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40% Of Estonian Companies Failed To Submit Annual Report

For the first time ever, all companies in the new euro zone country – Estonia – were required to submit an online annual report. But only 60% of Estonian businesses managed to do so, the web site aripaev.ee reports.

“Not all businessmen know that they are required to submit an annual report.”

Piret Meelind

Although all 93,402 companies registered in Estonia were required to submit their annual report by July 1, only about 60% did so. However, the percentage of complying companies went up slightly since a year ago it was 58.6%.

For the first time, all companies were required to submit an online annual report, reported aripaev.ee

As in earlier years, the lion’s share of annual reports were submitted in the last days of June. For instance, in the last three days, 23,378 companies uploaded their reports and signed them digitally.

For the first time, also non-profit organizations were required to submit their report.

As of 27,631 non-profit organizations, only about 49% had complied with the requirement.

Another 3,212 companies had uploaded their reports online, but not yet submitted them.

Piret Meelind, deputy manager of the Centre of Registers and Information Systems, said that there have been no technical problems with the submission of reports. “The system enables up to 20,000 users to operate in this online environment simultaneously, but the number of users who had logged in was much lower,” she said.

Meelind said that, historically, many companies will submit their annual reports in the first week of July.

A representative of the justice ministry said that although the law allows to fine business owners who fail to submit their annual report by the deadline, the authorities would send out a written warning instead of imposing an actual fine.

“In many cases, companies fail to submit their annual reports by the deadline because of unawareness or carelessness. For instance, not all businessmen know that they are required to submit an annual report also if the company had no operations during the financial year,” she added.

Source: balticbusinessnews.com

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Morgan Stanley To Buy Bad Baltic Loans?

Finns Outraged By Swedish Plans To Bring Estonian Builders To Finland

Estonia: Something Doesn’t Seem Right

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Filed under International Econnomic Politics, National Economic Politics

Welcome To The Euro, Estonia! Here's Your 4,5% Extra Risk Premium

As some might have noticed, the euro zone – also known as EZ16 – has now become EZ17. It happened last week, as Estonia officially joined the European disaster zone. And the financial markets gave their official approval this week by kicking the price on Estonian CDS’ up by 4,45%. The Baltic Euro newbee moves straight in among the Top 8 countries with the highest risk of default.

“Joining the euro is a status issue for countries seeking to cement their position at Europe’s top table.”

Simon Tilford

The funniest thing is that the first, and almost the only, newspaper outside the Baltic region  reporting the historical event was The New York Times; on Thursday June 17th the representatives of the 27 European countries hailed the sound economic and financial policies that had been achieved by Estonia in recent years, and signed the paper that authorize Estonia to shift from the kroon to the euro on January 1th 2011.

For the leaders of the bloc, expanding the euro zone to 17 nations is tantamount to a show of confidence at an inauspicious time for the battered euro, which has lost about 13 percent of its value against the dollar since the beginning of the year, James Kanter writes in the NYT,

With a debt crisis that appears to be spreading from Greece to Spain, membership for the country, Estonia, might seem more like a curse than a blessing.

There has been speculations about the countries might change its mind and abandon the single currency, and some have doubts that Estonia is even ready for the move.

“Maintaining low inflation rates in Estonia will be very challenging,” the European Central Bank warned last month.

Still, the euro remains among the strongest currencies in the world, and membership opens the door to a club with global influence.

For small and unsure countries on the fringes of the European Union, it doesn’t get much better than this – no matter the mounting downsides for countries already on the inside.

Political Prestige

Estonia becomes the third ex-Communist state to make the switch to the euro, after Slovenia and Slovakia, and the first former Soviet republic to do so.

Membership is also an important signpost that a country is on the way to achieving Western European standards of living, an important goal for a former Soviet republic like Estonia that has long been eager to develop.

“It’s a great day for Estonia,” Andrus Ansip, the Estonian prime minister, told Latvian state radio in an interview.

“We prefer to be inside, to join the club, to be among decision makers.”

And Estonia’s central bank governor, Andres Lipstok, will now be able to take a seat on the European Central Bank’s powerful council that sets interest rates.

Sheer Bloody-Mindedness

“Joining the euro is a status issue for countries seeking to cement their position at Europe’s top table,” says Simon Tilford, chief economist for the Center for European Reform, a research organization based in London.

“But you also could call it sheer bloody-mindedness of Estonia to join now with the outlook for the currency so uncertain,” Tilford says according to NYT.

With a total output of about $17 billion, the Estonian economy is tiny.

It’s placed as the sixth poorest country among the (now) 28 EU nations.

Public debt in Estonia is currently estimated at an annual 7.2% of GDP –  a tiny deficit compared to most other countries in the bloc.

And right now it looks like the Estonian government will be able to keep its pledge to the euro.

But note; it looks like it.

According To Schedule

Just two days before the deal was to be sign in Brussels, the Estonian Ministry of Finance published it’s budget figures for the first five months of 2010.

The Ministry of Finance estimated that the Government sector budget deficit by the end of April was 5.1 billion kroons,  or 2.39% of the projected GDP of the year 2010, theBalticCource.com reports, quoting LETA/Postimees Online.

In five months of 2010 the State budget collected 32.5 billion kroons in revenue while the expenses amounted to 34.6 billion kroons.

The biggest State budget spending in five months are mainly social benefits – 15.3 billion kroons.

2.4 billion kroons were spent on investments. The payments on investments in the first few months of the year were by 10% higher than in the past couple of years due to improvements in the use of foreign aid.

Estonia’s operating expenses in total as well as the human resources spending have fallen, the Ministry of Finance says. And the State’s benefits paid to individuals, the private sector and to other Government authorities are on the same level as last year.

Now – compare that with the projections charted below:

The Estonian unemployment rate has increased by more than 150% between September 30th 2009 and February 19th 2010, to 14,3%, according to Index Mundi.

In addition, the Estonian credit agency, Krediidiinfo, estimates that the number of companies that will go bankrupt this year could amount to 1,700, especially in the construction business, accommodation business and catering business.

That’s up by 700, compared with the 1000 bankruptcies in 2009.

Just to put the topping on the cake; Estonian overdue loans rose in May to the highest level since at least 2008 as troubles in the commercial property industry outweighed improvements in mortgage asset quality, Bloomberg reports.

The share of loans overdue for more than 60 days rose to 7 percent of total credit issued to companies and individuals, compared with 6.7 percent in April, central bank says, according to the balticbusinessnews.com.

According To Schedule?

In For A Shock?

For the first time in many years, the average wages in Estonia fell (about 5%) in 2009.

Kalev Petti, head of research at Faktum & Ariko, says that othewise optimistic Estonians may become more pessimistic in January 2011 when Estonia adopts the euro.

“When the euro arrives, people and especially older population, will understand how poor they are.”

Petti says that while there were few other factors that are increasing pessimism among the older generation, it must be their feeling about the upcoming euro adoption and fear of prices continuing to rise. Pensioners are uneasy about the euro and the actual transition may cause psychological depression for many, the balticbusinessnews.com writes.

I guess the following statement made by Estonia’s prime minister, Andrus Ansip, in a radio interview will not help the situation:

“Our banknotes are more beautiful than euro banknotes.”

According to economists, the preparation to join the euro zone created some disadvantages for Estonia compared with neighboring countries, which enjoy a relative larger degree of flexibility by hanging on longer to their legacy currencies.

Wrong Place – Wrong Time

But that seems to be very, very short-term advantages.

Since last week the price of insuring the Estonian Medium Term Loans has jumped 4,45%, and the spread compared to German CDS’ has widened to nearly 8%.

The price on Estonian Sovereign CDS is now 113,01 basis points. That makes the insurance of Estonian government debt the sixth most expensive in Europe.

Source: Zero Hedge

Still, it a long way to go reach the Greek level that soared to nearly 1.000 basis points today.

Estonia is also an export-driven economy that quickly could be overshadowed by financial difficulties, particularly if the euro zone remains unstable, and neighboring countries like Poland and its Baltic neighbors insist on hanging on to their currencies.

“Investors will only be willing to lend to Estonia on favorable terms if Estonia can continue to compete,” Mr. Tilford, the London economist, says.

“That is where the biggest risks for Estonia now lie.”

Tallin In Trouble

And as all of the above is not enough; the Estonian capital – Tallin – is set to become the European Culture Capital in 2011.

But now, it turns out, that the city may lose 23.5 million kroon granted by the European Union because it has failed to provide Brussels guarantees for financing the culture capital programme, ERR reports, according to balticbusinessnews.com.

The so-called Mercour prize in the amout of 23.5 million kroons, a direct EU grant, has already been included in this year’s budget revenues of the city, but right now that payment is doubtful.

According to Brussels, if Tallinn wants to secure the funds it needs to submit guarantees by 28 June at the latest when Tallinn is visited by Sir Bob Scott, chairman of the assessment committee.

This is unlikely to happen since the government has not plans to issue any such guarantees before September.

Estonian Minister Laine Jänes, on the other hand, claims that the commission has been informed of such circumstances.

Welcome to the euro disaster zone, Estonia.

And good luck!

Related by the Econotwist:

Estonia: Banks Lost USD 23 million in Q1

Estonia: Something Doesn’t Seem Right

Estonian Newspapers Protesting With Blank Front Page

Businessman To Declare Hunger Strike If Not Paid

An Estonian Mystery

Swedbank Buy Greek Bonds With Estonian Money

Estonia Put Pressure On Journalists


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Filed under International Econnomic Politics, National Economic Politics

Danish Homeowners Are Insolvent

At least 150 000 Danish homeowners are technically insolvent, Danish media reports. For many of them it comes as a shock, as they’ve just been informed of their critical situation.

“The housing prices have fallen twice as strong in this crisis compared to the past. Almost one in every third of the youngest homeowners are technically insolvent. My expectation is that it will be more.”

Jens Lunde

The reason for the eye-popping Danish news is to be found in the country’s very special property assessments. Properties in Denmark are only valued every second year. Since the last assessment, the home prices have fallen almost 50 percent.

“The latest property assessments will be shocking reading for many Danish families,” the Danish newspaper EPN writes.

At least 150.000 Danish families are technically insolvent and will lose money if they must sell their home.

According to the newspaper most of the will just now discover this, when the latest official value of their residences are being released.

Home prices in Denmark have not fallen this much between two reviews, ever.

Many will find that the value of their property has been cut in half over the last two years.

Denmark has a separate law on “assessment of the country’s real estate“.

Housing values are being reviewed every two years.

The reviews was undertaken by the Danish IRS in October, but the individual home owners are not enlightened to know the value that is determined before tax settlement is sent out in March the next year.

(Here’s the full law text – in Danish)

“Housing prices have fallen twice as strong in this crisis compared to the past. Almost one in every third of the youngest homeowners were technically insolvent. My expectation is that it will be more now. Not necessarily among the youngest, but among older homeowners.  Some are in for a nasty surprise, ” associate professor, Jens Lunde, at Copenhagen Business School says.

He adds that it’s less important whether home owners are indebted up to the chimney; that if they’re not stands to sell  or would like to borrow against the non-existent release.

Chief Economist Ulrikke Ekelund says that there are surprises in store for those who have not had their house valued by an estate or mortgage agent in recent years.

“Since the last price assessment of the houses some years back, this will be an eye-opener for homeowners. Some people will probably choose to cushion a little, either by paying off the house or by saving in other ways. If one don’t have to move, it doesn’t mean much to be technically insolvent. But it is unpleasant, and one is locked, “ Ulrikke Ekelund says.

She points out that property assessments in 2005 and 2007 were far from the current market value, and that the new  assessments were carried out in October but made public first now. Therefore, prices may have changed.

(Hopefully for the better).

Original article in Danish.


Related by the Econotwist:

Denmark In Danger Of Becoming The “New Greece”

Traders Short Record Amount of Euro

Is Mark-To-Market Accounting Coming To An End?

E.U. To Reform Economic Policy

European Commission Warns Of “Lost Decade”

Europe’s Real Estate Industry: “A long, Slow Haul To Recovery”

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