The financial crisis has significantly impacted pension systems in the countries of Europe and Central Asia (ECA) and many of the governments have been tempted to make policy changes in response to the increased pension deficits, says ‘Pensions in Crisis,’ a World Bank Regional reportreleased today. But despite the severity of the crisis, it pales in comparison to the demographic crisis which the region will face, and World Bank experts urge countries in the region not to make any policy changes focused on addressing short-term fiscal concerns that make the long-term even worse.

The new report analyzes the impact of the financial crisis on pension systems of ECA countries, reviews the initial policy responses by individual governments, and provides recommendations on how to strengthen pension systems in the region both in the short- and long-term. World Bank experts concluded that though pension systems in ECA come in all shapes and sizes, no pension system, however well structured, proved immune to the crisis.

“The financial crisis affects each component of a pension system differently, and while magnitude and timing may be different, each component is adversely affected,” said Anita Schwarz, main author of the Report and the World Bank Lead Economist in the Europe and Central Asia Region. “Sharp falls in output and reduction of the overall tax base reduced public funds available for pension systems, while at the same time growing unemployment, drops in wages, and depreciation of financial assets negatively affected systems financed by worker and employer contributions.”

The new study finds that ECA countries, once hit with a sudden shock to the fiscal balances of their pension systems, started considering and implementing policy changes that both increase resources and cut expenditures. The report warns policymakers that actions which generate short-term benefits may involve additional costs in the future. According to one simulation, even the most severe scenario of the financial crisis pales in comparison with the effects of the demographic crisis that is looming in the region.

“It is alarming to look at what the Europe and Central Asian countries are soon to face as the region continues to age,” said Schwarz.
“Future pension system deficits can be threefold than what is currently expected, and are expected to remain at that level for more than 20 years before slightly improving. Policymakers need to use the opportunity of the current crisis to address long-term issues, which could bankrupt pension systems precisely when the numbers of people who need them are growing.”

Given the diversity of ECA countries, there is no one blueprint for reforms. Broadly, the report recommends – depending on the country – a combination of measures, including moving to inflation indexation of pensions after retirement, increasing the retirement age and equalizing the retirement age of men and women, and reducing early retirement.
In addition, it suggests provision of better insurance against the volatility of financial markets, and calls for the acceleration of regulatory and supervisory reforms that will allow pension funds to earn better rates of return along with further development of capital markets. Finally, it urges governments to promote awareness among their citizens that public pensions will need to be less generous than in the past if they are to be sustainable.

In Washington: 

Elena Karaban  202-473-9277
Ekaraban @ worldbank.org
Michael Jones  202-473-2588
Mjones2 @ worldbank.org

There was 9.6 billion kroons of cash in circulation in Estonia at the end of November 2009, by 20% less than at the same time last year, Postimees Online/LETA reports.

The amount was smaller than that at the end of August 2005 latest, Bank of Estonia data indicate.

People use account money more actively and conduct more electronic payments, explained Ingrid Mitt from Bank of Estonia PR bureau. Economic fall may also have affected the amount of cash in circulation.

Account money totaled 24.6 bln kroons at the end of November, 2% more than a year ago.

Bank of Estonia balance volume was 43.3 bln kroons at the end of November or 7% more than a month before. The central bank’s gold and net foreign currency reserves grew in November by 8% to 40.4 bln kroons.

Juhan Tere

Estonian state institutions are already preparing for transition to the euro because if Estonia manages to join the euro area in 2011, systems have to be ready six months in advance, National Broadcasting/LETA reports.

"The accounting systems of all institutions handling money and other much more specific systems have been counted by now and changing them has been started or is about to start,” said finance ministry administrative policy deputy chancellor Marek Helm in ETV’s morning programme.

“All institutions and organisations have to achieve physical readiness by July 1, 2010. All have to report a half a year in advance that they are physically capable of starting to use the euro,” said Helm.

He noted that for more critical systems it is a one-time, very strong and serious effort and thus, it has been prescribed that for example changing the Social Insurance Board and Tax and Customs Board information systems will be supported with EU funds.

Helm was unable to say how much changing all information systems would cost since not all state procurement contests have been held.

On Tuesday, an expert committee will convene at the finance ministry to review the state of preparations.

Juhan Tere

Estonian ships in 2008 started the large-scale shrimp fishing in the Barents Sea, and the volume of catch has been growing in 2009 in the catch area where no quota in terms of amounts have been set, BBN/LETA reported. Estonian ships were fishing shrimp in two areas in the Barents Sea. One of the areas was the Spitsbergen fishery protection area where Estonia can fish shrimp to the extent of 377 catch days.

The other area is in the sphere of administration of the North-East Atlantic Fishery Commission, and no limits have been set there in terms of the amount caught.

"The catch must only take place in accordance with the NEAFC regulations and the attractiveness of the area has been increasing among our fishermen," said Kaire Martin, the chief specialist at the Environment Ministry fishery resources department.

In the NEAFC administration area, Estonian fishermen caught 1,473 tons of shrimp last year; this November the size of the catch was 4,800 tons. Where are they ?

In the Northwest Atlantic the catch quota was 11,200 tons last year, but this year the amount has contracted to 3,000 tons as of November.

All the countries that belong to the North-East Atlantic Fishery Committee can catch shrimps without any limitations by volume. These countries are the European Union, Norway, Iceland, Russia, the Faeroe Islands, and Greenland.

According to the information available to the Environment Ministry, only Estonian and Norwegian fishing vessels have been catching shrimp without any limitations by amount in the area.

Juhan Tere

Eugene Eteris

The UN Climate Change Conference kicked off on Monday, 7 December, with a strong sense of confidence that countries can seal a comprehensive, ambitious and effective international climate change deal in Demark and with an unprecedented sense of urgency to act on climate change. And important initiative followed…

The two-week meeting, the fifteenth Conference of the 193 Parties to the United Nations Framework Convention on Climate Change (UNFCCC) and the fifth meeting of the 189 Parties to the Kyoto Protocol, is the culmination of a process set in motion in Bali, where Parties to the UNFCCC agreed to conclude negotiations on a new global deal in Denmark in 2009 (see our report from COP-15, 6 December 2009 in the BC).

According to speakers at the opening ceremony, the highly anticipated conference marks an historic turning point on how the world confronts climate change, an issue with profound implications for the health and prosperity of all people. Danish Prime Minister, Lars Løkke Rasmussen announced that 110 heads of state and government would attend the closing part of the conference and in making its final concluding document.

The Danish PM acknowledged that the climate changes transcend state borders: these changes do not discriminate, they affects us all, he said. “And we are here today because we are all committed to take action. That is our common point of departure – the magnitude of the challenge before us is to translate this political will into a strong political approach,” he concluded.

The urgency to act was underlined by another speaker, Dr. Rajendra Pachauri, Chair of the UN Intergovernmental Panel on Climate Change (and director of a couple of environmental institutions), who told the conference that global emissions would need to peak by 2015 for the world to stay below a two degrees Celsius temperature rise.  “The costs of responding to climate change will become progressively higher as time goes on, therefore we must take action now,” he said.

The newly elected COP-15 President and Danish environment and climate Minister, Ms. Connie Hedegaard was worried about the fact that “the world has reached the deadline and there is no going back”; Copenhagen will be the city of the three C’s: Cooperation, Commitment and Consensus”. Now is the time to capture the moment and conclude a truly ambitious global deal. This is our chance. If we miss this opportunity, we will not get a better one,” she concluded.

UNFCCC Executive Secretary Yvo de Boer said there was unprecedented political momentum for a deal; world leaders are gathering in Denmark ready to make an agreement that offers serious emission limitations and providing significant financial and technological support to developing countries. “At the same time, he said, COP-15 will only be a success if it delivers significant and immediate action that begins the day the conference ends”.

According to the UN’s top climate official, negotiators must focus on solid and practical proposals that will unleash prompt action on mitigation, adaptation, finance, technology, reducing emissions from deforestation in developing countries and capacity-building.

Yvo de Boer spoke of three layers of action that governments must agree to by the end of the conference: fast and effective implementation of immediate action on climate change; ambitious commitments to cut and limit emissions, including start-up funding and a long-term funding commitment; and a long-term shared vision on a low-emissions future for all.

According to the Intergovernmental Panel on Climate Change, an aggregate emission reduction by industrialised countries of between minus 25% and 40% over 1990 levels would be required by 2020 in order to eliminate the worst effects of climate change, with global emissions falling by at least 50% by 2050. Even under this scenario, there would be only a 50% chance of
avoiding the most catastrophic consequences.

Eight days before the final decision

The UNFCCC working groups starting Monday will have six days to conclude negotiations before the Ministerial High Level Segment starts 16 December. Ministers will then in turn have two days to take any unresolved issues forward before the more than 100 world leaders arrive the evening of 17 December. This means a total of eight negotiating days to prepare a workable package that consists of both immediate and long-term components, which leaders can endorse on 18 December.

An important initiative

The European Union has shown again its leadership in tackling climate change with the European Commission announcement that the number of signatories to the Covenant of Mayors on sustainable energy has reached 1000. The German city of Rostock became the 1000^th  signatory and is now fully committed to going beyond the EU 20% reduction target for CO 2 emissions, the Commission announced in COP-15.

This milestone marks ten months of exceptional growth for the Covenant of Mayors’ initiative, as the number of local authorities participating has almost trebled since the first signing ceremony in February 2009.

“It is in the cities and municipalities that daily life is organised on a local democratic basis, said Karina Jens, President of the Rostock City Council. We understand the sustainable use of natural resources includes the management of forests and green spaces in the city as well as the efforts deployed in all the fields of environment protection and the greater use of renewable energies”.

Rostock lies on the Baltic Sea coast and with a population of 200,000 is a university city and the largest city in the north German state of Mecklenburg-Western Pomerania. Since 2006, the city has systematically applied a framework concept of climate protection that has already reduced CO 2 emissions from 7.5 tones/capita per year in 1990 to 4.1 tones today. The average figure for Germany is now at 10tonnes/capita and for the EU-27 at 9 tones/capita. The city’s long-term goal is a reduction to 2 tones/capita.

Key actions include:

- Targeting a completely fossil-free energy supply with energy supplied from the region;
- Extending use of combined heat and power (CHP) for district heating through a system that already covers 70% of the households;
- Doubling of the tram network from 21 to 38km over the past decade, ensuring 80% of the population is within 300m of services;
- Improving the bicycle friendliness of the city; and
- Encouraging sustainability in the 6000ha of Forest Stewardship Council (FSC) certified forest within the city boundaries – the largest single wooded area along the Baltic coast.

According to Statistics Estonia, in the 3rd quarter of 2009, the net sales, total costs and total profit of the business sector decreased compared to the previous quarter as well as to the same quarter of the previous year.

According to the seasonally adjusted data, the net sales of enterprises decreased 9% in the 3rd quarter of 2009 compared to the 2nd quarter. If in the first half of the previous year the fall remained within 1–3% each quarter compared to the previous quarter, then starting from the 3rd quarter of the previous year the decrease has dropped to 7–9% already.

In the 3rd quarter of 2009, enterprises sold goods and services for 126 billion kroons at current prices, i.e. for a fourth less than a year ago. Although the net sales of construction and education enterprises decreased the most, the decrease in the sales of the total business sector was mainly influenced by the wholesale and retail trade and manufacturing enterprises due to a bigger share of these economic activities in gross net sales.

The total profit of enterprises amounted to 4.3 billion kroons in the 3rd quarter, which was by 63% smaller compared to the same quarter of the previous year and about a fifth smaller than in the 2nd quarter of 2009. Compared to the 3rd quarter of the previous year, the total profit decreased the most in transport, construction and wholesale and retail trade. Agriculture, forestry, education and repair of computers and personal and household goods were running at a loss.

Compared to the 3rd quarter of the previous year the enterprises’ total costs decreased 23%, whereas personnel expenses 19%.

In the 3rd quarter, enterprises invested 6.3 billion kroons, which is a fourth less than in the 3rd quarter of 2008, but about 7% more than in the 2nd quarter of 2009. Investments were mainly made in the construction and alteration of buildings and in other equipment and machinery. The major investors were manufacturing, energy and transportation and storage enterprises with more than a half of the total investments of enterprises. Compared to the 2nd quarter, the investments of manufacturing enterprises increased more than half a billion kroons or 74%.

According to Statistics Estonia, the consumer price index decreased 2.1% in November 2009 compared to November of the previous year, and 0.2% compared to October of the current year.

Goods were 2.2% and services 1.8% cheaper compared to November of the previous year. Food products were 5.0% cheaper and manufactured goods were 0.3% more expensive.

Regulated prices of goods and services have risen by 2.0% and non-regulated prices fallen by 3.3% compared to November of the previous year.

Compared to November of the previous year, the consumer price index was mainly influenced by the price decrease of food by 7.1%, of which dairy products accounted for two fifths (price decrease 14.7%) and fresh vegetables and fruits for over a third. Heat energy was 15.3% cheaper and motor fuel 7.5% more expensive compared to the same time of the previous year.

In November compared to October, the consumer price index was mainly influenced by some reduction in the prices of various goods and services related to recreation and culture and by a rise in the prices of motor fuel. The prices of airline tickets decreased the most (8.6%) and the price of butter increased the most (5.8%) compared to the previous month.

Father Christmas has abandoned his traditional birch whip in Estonia after a conference of holiday performers decided it was too frightening for children.

Estonia's Father Christmas has traditionally carried a bunch of twigs to keep naughty children in line - although the weapon remained an unused threat. He would remind children that they would not receive presents if they misbehaved.

But at the Baltic nation's annual Father Christmas congress, delegates decided to do away with the whip.

"Good children must grow up without the whip - or the fear of the whip - so we've called upon all Santas to leave them at home from now on," one Father Christmas attending the conference told Estonian television.

But other traditions proved more difficult to update, the Santa noted.

"On delegate asked for the freedom to choose the colour of Santa's coat, saying he feels allergic to red and wants to wear a yellow coat instead, but that request was turned down by the congress," he said.

Singing sensation Hannah - full name Hannah Ild - stopped off at Crosshall Junior School in Eaton Ford as part of a series of visits she is currently making to schools across the country.

The 28-year-old, from Estonian capital Tallinn, is hoping to make her name in the UK after ruling the charts in her homeland for the past decade.

The songstress, who now lives in London, has also teamed up with the Estonian Embassy to promote Estonian culture. Tallinn has been made the European Culture Capital for 2011.

Hannah performed four songs to the children, spoke about Estonia and encouraged them to look after the planet.

She said: "The school was absolutely lovely. All together there were about 480 kids and they were amazing."

Hannah said the youngsters gave her a very warm welcome - and she gave the school a book about Estonia.

Movie directed by Yaron Shani and Scandar Copti wins first place at Black Nights Film Festival.

The renowned film "Ajami" tucked another accomplishment under its belt. The debut film of Yaron Shani and Scandar Copti on Friday was awarded the 10,000 euro (about $14,850) first prize in the EurAsia category of the international Black Nights Film Festival held for the 13th year in Tallinn, Estonia.

Ajami beat out 20 other films contending in the competition, including a number of films with which the Israeli picture will face off for the Oscar for Best Foreign Language Film.

The judge's pick for Best Director went to Klaus Haro for his film "Letters to Father Jacob," the Finnish Oscar contender.

"Ajami" won the Ofir Prize for Best Film and is the Israeli submission in the Oscar's Best Foreign Language Film category. The film was first debuted at the Cannes Film Festival, where it won Camera d'Or. From there, the film moved on to win the Best Full-Length Feature in the international Jerusalem Film Festival. Some two weeks ago, Copti and Shani's film won first prize at the Thessaloniki Film Festival.

By Mike Haggerty

INTERNATIONAL Championship curling returns to Scotland today when the Le Gruyere European Curling Championships get underway in Aberdeen.

This is the largest championship event on the international calendar, with 51 teams from 30 nations competing in two venues, the Linx Ice Arena and Curl Aberdeen facility. It is the first major competition to be held in the home of the sport since the 2005 Women's World Championship.

As well as being current world champion, Scotland's David Murdoch is also European champion and he starts his defence of a title he has won in the last two years, and three times overall, this morning against Sweden's Niklas Edin. Murdoch and his team – third Ewan MacDonald, second Pete Smith, lead Euan Byers and alternate Graeme Connal – then return to the ice this afternoon to face Thomas Dufour of France.

Among Murdoch's other "A" division rivals are Norway's Thomas Ulsrud, losing finalist in the last two European championships, and Denmark, France, Germany, Sweden and Switzerland, Czech Republic, Finland and Italy.

A further 20 men's teams are involved in the "B" division, which has been divided into two further sections. One of these sees Bulgaria, England, Estonia, Greece, Lithuania, the Netherlands, Poland, Russia, Serbia and Spain compete. The other involves Austria, Belarus, Belgium, Croatia, Hungary, Iceland, Ireland, Latvia, Slovakia and Wales.

The Scottish women are led by 19-year-old Eve Muirhead from Atholl, the current and three-times world junior champion. The rest of the team is former world champion Jackie Lockhart at third, second Kelly Wood, lead Lorna Vevers and alternate Karen Addison. They also have two round-robin games today – against Italy's Giorgia Apollonio and then England's Kirsty Balfour. The other teams in the women's "A" division are Switzerland, Sweden, Denmark, Germany, Russia, Finland and Norway.

The women's "B" teams are divided into two further groups, one of six teams – Croatia, Latvia, the Netherlands, Poland, Slovakia and Wales – and the other of five – Austria, the Czech Republic, Estonia, Hungary and Spain.

Both of the Scottish teams make up the British Olympic training squad, and, barring unforeseen circumstances, both will be Vancouver-bound in February for the Winter Olympic Games.

While Murdoch and his men are a tried and tested – and feared – outfit, the women's squad is relatively new. Although they have done well in open competitions this season – they won a top-class event in Switzerland last weekend – this will be their first outing together in a championship environment. They will face tough competition throughout the week, particularly in the form of defending European Champion Mirjam Ott from Switzerland and reigning Olympic champion Anette Norberg from Sweden.

Round-robin play goes on till Thursday morning, with the finals being staged next Saturday.

The European Championships double as the European qualifying event for the World Curling Championships. This year, the top seven men's teams from this event, as well as hosts Italy, will take part in the championships in Cortina d'Ampezzo in April, while the top-finishing eight women's teams go onto Swift Current in Canada.

Good performances in the "B" division will bring promotion to next year's "A" division, with the top two "B" finishers swapping places for next year's championships with the last two "A" finishers. In addition, for the overall "B" winners in both men's and women's events, there is the added incentive of a best-of-three World Challenge event against the last qualifiers from the "A" group – a potential doorway into this season's World Championships.

This Saturday, we will mark the first anniversary of the death of Patriarch Aleksei Rediger of Moscow and all the Russias. On 4 December, the feast of the Presentation of the Virgin in the Temple, Patriarch Kirill served a Pannikhida at the tomb of the late First Hierarch at the Epiphany Cathedral in Moscow.

This is a memorial service, usually performed on Friday evenings, on the eve of Ancestors’ Saturdays, or on days that the whole Church commemorates the reposed in general. On the morning of 5 December, Patriarch Kirill will return to the same church to celebrate the liturgy, then, he will serve a Pannikhida at the grave of Patriarch Aleksei in the right side of the cathedral.

On this day, all Orthodox churches and monasteries will serve memorial liturgies for the repose of the soul of the late Patriarch Aleksei. Many parishes will hold commemorative events and exhibitions devoted to the departed patriarch.

The clergy and the faithful will remember Patriarch Aleksei, the First Hierarch of the Moscow Patriarchate during the most recent period in Russian history, a time that saw the revival of church life in the Motherland.

Today, the Museum of the Cathedral of Christ the Saviour opened a new exhibition about the life and ministry of the reposed First Hierarch. It will present his personal belongings, and, on Saturday, viewers of TV Pervy Kanal (First Channel) will see the documentary Путь патриарха (Put Patriarkha: The Path of the Patriarch), dedicated to the memory of Patriarch Aleksei. In the film, figures such as Metropolitan Amfilohije Radović of Montenegro and Primorsky, the Patriarchal Locum Tenens of the Serbian Orthodox Church, and Patriarch Aleksei’s assistant, Nikolai Derzhavin, and TV presenter Aleksei Svetozarsky, who did holiday broadcasts from the Cathedral of Christ the Saviour, shall give their recollections of the late First Hierarch.

The memories of the personal chauffeur of the patriarch occupy a special place in the programme; they are the reminisces of a man who for years was close to His Holiness and to Metropolitan Kornely Yakobs of Tallinn and All Estonia. The chauffeur knew Patriarch Aleksei for many years, starting when the driver was a boy.

Patriarch Aleksei II (his secular name was Aleksei Mikhailovich Rediger) was born in 1929 in Tallinn in Estonia, and served the Church since his early childhood. After graduating from the Leningrad Theological Academy, the future patriarch served in various churches in Estonia. In 1961, he was consecrated Bishop of Tallinn and Estonia, and, in the same year, became deputy chairman of the Department for External Church Relations, and, three years later, Chancellor of the Moscow Patriarchate.

Prior to his election as patriarch by the Local Council of the MP in 1990, Archbishop Aleksei (later, a Metropolitan) headed the Education Committee of the Russian Church, was part of the Synodal Commission on Christian Unity and Inter-Church Relations, and was on the Commission on the preparation and holding of the celebration of the Millennium of the Baptism of Russia. In 1986, he became Metropolitan of Leningrad and Novgorod, and he retained control of the Diocese of Tallinn concurrently.

A revival in the Church unprecedented in scope and pace on the canonical territory of the MP took place in the patriarchate of Aleksei II. To cite only one example, the Church was able to restore about 20,000 churches.

At the same time, the Church greatly increased its role in society. Aleksei II was at the forefront of many peace initiatives, and he shall go down in history as “Aleksei the Unifier”, for his efforts were crucial in overcoming the split between the ROCOR and MP in 2007. Patriarch Aleksei died on 5 December 2008, a little more than two months before his 80^th birthday.

Coca-Cola is closing its Tallinn plant and will lay off tens of people. Well, as mentioned several months ago, time has come and it is "Good-bye" to another, this time: Coca-Cola!

Postimees reported that Coca-Cola HBC, the Coca-Cola bottler in Estonia, plans to transfer production of drinks into plastic PET bottles from Tallinn to Lithuania and the production of drinks in glass bottles from Tallinn to Poland. According to the paper, 66 people would be made redundant on April 1.

The company plans to build a new plant in Latvia. "In the meantime,  production of PET bottles will be transferred to our Lithuanian plant in Alytus and production of glass bottles to Poland," said Piret Jaaks from Coca-Cola HBC.

Jaaks said that the company has found suitable vacant land in Ropaži in Latvia and plans to purchase it in the near future.

Tallinn plant was opened in 1992.

Toomas Hõbemägi

TALLINN — Tallinn Mayor Edgar Savisaar started a tax war Wednesday between the capital city and the Estonian government, saying the municipality would scuttle a 1 percent sales tax hike if the state will reduce the income tax by 2 percent.

On Tuesday the Tallinn municipal government proposed establishing a 1 percent sales tax and boat tax to revive of city’s declining revenues, but received negative reactions from the Estonian Taxpayers Union and the national government. Savisaar then agreed to forgo the tax hike on the condition that the state will lower the income tax back to 18 percent, as it initially was before the crisis.

The national government isn’t amused. In an interview with Äripäev published Thursday Minister of Finance Jürgen Ligi said that bargaining with taxes is revenge toward the government and Savisaar’s “we increase our deficit if you increase yours” attitude lacks financial logic. Ligi calls the Tallinn 2010 budget draft one big mess, as it’s not reasonable to consider a loan a source of income.

Ligi told Äripäev that according to law it is not possible for Tallinn to take a loan, as the city has crossed the 60 percent debt limit. The mayor’s statement calling the sales tax as a “luxury tax” provoked Ligi to say it’s a “luxury tax” because it pays for the city’s luxurious lifestyle as the salaries of public officials remain the same and no jobs are cut.

Annika Vilu, a finance ministry spokeswoman told Baltic Reports that the ministry does not consider taxes are a subject of bargaining, therefore the ministry will not negotiate with the Tallinn municipality on the issue.