Estonian Travel Guide - travel & tourism in Estonia

In the north-east part of Europe, way up where the Baltic Sea meets the Gulf of Finland is a little country slowly gaining a reputation for being a good place to live: Estonia. Over the last few years the former Soviet bloc country of 1.34 million residents has embarked on an ambitious financial reform program which has drastically reduced public debt, stabilized the economy, and prepared Estonia to join the Euro in January 2011. The financial reform has been so successful, government authorities claim the country has enough cash reserves to eliminate the national debt and still have some left over.

One of the results of Estonia's reform is a wide open market for foreign investors, including those from the U.K. Companies like AstraZeneca, GlaxoSmithKline, Scottish & Newcastle Brewery, and Shell are already doing a good business there and showing the way for a host of others. With the increased U.K. business presence also comes an increase in the number of expatriates, or expats for short, from the British Isles. Economic incentives, combined with the promise of new adventure, are bringing U.K. citizens to Estonia in modest numbers. But even with all the potential positives from such a move there are still a few negatives that expats are seemingly not prepared for. One of those is personal debt.

With an unemployment rate near 20%, Estonians are naturally protective of the jobs they do have and wary of outsiders coming in to work. Labour costs have been kept relatively low which may add to the difficulty. The U.K. expat who moves to Estonia and brings with him the baggage of debt problems may quickly discover he cannot erase his debt as easily as he thought. Likewise, expats who are on good financial ground initially may end up creating financial problems if they aren't familiar with the way Estonians do business.

Like the citizens of most foreign countries, Estonians tend to be very warm and welcoming to their new U.K. residents. But business is business. U.K. expats, especially those who don't make the time and effort to learn the Estonian language and culture, will find it more difficult to establish their new life at the low cost level they read about online. While real estate prices are considerably lower than in the U.K., and the cost of living very attractive to those on fixed incomes, expats need to learn to negotiate in order to get the best value. Not that Estonians are greedy or ruthless, but like anyone else they are seeking their own economic advantage first. Foreigners represent the opportunity for increased financial gain for the Estonian businessman.

Another financial concern is one of taxation. Estonia is similar to just about every country in that it collects resident taxes from expats who establish permanent residency or who live in the country for more than 183 days annually. If an expat works for an Estonian company, or a foreign company which pays employees directly through an Estonian vehicle, his income will be taxed regardless of residency status or length of time in the country. The risk of double taxation could hamper an expat's plans to erase personal debt, so the wise will consult an international tax expert as part of his preparations to move.

One the positive side, the U.K. has a reciprocal agreement with Estonia when it comes to pension payouts. This means that retirees whose U.K. pensions would normally be indexed to inflation had they remained in their native land, will not lose that benefit should they choose Estonia as their retirement home. While there may be tax issues to deal with, the expat at least will be able to count on his pension being indexed at the same rate as his counterparts who remain in the U.K.

Two of the biggest concerns regarding debt issues for U.K. expats in Estonia revolve around the country's financial future. Where real estate is concerned, some experts believe the market is on the verge of a price explosion while others think any increase in property values, if they come at all, will be gradual. Expats with a taste for real estate ventures can be tempted to invest a lot of money while prices are low, hoping to cash in when they increase. However, if that increase doesn't come or it bubbles and bursts, property owners could be in worse shape than when they started.

The other major concern is the introduction of the Euro next year. Estonia had previously petitioned to adopt the currency in 2007 but inflation problems thwarted those plans. Now that she's ready to take the plunge, the hope of increased markets and a more friendly European business climate is being tempered by the realisation that the Euro is not as stable and desirable as it once was. The financial crisis in Greece, along with the sluggish economies of other Euro members like Spain and Ireland, is casting a potentially dark cloud on Estonia's horizon.

While Estonia's current economic conditions are still quite favourable to foreigners settling there, one of the unintended consequences of the economic boom experienced during the last several years is a dramatic increase in household debt. In fact, according to some government estimates, household debt for both the native and expat has never been higher in relation to individual income and GDP. What this means for the expat with debt problems is a worsening condition if the changeover to the Euro causes higher interest rates or even a slight jump in inflation. Either of those scenarios would almost certainly cause a fall in property values which in turn, could make debt issues even harder to deal with.

For U.K. expats in Estonia, or those looking at the future potential of this inviting destination, the reality remains that debt issues are a problem anywhere you go. Taking a large amount of personal debt with you when you move is only going to make things more difficult than they need to be. For those who make a move without personal debt issues, acquiring large amounts of debt in a foreign country is rife with other unforeseen issues indigenous to that country.

So what's the solution?

Get out of debt and stay out of debt if you have difficulties then look for a debt management plan. Whether you've chosen Estonia or another country to relocate to, you'll then be free to enjoy all that your new home has to offer without a heavy financial chain.