By Liis Kangsepp
Special to Dow Jones Newswires
TALLINN, Estonia--Pressure is mounting on the European Central Bank's
freshest face, U.S.-born economist Ardo Hansson, to start carving out
a more active role for Estonia in the euro-zone crisis when he makes
his first public comments on Wednesday since becoming president of
Estonia's central bank.
Mr. Hansson, 54, came to the helm of Eesti Pank last week carrying a
reputation for being a currency guru and having a wealth of
international experience, including a stint as chief of the World
Bank's economics unit in China. Born in Chicago and playing a key role
in establishing Estonian monetary policy two decades ago, the new
central banker is seen as bringing a diverse view to the job.
But his immediate task will be proving he can be an assertive
spokesman for the Baltic nation and the lessons Estonia can impart to
countries staring down the euro zone's sovereign debt crisis.
"It is Eesti Pank's obligation to be bolder in communicating Estonia's
position," Valdo Randpere, a member of the Estonian Parliament and the
bank's supervisory board, said in an interview. Mr. Randpere said
Estonia is a good example of how to conduct financial affairs in a
crisis situation, and the nation could be a model for other European
countries on the brink of fiscal collapse.
Although Estonia was recently criticized by Nobel Prize-winning
economist and New York Times columnist Paul Krugman for posting what
he deemed an incomplete economic recovery following a sharp output
drop in 2008, the country has often been seen as a leader in endorsing
free markets and exercising sound monetary policy. It also has
experienced boom-and-bust economic cycles that have dealt Estonians
hard lessons.
Estonia, the euro bloc's 17th and newest member, undertook structural
reforms including tax increases and painful measures to cut public
spending starting in 2008 to lower its debt as the global credit
crunch spread. The country of 1.3 million people had a budget surplus
of 1% of gross domestic product in 2011. The economy expanded by 7.6%
last year and the Ministry of Finance in April forecast gross domestic
product growth of 1.7% in 2012.
"Hansson should establish our beliefs in Europe," Mr. Randpere said.
"Budgets should be balanced and spending more than earning is not
acceptable. He has to help build up Europe's economy again."
Mr. Hansson's global view and measured negotiation style could be
critical to his success.
"We valued highly his international experience," Jaan Maennik,
chairman of Eesti Pank's supervisory board, said in an interview.
"During complicated negotiations it is very important to understand
very precisely what the other party is saying," Mr. Maennik said.
He noted that Mr. Hansson's strongest language is English, a change
from his predecessor--Andres Lipstok--who doesn't have as strong a
command of the language.
Recently, Mr. Hansson--who has a doctorate from Harvard--said he will
spend his first few months in office getting to know Eesti Pank and
the challenges facing its staff. In addition, it is "important to come
up to speed on euro zone-wide issues, so as to most effectively
contribute to European monetary policy...this will require much
reading and extensive consultation with a broad range of persons in
Estonia and beyond."
He is scheduled to give the Estonian central bank's economic policy
statement and forecast Wednesday.
While Estonia is on the geographical sidelines of an economic crisis
engulfing bigger players in the euro zone, Mr. Hansson isn't expected
to stand by silently despite his reputation for being humble, and he
is likely to take a hard look at how to better gird Estonia against
economic turmoil.
Estonia's former minister of economic affairs, Olari Taal, said in an
interview that in recent years Eesti Pank has been living in its own
insulated bubble, not doing enough to interact with the outside world.
Mr. Taal said he hopes Mr. Hansson will change that.
"Central banks should have the function to discipline government, but
in recent years this has not happened," Mr. Taal said. The two worked
together in the early 1990s when Mr. Hansson worked as an adviser for
several Estonian prime ministers.
"I am sure that now that Estonia has a person with such international
experience sitting in the ECB council, attitudes towards our country
would be slightly different," Mr. Taal said.
Although Mr. Hansson may be a new player at the ECB, he isn't a total
stranger in Estonia. He was a key player in 1992 when Estonia changed
from the Soviet ruble to its own currency, the kroon. Mr. Taal said it
was Hansson who proposed the idea to peg the kroon to Germany's
Deutsche mark.
"This makes him somewhat the founding father of our currency," Mr.
Taal said. "But as Ardo is a rather discreet person he has never
really claimed that honor for himself."
Siim Kallas, the European commissioner of transport and a one-time
president of Eesti Pank who also worked with Mr. Hansson in the 1992
monetary reform, said Estonia's new central banker is likely to avoid
getting mired in local politics.
"He managed to give independent evaluations on financial politics and
is for sure capable of doing the same today," said Mr. Kallas.
Mr. Hansson spent his childhood in Chicago and northwest Canada. He
visited Estonia for the first time in the 1980's when the country was
occupied by the Soviet Union, before returning to help the country's
transition to independence.
Write to Liis Kangsepp at djnews.stockholm@dowjones.com
(END) Dow Jones Newswires
June 12, 2012 08:52 ET (12:52 GMT)
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