virumaa (Latin: Vironia), mainland Estonia from where he flew to Oesel, Saaremaa ^[26] The name Taarapita has been interpreted as "Taara, help!" (Taara a(v)ita in Estonian) or "Taara keeper" (Taara pidaja) Taara is associated with the Scandinavian god Thor. The story of Tharapita's or Taara's flight from Vironia to Saaremaa has been associated with a major meteor disaster estimated to have happened in 660 ± 85 B.C. that formed Kaali crater in Saaremaa.

Middle Ages[link]

Medieval Livonia

Kuressaare castle in Saaremaa

At the beginning of the 13th century, Lembitu of Lehola, a chieftain of Sakala sought to unify the Estonian people and thwart Danish and Germanic conquest during the Livonian Crusade. He managed to assemble an army of 6,000 Estonian men from different counties, but he was killed during the Battle of St. Matthew's Day in September 1217.^[27]

In 1228, in the aftermath of the Livonian Crusade, to the 1560s, Estonia became part of Terra Mariana, established on 2 February 1207^[28] as a principality of the Holy Roman Empire^[29] and proclaimed by pope Innocent III in 1215 as a subject to the Holy See.^[30] The southern parts of the country were conquered by Livonian Brothers of the Sword who joined the Teutonic Order in 1237 and became its branch known as Livonian Order. The Duchy of Estonia was formed in the northern parts of the country^[31] as a direct dominion of the King of Denmark from 1219 until 1346 when it was sold to the Teutonic order and became part of the Ordenstaat.^[32] In 1343, the people of northern Estonia and Saaremaa rebelled against the German rule in the St. George's Night Uprising, which was put down by 1345.

Reval (known as Tallinn since 1918) gained Lübeck Rights in 1248 and joined an alliance of trading guilds called the Hanseatic League at the end of the 13th century.

After the Teutonic Order fell into decline following its defeat in the Battle of Grunwald in 1410, and the defeat of the Livonian Order in the Battle of Swienta on 1 September 1435, the Livonian Confederation agreement was signed on 4 December 1435.^[33] The Grand Duchy of Moscow and Tsardom of Russia attempted unsuccessful invasions in 1481 and 1558.

The Livonian Confederation ceased to exist during the Livonian War (1558–82). The wars had reduced the Estonian population from about 250–300,000 people before the Livonian War to 120–140,000 in the 1620s.^[34]

Reformation and Swedish Estonia[link]

Estonian capital Tallinn in the first half of the 17th century.

The Swedish Empire following the Treaty of Roskilde of 1658. The dark green shows Sweden proper represented in the Riksdag of the Estates, while the other shades of green stand for different dominions and possessions.

The Reformation in Europe officially began in 1517 with Martin Luther (1483–1546) and his 95 Theses. The Reformation resulted in great change in the Baltic region. Ideas entered the Livonian Confederation very quickly and by the 1520s they were well known. Language, education, religion, and politics were greatly transformed. The Church services were now given in the local vernacular, instead of Latin, as was previously used.^[35] During the Livonian War in 1561, northern Estonia submitted to Swedish control. Southern Estonia in 1560s formed an autonomous Duchy of Livonia in the Polish-Lithuanian Commonwealth under joint control of the Polish Crown and the Grand Duchy, containing two voivodeships of present-day Estonia: Dorpat Voivodeship (Tartu region) and Parnawa Voivodeship (Pärnu region). In 1629, mainland Estonia came entirely under Swedish rule. Estonia was administratively divided between the provinces of Estonia in the north and Livonia in southern Estonia and northern Latvia, a division which persisted until the early 20th century.

In 1631, the Swedish king Gustaf II Adolf forced the nobility to grant the peasantry greater rights, although serfdom was retained. King Charles XI withdrew large noble estates to the Swedish Crown effectively turning serfs to taxpaying farmers. In 1632, a printing press and university were established in the city of Dorpat (known as Tartu since 1918). This period is known in Estonian history as "the Good Old Swedish Time."

The steady growth of the population continued until the outbreak of the plague in 1657. The Great Famine of 1695–97 killed some 70,000 people – almost 20% of the population.^[34]

Russian Empire[link]

Following the Capitulation of Estonia and Livonia during the Great Northern War (1700–21), the Swedish empire lost Estonia to Russia by the Treaty of Nystad. However, the upper classes and the higher middle class remained primarily Baltic German. The war devastated the population of Estonia, but it recovered quickly. Although the rights of peasants were initially weakened, serfdom was abolished in 1816 in the province of Estonia and in 1819 in Livonia. After the Russian revolution of 1917, Tallinn remained under Soviet control until 24 February 1918, when Estonian independence was declared.

Declaration of independence[link]

Estonian Declaration of Independence

As a result of the abolition of serfdom and the availability of education to the native Estonian-speaking population, an active Estonian nationalist movement developed in the 19th century. It began on a cultural level, resulting in the establishment of Estonian language literature, theatre and professional music and led on to the formation of the Estonian national identity and the Age of Awakening. Among the leaders of the movement were Johann Voldemar Jannsen, Jakob Hurt and Carl Robert Jakobson.

Declaration of independence in Pärnu on 23 February in 1918. One of the first images of the Republic.

Significant accomplishments were the publication of the national epic, Kalevipoeg, in 1862, and the organization of the first national song festival in 1869. In response to a period of Russification initiated by the Russian empire in the 1890s, Estonian nationalism took on more political tones, with intellectuals first calling for greater autonomy, and later, complete independence from the Russian Empire.

Following the Bolshevik takeover of power in Russia after the October Revolution of 1917 and German victories against the Russian army, between the Russian Red Army's retreat and the arrival of advancing German troops, the Committee of Elders of the Maapäev issued the Estonian Declaration of Independence^[36] in Pärnu on 23 February and in Tallinn on 24 February 1918.

After winning the Estonian War of Independence against both Soviet Russia and the German Freikorps and Baltische Landeswehr volunteers, (the Tartu Peace Treaty was signed on 2 February 1920). The Republic of Estonia was recognised (de jure) by Finland on 7 July 1920, Poland on 31 December 1920, Argentina on 12 January 1921 and by the Western Allies on 26 January 1921.

Estonia maintained its independence for twenty-two years. Initially a parliamentary democracy, the parliament (Riigikogu) was disbanded in 1934, following political unrest caused by the global economic crisis. Subsequently the country was ruled by decree by Konstantin Päts, who became President in 1938, the year parliamentary elections resumed.

World War II[link]

The fate of Estonia in World War II was decided by the German–Soviet Nonaggression Pact and its Secret Additional Protocol of August 1939. World War II casualties of Estonia, estimated at around 25% of the population, were among the highest in Europe. War and occupation deaths have been estimated at 90,000. These include the Soviet deportations in 1941, the German deportations and Holocaust victims.^[37] World War II began with the invasion and subsequent partition of an important regional ally of Estonia – Poland, by a joint operation of Nazi Germany and Soviet Union.

Soviet occupation[link]

1940 Soviet map of the Estonian SSR

The fate of the Republic of Estonia before World War II was decided by the German–Soviet Nonaggression Pact of August 1939 after Joseph Stalin gained Adolf Hitler's agreement to divide Eastern Europe into "spheres of special interest" according to the Molotov–Ribbentrop Pact and its Secret Additional Protocol.^[38][39]

On 24 September 1939, warships of the Red Navy appeared off Estonian ports and Soviet bombers began a patrol over Tallinn and the nearby countryside.^[40] The Estonian government was forced to give their assent to an agreement which allowed the USSR to establish military bases and station 25,000 troops on Estonian soil for "mutual defence".^[41] On 12 June 1940, the order for a total military blockade on Estonia was given to the Soviet Baltic Fleet.^[42]

On 14 June 1940, while world's attention was focused on the fall of Paris to Nazi Germany a day earlier, the Soviet military blockade on Estonia went into effect, two Soviet bombers downed the Finnish passenger airplane "Kaleva" flying from Tallinn to Helsinki carrying three diplomatic pouches from the U.S. legations in Tallinn, Riga and Helsinki.^[43] On 16 June 1940, the Soviet Union invaded Estonia.^[44] The Red Army exited from their military bases in Estonia on 17 June.^[45] The following day, some 90,000 additional troops entered the country. In the face of overwhelming Soviet force, the Estonian government capitulated on 17 June 1940 to avoid bloodshed.^[46]

The military occupation of Estonia was complete by 21 June 1940.^[47]

Most of the Estonian Defence Forces surrendered according to the orders of the Estonian Government believing that resistance was useless and were disarmed by the Red Army.^[48][49] Only the Estonian Independent Signal Battalion stationed in Tallinn at Raua Street showed resistance to Red Army and Communist Militia called "People's Self-Defence"^[50] on 21 June 1940.^[51] As the Red Army brought in additional reinforcements supported by six armoured fighting vehicles, the battle lasted several hours until sundown. Finally the military resistance was ended with negotiations and the Independent Signal Battalion surrendered and was disarmed.^[52] There were 2 dead Estonian servicemen, Aleksei Männikus and Johannes Mandre, and several wounded on the Estonian side and about 10 killed and more wounded on the Soviet side.^[53][54] The Soviet militia that participated in the battle was led by Nikolai Stepulov.^[55]

In 6 August 1940, Estonia was illegally annexed by the Soviet Union as the Estonian SSR.^[56] The provisions in the Estonian constitution requiring a popular referendum to decide on joining a supra-national body were ignored. Instead the vote to join the Soviet Union was taken by those elected in the sham elections held in the previous month. Additionally those who had failed to do their "political duty" of voting Estonia into the USSR, specifically those who had failed to have their passports stamped for voting, were condemned to death by Soviet tribunals.^[57] The repressions followed with the mass deportations carried out by the Soviets in Estonia on 14 June 1941. Many of the country's political and intellectual leaders were killed or deported to remote areas of the USSR by the Soviet authorities in 1940–1941. Repressive actions were also taken against thousands of ordinary people.

When the German Operation Barbarossa started against the Soviet Union, about 34,000 young Estonian men were forcibly drafted into the Red Army. Fewer than 30% of them survived the war. Political prisoners who could not be evacuated were executed by the NKVD.^[58]

Many countries, including the UK and US, did not recognise the annexation of Estonia by the USSR de jure. Such countries recognised Estonian diplomats and consuls who still functioned in the name of their former governments. These diplomats persisted in this anomalous situation until the ultimate restoration of Baltic independence.^[59]

Contemporary Russian politicians deny that the Republic of Estonia was illegally annexed by the Soviet Union in 1940. They state that the Soviet troops had entered Estonia in 1940 following the agreements and with the consent of the government of the Republic of Estonia, regardless of how their actions can be interpreted today. They maintain that the USSR was not in a state of war and was not waging any combat activities on the territory of Estonia; therefore there could be no occupation. The official Soviet and current Russian version claims that Estonians voluntarily gave up their statehood. Freedom fighters of 1944–1976 are labeled "bandits" or "nazis". The Russian position is not recognised internationally.^[60]

German occupation[link]

Jüri Uluots

After Germany invaded the Soviet Union on 22 June 1941, the Wehrmacht was able to reach Estonia within days. The German Army crossed the Estonian southern border on 7 July. The Red Army retreated behind the Pärnu River – Emajõgi line on 12 July. At the end of July the Germans resumed their advance in Estonia working in tandem with the Estonian Forest Brothers. Both German troops and Estonian partisans took Narva on 17 August and the Estonian capital Tallinn on 28 August. After the Soviets were driven out from Estonia German troops disarmed all the partisan groups.^[61]

Although initially the Germans were perceived by most Estonians as liberators from the USSR and its repressions, and hopes were raised for the restoration of the country's independence, it was soon realised that they were but another occupying power. The Germans used Estonia's resources for the war effort; for the duration of the occupation Estonia and was incorporated into the German province of Ostland.

This led many Estonians, unwilling to side with the Nazis, to join the Finnish Army to fight against the Soviet Union. The Finnish Infantry Regiment 200 (Estonian: soomepoisid) was formed out of Estonian volunteers in Finland. Although many Estonians were recruited into the German armed forces (including Estonian Waffen-SS), the majority of them did so only in 1944 when the threat of a new invasion of Estonia by the Red Army had become imminent and it was clear that Nazi Germany could not win the war.^[62]

By January 1944, the front was pushed back by the Red Army almost all the way to the former Estonian border. Narva was evacuated. Jüri Uluots, the last legitimate prime minister of the Republic of Estonia (according to the Constitution of the Republic of Estonia) prior to its fall to the Soviet Union in 1940, delivered a radio address that appealed to all able-bodied men born from 1904 through 1923 to report for military service (Before this, Jüri Uluots had opposed Estonian mobilization.) The call drew support from all across the country: 38,000 volunteers jammed registration centres.^[63]

Several thousand Estonians who had joined the Finnish Army came back across the Gulf of Finland to join the newly formed Territorial Defense Force, assigned to defend Estonia against the Soviet advance. It was hoped that by engaging in such a war Estonia would be able to attract Western support for the cause of Estonia's independence from the USSR and thus ultimately succeed in achieving independence.^[64]

Soviet Estonia[link]

The Soviet forces reconquered Estonia in the autumn of 1944 after fierce battles in the northeast of the country on the Narva river, on the Tannenberg Line (Sinimäed), in Southeast Estonia, on the Emajõgi river, and in the West Estonian Archipelago.

In the face of the country being re-occupied by the Red Army, tens of thousands of Estonians (including a majority of the education, culture, science, political and social specialists) (estimates as many as 80,000) chose to either retreat with the Germans or flee to Finland or Sweden. On 12 January 1949, the Soviet Council of Ministers issued a decree "on the expulsion and deportation" from Baltic states of "all kulaks and their families, the families of bandits and nationalists", and others.^[65]

More than 200,000 people are estimated to have been deported from the Baltic in 1940–1953. In addition, at least 75,000 were sent to Gulag. More than 10% of the entire adult Baltic population was deported or sent to Soviet labor camps.^[65] In response to the continuing insurgency against Soviet rule,^[66] more than 20,000 Estonians were forcibly deported either to labor camps or Siberia (see Gulag).^[67] Within the few weeks that followed, almost all of the remaining rural households were collectivized.

After World War II, as part of the goal to more fully integrate Baltic countries into the Soviet Union, mass deportations were concluded in the Baltic countries and the policy of encouraging Soviet immigration to the Baltic states continued.^[68] In addition to the human and material losses suffered due to war, thousands of civilians were killed and tens of thousands of people deported from Estonia by the Soviet authorities until Joseph Stalin's death in 1953.

Half of the deported perished, the other half were not allowed to return until the early 1960s (years after Stalin's death).^{[citation needed]} The various repressive activities of Soviet forces in 1940–1941 and after reoccupation sparked a guerrilla war against the Soviet authorities in Estonia which was waged into the early 1950s by "forest brothers" (metsavennad) consisting mostly of Estonian veterans of both the German and Finnish armies as well as some civilians.^[69] Material damage caused by the world war and the following Soviet era significantly slowed Estonia's economic growth, resulting in a wide wealth gap in comparison with neighboring Finland and Sweden.^[70]

Militarization was another aspect of the Soviet regime. Large parts of the country, especially the coastal areas were closed to all but the Soviet military. Most of the sea shore and all sea islands (including Saaremaa and Hiiumaa) were declared "border zones". People not actually resident there were restricted from traveling to them without a permit. A notable closed military installation was the city of Paldiski which was entirely closed to all public access. The city had a support base for the Soviet Baltic Fleet's submarines and several large military bases, including a nuclear submarine training centre complete with a full-scale model of a nuclear submarine with working nuclear reactors. The Paldiski reactors building passed into Estonian control in 1994 after the last Soviet troops left the country.^[71][72] Immigration was another effect of Soviet occupation. Hundreds of thousands of migrants were relocated to Estonia from other parts of Soviet Union to assist industrialization and militarization, contributing an increase of about half a million people within 45 years.^[73]

Post-independence[link]

The US, UK, France, Italy and the majority of other Western democracies considered the annexation of Estonia by the USSR illegal. They retained diplomatic relations with the representatives of the independent Republic of Estonia, never de jure recognised the existence of the Estonian SSR, and never recognised Estonia as a legal constituent part of the Soviet Union.^[74] Estonia's return to independence became possible as the Soviet Union faced internal regime challenges, loosening its hold on the outer empire. As the 1980s progressed, a movement for Estonian autonomy started. In the initial period of 1987–1989, this was partially for more economic independence, but as the Soviet Union weakened and it became increasingly obvious that nothing short of full independence would do, the country began a course towards self-determination.

Estonia joined the European Union in 2004 and signed the Lisbon Treaty in 2007.

In 1989, during the "Singing Revolution", in a landmark demonstration for more independence, called the Baltic Way, a human chain of more than two million people was formed, stretching through Lithuania, Latvia and Estonia. All three nations had similar experiences of occupation and similar aspirations for regaining independence. The Estonian Sovereignty Declaration was issued on 16 November 1988^[75] and formal independence declared on 20 August 1991, reconstituting the pre-1940 state, during the Soviet military coup attempt in Moscow. The Soviet Union recognised the independence of Estonia on 6 September 1991. The first country to diplomatically recognize Estonia's reclaimed independence was Iceland. The last Russian troops left on 31 August 1994.

The 2004 enlargement of the European Union was the largest single expansion of the European Union (EU), both in terms of territory and population, however not in terms of gross domestic product (wealth). Estonia was amongst a group of ten countries which were incorporated into the EU on 1 May 2004. The Treaty of Accession 2003 was signed on 16 April 2003.

Estonia as a Nordic country[link]

Many Estonians consider themselves to be Nordic rather than Baltic. The term Baltic as a concept to group Lithuania, Latvia, and Estonia has been criticized, as what the three nations have in common almost wholly derives from shared experiences of occupation, deportation, and oppression; what Estonia does not share with Latvia and Lithuania is a common identity or language group. The term Balts does not apply to Estonians.

The Estonian language is closely related to the Finnish language, not to the Baltic languages and Estonians, as an ethnic group, are a Finnic people. The northern part of Estonia was part of medieval Denmark during the 13th-14th centuries, being sold to the Teutonic Order after St. George's Night Uprising in 1346. The name of the Estonian capital, Tallinn, is thought to be derived from the Estonian taani linn, meaning 'Danish town' (see Flag of Denmark for details). Parts of Estonia were under Danish rule again in the 16th-17th centuries, before being transferred to Sweden in 1645. Estonia was part of the Swedish Empire from 1561 until 1721. The Swedish era became colloquially known in Estonia as the "good old Swedish times". Swedish ambassador, Mr. Dag Hartelius's speech on the Estonian Independence day, February 24, 2009, where he considered Estonia "A Nordic Country" gathered a lot of attention in the country and was widely considered as a great compliment. Additionally, the foreign trade minister of Finland, Alexander Stubb, has been quoted saying that Estonia is a "Distinct Nordic country".^[76]

Flag of Estonia	Proposed Estonian flag featuring a Nordic cross	Flag proposed in 1919

Historically, large parts of Estonia’s north-western coast and islands have been populated by an indigenous ethnically Swedish population, the Estonian Swedes. The majority of Estonia's Swedish population fled to Sweden in 1944, escaping the advancing Soviet Army. In 2005, Estonia joined the European Union's Nordic Battle Group.

Territorial history timeline[link]

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Geography[link]

Satellite image of Estonia

Osmussaar (Swedish: Odensholm) is one of the many islands in the territorial waters of Estonia.

Estonia's land border with Latvia runs 267 kilometers; the Russian border runs 290 kilometers. From 1920 to 1945, Estonia's border with Russia, set by the 1920 Tartu Peace Treaty, extended beyond the Narva River in the northeast and beyond the town of Pechory (Petseri) in the southeast. This territory, amounting to some 2,300 square kilometers (888 sq mi), was incorporated into Russia by Stalin at the end of World War II. For this reason the borders between Estonia and Russia are not still defined today.

Estonia lies on the eastern shores of the Baltic Sea immediately across the Gulf of Finland from Finland on the level northwestern part of the rising East European platform between 57.3° and 59.5° N and 21.5° and 28.1° E. Average elevation reaches only 50 meters (164 ft) and the country's highest point is the Suur Munamägi in the southeast at 318 meters (1,043 ft). There is 3,794 kilometers (2,357 mi) of coastline marked by numerous bays, straits, and inlets. The number of islands and islets is estimated at some 1,500. Two of them are large enough to constitute separate counties: Saaremaa and Hiiumaa.^[77][78] A small, recent cluster of meteorite craters, the largest of which is called Kaali is found on Saaremaa, Estonia.

Estonia is situated in the northern part of the temperate climate zone and in the transition zone between maritime and continental climate. Estonia has four seasons of near-equal length. Average temperatures range from 16.3 °C (61.3 °F) on the Baltic islands to 18.1 °C (64.6 °F) inland in July, the warmest month, and from −3.5 °C (25.7 °F) on the Baltic islands to −7.6 °C (18.3 °F) inland in February, the coldest month. The average annual temperature in Estonia is 5.2 °C (41.4 °F).^[79] The average precipitation in 1961–1990 ranged from 535 to 727 mm (21.1 to 28.6 in) per year.^[80]

Snow cover, which is deepest in the south-eastern part of Estonia, usually lasts from mid-December to late March. Estonia has over 1,400 lakes. Most are very small, with the largest, Lake Peipus, (Peipsi in Estonian) being 3,555 km² (1,373 sq mi). There are many rivers in the country. The longest of them are Võhandu (162 km/101 mi), Pärnu (144 km/89 mi), and Põltsamaa (135 km/84 mi).^[77] Estonia has numerous fens and bogs.

Phytogeographically, Estonia is shared between the Central European and Eastern European provinces of the Circumboreal Region within the Boreal Kingdom. According to the WWF, the territory of Estonia belongs to the ecoregion of Sarmatic mixed forests.

Administrative divisions[link]

Old town in Haapsalu

Main street in Pärnu

Town Hall in Tartu

Kuressaare Castle in winter

The Republic of Estonia is divided into fifteen counties (Maakonnad) which are the administrative subdivisions of the country. The first documented mentioning of Estonian political and administrative subdivisions comes from the Chronicle of Henry of Livonia, written in the 13th century during the Northern Crusades.^[81]

A maakond (county) is the biggest administrative subdivision. The county government (Maavalitsus) of each county is led by a county governor (Maavanem), who represents the national government at the regional level. Governors are appointed by the Government of Estonia for a term of five years. Several changes were made to the borders of counties after Estonia became independent, most notably the formation of Valga County (from parts of Võru, Tartu and Viljandi counties) and Petseri County (area acquired from Russia with the 1920 Tartu Peace Treaty).

During the Soviet rule, Petseri County was annexed and ceded to the Russian SFSR in 1945 where it became one the districts of Pskov Oblast. Counties were again re-established on 1 January 1990 in the borders of the Soviet-era districts. Because of the numerous differences between the current and historical (pre-1940, and sometimes pre-1918) layouts, the historical borders are still used in ethnology, representing cultural and linguistic differences better.

Estonia is divided into 15 counties (maakond). Each county is further divided into municipalities (omavalitsus), which is also the smallest administrative subdivision of Estonia. There are two types of municipalities: an urban municipality – linn (town), and a rural municipality – vald (parish). There is no other status distinction between them. Each municipality is a unit of self-government with its representative and executive bodies. The municipalities in Estonia cover the entire territory of the country.

A municipality may contain one or more populated places. Tallinn is divided into eight districts (linnaosa) with limited self-government (Haabersti, Kesklinn (centre), Kristiine, Lasnamäe, Mustamäe, Nõmme, Pirita and Põhja-Tallinn).

Municipalities range in size from Tallinn with 400,000 inhabitants to Ruhnu with as few as 60. As over two-thirds of the municipalities have a population of under 3,000, many of them have found it advantageous to co-operate in providing services and carrying out administrative functions. There have also been calls for an administrative reform to merge smaller municipalities together.

As of March 2008, there are a total of 227 municipalities in Estonia, 33 of them being urban and 193 rural.

Politics[link]

Politics of Estonia takes place in a framework of a parliamentary representative democratic republic in which the Prime Minister of Estonia is the head of government and of a multi-party system. The political culture is very stable in Estonia, where the power is held between two to three parties, that have been in politics for a long time. This situation is similar to other countries in Northern Europe. The current prime minister of Estonia, Andrus Ansip, is the second longest-serving prime minister in Europe.

Parliament[link]

The seat of the Parliament of Estonia in Toompea Castle.

The Parliament of Estonia (Estonian: Riigikogu) or the legislative branch is elected by people for a four year term by proportional representation. Estonia is a parliamentary representative democratic republic. The Estonian political system operates under a framework laid out in the 1992 constitutional document. The Estonian parliament has 101 members and influences the governing of the state primarily by determining the income and the expenses of the state (establishing taxes and adopting the budget). At the same time the parliament has the right to present statements, declarations and appeals to the people of Estonia, ratify and denounce international treaties with other states and international organisations and decide on the Government loans.^[82]

The Riigikogu elects and appoints several high officials of the state, including the President of the Republic. In addition to that, the Riigikogu appoints, on the proposal of the President of Estonia, the Chairman of the National Court, the Chairman of the Board of the Bank of Estonia, the Auditor General, the Legal Chancellor and the Commander-in-Chief of the Defence Forces. A member of the Riigikogu has the right to demand explanations from the Government of the Republic and its members. This enables the members of the parliament to observe the activities of the executive power and the above mentioned high officials of the state.

Government[link]

Stenbock House, the seat of the Government of Estonia on Toompea Hill

The Government of Estonia (Estonian: Vabariigi Valitsus) or the executive branch is formed by the Prime Minister of Estonia, nominated by the president and approved by the parliament. The government exercises executive power pursuant to the Constitution of Estonia and the laws of the Republic of Estonia and consists of 12 ministers, including the prime minister. The prime minister also has the right to appoint other ministers, whom he or she will assign with a subject to deal with and who will not have a ministry to control, becoming a minister without portfolio who currently is the Minister of Regions.

The prime minister has the right to appoint a maximum of 3 such ministers, as the limit of ministers in one government is 15. It is also known as the cabinet. The cabinet carries out the country's domestic and foreign policy, shaped by parliament; it directs and co-ordinates the work of government institutions and bears full responsibility for everything occurring within the authority of executive power. The government, headed by the Prime Minister, thus represents the political leadership of the country and makes decisions in the name of the whole executive power.

Estonia has pursued the development of the e-state and e-government. Internet voting is used in elections in Estonia.^[83] The first Internet voting took place in the 2005 local elections and the first in a parliamentary election was made available for the 2007 elections, in which 30,275 individuals voted over the Internet. Voters have a chance to invalidate their electronic vote in traditional elections, if they wish to. In 2009 in its 8th Worldwide Press Freedom Index, Reporters Without Borders ranked Estonia 6th out of 175 countries.^[84] In the first ever State of World Liberty Index report, Estonia was ranked 1st out of 159 countries.

Law[link]

According to the Constitution of Estonia (Estonian: Põhiseadus) the supreme power of the state is vested in the people. The people exercise their supreme power of the state on the elections of the Riigikogu through citizens who have the right to vote.^[85] The supreme judicial power is vested in the Supreme Court or Riigikohus, with 19 justices.^[86] The Chief Justice is appointed by the parliament for nine years on nomination by the president. The official Head of State is the President of Estonia, who gives assent to the laws passed by Riigikogu, also having the right of sending them back and proposing new laws.

The president, however, does not use these rights very often, having a largely ceremonial role. He or she is elected by Riigikogu, with two-thirds of the votes required. If the candidate does not gain the amount of votes required, the right to elect the president goes over to an electoral body, consisting of the 101 members of Riigikogu and representatives from local councils. As other spheres, Estonian law-making has been successfully integrated with the Information Age.

Foreign relations[link]

President Toomas Hendrik Ilves, and his wife, first lady Evelin Ilves in New York with Barack Obama and first lady Michelle Obama in 2009.

Estonia was a member of the League of Nations from 22 September 1921,^[87] has been a member of the United Nations since 17 September 1991,^[88] and of NATO since 29 March 2004,^[89] as well as the European Union since 1 May 2004.^[90] Estonia has also signed the Kyoto protocol. Estonia is a member of the Organization for Security and Cooperation in Europe (OSCE). As an OSCE participating State, Estonia’s international commitments are subject to monitoring under the mandate of the U.S. Helsinki Commission.

Since regaining independence, Estonia has pursued a foreign policy of close cooperation with its Western European partners. The two most important policy objectives in this regard have been accession into NATO and the European Union, achieved in March and May 2004 respectively. Estonia's international realignment toward the West has been accompanied by a general deterioration in relations with Russia, most recently demonstrated by the controversy surrounding the relocation of the Bronze Soldier WWII memorial in Tallinn.^[91]

Estonia is a member of the European parliament since 2004.

An important element in Estonia's post-independence reorientation has been closer ties with the Nordic countries, especially Finland and Sweden. Indeed, Estonians consider themselves a Nordic people rather than Balts,^[92][93] based on their historical ties with Sweden, Denmark and particularly Finland. In December 1999, then Estonian foreign minister (and since 2006, president of Estonia) Toomas Hendrik Ilves delivered a speech entitled "Estonia as a Nordic Country" to the Swedish Institute for International Affairs.^[94] In 2003, the foreign ministry also hosted an exhibit called "Estonia: Nordic with a Twist".^[95]

In 2005, Estonia joined the European Union's Nordic Battle Group. It has also shown continued interest in joining the Nordic Council. Whereas in 1992 Russia accounted for 92% of Estonia's international trade,^[96] today there is extensive economic interdependence between Estonia and its Nordic neighbors: three quarters of foreign investment in Estonia originates in the Nordic countries (principally Finland and Sweden), to which Estonia sends 42% of its exports (as compared to 6.5% going to Russia, 8.8% to Latvia, and 4.7% to Lithuania). On the other hand, the Estonian political system, its flat rate of income tax, and its non-welfare-state model distinguish it from the other Nordic states, and indeed from many other European countries.^[97]

Military[link]

Estonia is a part of the Nordic Battle Group.

An Estonian Patria Pasi XA-180 in Afghanistan.

An Estonian soldier in Baghdad, Iraq.

The military of Estonia is based upon the Estonian Defence Forces (Estonian: Kaitsevägi) which is the name of the unified armed forces of the republic with Maavägi (Army), Merevägi (Navy), Õhuvägi (Air Force) and a paramilitary national guard organization Kaitseliit (Defence League). The Estonian National Defence Policy aim is to guarantee the preservation of the independence and sovereignty of the state, the integrity of its land, territorial waters, airspace and its constitutional order.^[98] At the moment the main strategic goals are to be able to defend the country's interests and development of the armed forces which would be ready to be interoperability with the other armed forces of NATO and European Union member states and also their capability to participate in NATO missions.

The current national military service (Estonian: ajateenistus) is compulsory for men between 18 and 28, and conscripts serve eight-month to eleven-month tours of duty depending on the army branch they serve in. Estonia has retained conscription unlike Latvia and Lithuania and has no plan to transition to a professional army. In 2008, annual military spending will reach 1.85% of GDP, or 5 billion kroons, and will continue to increase until 2010, when a 2.0% level is expected to be reached.^[99]

As of January 2008, the Estonian military had almost 300 troops stationed in foreign countries as part of various international peacekeeping forces, including 35 Defence League troops stationed in Kosovo; 120 Ground Forces soldiers in the NATO-led ISAF force in Afghanistan; 80 soldiers stationed as a part of MNF in Iraq; and 2 Estonian officers in Bosnia-Herzegovina and 2 Estonian military agents in Israel's Golan Heights.^[100]

The Estonian Defence Forces have also previously had military missions in Croatia from March until October 1995, in Lebanon from December 1996 until June 1997 and in Macedonia from May until December 2003.^[101] Estonia participates in the Nordic Battlegroup and has announced readiness to send soldiers also to Sudan to Darfur if necessary, creating the very first African peacekeeping mission for the armed forces of Estonia.^[102]

The Ministry of Defence and the Defence Forces have been working on a cyberwarfare and defence formation for some years now. In 2007, a military doctrine of an e-military of Estonia was officially introduced as the country was under massive cyberattacks in 2007.^[103] The proposed aim of the e-military is to secure the vital infrastructure and e-infrastructure of Estonia. The main cyber warfare facility is the Computer Emergency Response Team of Estonia (CERT) which was founded in 2006. The organization operates with the security problems that occur in the local networks also with those which are started there.^[104]

On 25 June 2007, Estonian president Toomas Hendrik Ilves met with the President of the US, George W. Bush.^[105] Among the topics discussed were the attacks on Estonian e-infrastructure.^[106] The attacks triggered a number of military organisations around the world to reconsider the importance of network security to modern military doctrine. On 14 June 2007, defence ministers of NATO members held a meeting in Brussels, issuing a joint communiqué promising immediate action. First public results were estimated to arrive by autumn 2007.^[107]

As to the placement of a NATO Cooperative Cyber Defence Centre of Excellence (CCDCOE), Bush announced his support of Estonia as this centre's location.^[108] In the aftermath of the 2007 cyberattacks, plans to combine network defence with Estonian military doctrine have been nicknamed as the Tiger's Defence, in reference to Tiigrihüpe.^[109] The CCDCOE started its operations in November 2008.^[110]

Economy[link]

Business quarter in Tartu.

As a member of the European Union, Estonia's economy is rated as high income by the World Bank. Because of its rapid growth, the Estonian economy has often been described as the Baltic Tiger. Beginning 1 January 2011, Estonia adopted the euro and became the 17th eurozone member state.^[111]

According to Eurostat newsrelease published at 21 October 2011, Estonia has the lowest ratio of government debt to GDP among EU countries as 6.7 percent at the end of 2010. The world media has lately started to describe Estonia as a Nordic country, emphasizing the economic, political and cultural differences between Estonia and its less successful Baltic neighbors.^[112]

A balanced budget, almost non-existent public debt, flat-rate income tax, free trade regime, competitive commercial banking sector, innovative e-Services and even mobile-based services are all hallmarks of Estonia's market economy.

Estonia is producing ca 75% of its consumed electricity.^[113] Over 85% of it generated with locally mined oil shale.^{[citation needed]}. Alternative energy sources such as wood, peat, and biomass make up approximately 9% of primary energy production. Renewable wind energy part was ca 6% of total consumption in 2009.^[114] Estonia imports needed petroleum products from western Europe and Russia. Oil shale energy, telecommunications, textiles, chemical products, banking, services, food and fishing, timber, shipbuilding, electronics, and transportation are key sectors of the economy. The ice-free port of Muuga, near Tallinn, is a modern facility featuring good transshipment capability, a high-capacity grain elevator, chill/frozen storage, and brand-new oil tanker off-loading capabilities. The railroad serves as a conduit between the West, Russia, and other points to the East.

Estonia is part of the Schengen Area, the EU single market and Eurozone (dark blue).

Estonia today is mainly influenced by developments in Finland, Sweden and Germany – the three main trade partners. The government recently increased greatly its spending on innovation. The prime minister of Estonian Reform Party has stated its goal of bringing Estonian GDP per capita into the TOP 5 of EU by 2022. Ireland is sometimes seen as a model for Estonian economic future.

Because of the Global Economic Recession, the GDP of Estonia decreased by 1.4% in the 2nd quarter of 2008, over 3% in the 3rd quarter of 2008, and over 9% in the 4th quarter of 2008. The Estonian government made a supplementary negative budget, which was passed by Riigikogu. The revenue of the budget was decreased for 2008 by EEK 6.1 billion and the expenditure by EEK 3.2 billion.^[115] In 2010, the economic situation stabilized and started a growth based on strong exports. In the fourth quarter of 2010, Estonian industrial output increased by 23% compared to the year before.^[116]

According to Eurostat data, Estonian PPS GDP per capita stood at 67% of the EU average in 2008.^[117] In March 2011, the average monthly gross salary in Estonia was 843€ ^[116][118]

However, there are big differences in GDP between different areas in Estonia. Currently, over half of the Estonian GDP is created in the capital Tallinn.^[119] In 2008, the GDP per capita of Tallinn stood at 172% of the Estonian average.^[120] This makes the GDP per capita of Tallinn number in at 115% of the European Union average, exceeding the average levels of other counties.

The registered unemployment rate was in April 2011 10.1%.^[121]

In 2011, the real GDP growth in Estonia was 8.0%.^[122]

Historic development[link]

Real GDP growth in Estonia, 2000–2011.

Milton Friedman's economic theories have had a large influence on the development of the Estonian economic policies.

By 1929, a stable currency, the kroon, was established. It is issued by the Bank of Estonia, the country's central bank. Trade focused on the local market and the West, particularly Germany and the United Kingdom. Only 3% of all commerce was with the USSR.

Before the Second World War Estonia was mainly an agricultural country whose products such as butter, milk and cheese were widely known on the western European markets. The USSR's forcible annexation of Estonia in 1940 and the ensuing Nazi and Soviet occupation during World War II crippled the Estonian economy. Post-war Sovietization of life continued with the integration of Estonia's economy and industry into the USSR's centrally planned structure.

Since re-establishing independence, Estonia has styled itself as the gateway between East and West and aggressively pursued economic reform and integration with the West. Estonia's market reforms put it among the economic leaders in the former COMECON area. In 1994, based on the economic theories of Milton Friedman, Estonia became one of the first countries to adopt a flat tax, with a uniform rate of 26% regardless of personal income. In January 2005, the personal income tax rate was reduced to 24%. Another reduction to 23% followed in January 2006. The income tax rate was decreased to 21% by January 2008.^[123] The Government of Estonia finalised the design of Estonian euro coins in late 2004, and adopted the euro as the country's currency on 1 January 2011, later than planned due to continued high inflation.^[111][124]