19/10/2005 1:14:09 pm
The Race To the Top. In the latest edition of The Economist, there is an interesting comparison between Estonia and Slovenia. Estonia did radical reform - with substantial reduction of the size of the state - early and Slovenia has taken smaller steps. Estonia started from a much lower level, though, with its society severely damaged by the Soviet centraly planned economy. But Slovenia, as part of Yugoslavia, always hade a big foreign trade and was closer to the West. But now, Estonia has enjoyed an enormous economic growth - in the last quarter it was 9,9 per cent on an annual basis. Highest in Europe and on a Chinese level at least! Slovenia has a high growth, about 4 per cent, but lower. The new Prime Minister of Slovenia wants radical reform too, inspired by, for example, Estonia. He speaks of a flat tax at 24 per cent as one part of such a package. Thus, not only Western Europe is challenged by the European tigers to reform and compete - but also within that gruop there is competition. Similarly, the Czech Republic will reduce their corporate tax to be able to compete with Slovakia. The race to the top has just begun.