Dear friends,

Today we bid farewell to a leader and visionary whose life’s work has left a profound mark on the history of the Estonian state and the Estonian economy.

From a central banker’s perspective, one period stands out particularly clearly in Siim Kallas’s legacy – the monetary reform of 20 June 1992.

It gave Estonia its own currency. In hindsight, this step may seem natural and straightforward, but for a newly re-independent country and its leaders it required a vast number of extremely complex and consequential decisions. We had no readily available examples to follow, and international advisers were more inclined to say “don’t do it”, because the risks were so great. No one knew what would happen. Yet in Estonia there was a clear understanding and sense that “the Estonian people wanted to have their own currency, that currency had to be ‘hard money’, and it was needed as quickly as possible”, to quote Siim Kallas.

As Governor of Eesti Pank, Kallas took decisive leadership of this process, inspiring colleagues and those around him with his passion, courage and determination to accomplish great things: to secure Estonia’s freedom and independence.

And Estonia did get hard money. This was ensured by the kroon’s fixed peg to the German mark and by a monetary system based on the currency board principle. Amid economic chaos, this gave the young state something immensely valuable – predictability. People and businesses could be confident that there were clear rules for preserving the value of money and that those rules would be observed. Stability began to emerge, along with the confidence to invest and build for the future.

“A strong national currency was like a pole in a blizzard – it stood firm and gave you something to hold on to,” Siim Kallas recalled when, a few years ago at Eesti Pank, we marked the thirtieth anniversary of the monetary reform.

The choices made at the time also established the principles on which Estonia’s subsequent economic policy would come to rest. Because the kroon’s exchange rate could not be changed and the central bank could not support the economy or the government by creating money, the economy itself had to adjust. Companies had to become more productive, prices and wages had to develop in line with market conditions, and the state had to align its spending with the resources available to it. A balanced budget was therefore treated as an inviolable principle. This helped foster a cautious attitude towards debt, fiscal discipline, and an understanding that, over the longer term, we can primarily spend what we ourselves are capable of earning.

Sound money and sound public finances were two sides of the same coin.

The monetary reform also shaped Estonia’s credibility beyond our borders. Once it became clear that the kroon was stable and that Estonia was abiding by the rules it had set for itself, attitudes towards Estonia changed as well. That credibility became a cornerstone of the foundation on which Estonia’s further integration into the European Union and NATO was built. The constraints and sense of responsibility learned during the currency board years also prepared the Estonian economy for joining the euro area. The currency changed, but not the principle that credible money requires credible economic policy.

Siim Kallas continued to stand by these principles decades later and warned against living carelessly on borrowed money. “Borrowed bread and a fire of wood shavings – neither lasts long,” he would say, quoting an Estonian proverb. Every loan must eventually be repaid. What concerned him most, however, was a change in mindset – whether we still believe that we must create our own prosperity and opportunities first and foremost, or whether we expect someone else to solve our problems for us.

The Estonian kroon has now been replaced by the euro, and Eesti Pank is part of the Eurosystem. But the questions that had to be answered in the early years of restoring the Estonian state have not disappeared: how to create confidence and trust in uncertain times, how to preserve the value of money, how to make decisions with a long-term perspective, and how to take responsibility for those decisions. Siim Kallas’s legacy is therefore not merely a chapter in Estonia’s economic history. It lives on in the understanding that credibility must be earned and that rules must be upheld – even when doing so is difficult.

Rest in peace, Siim Kallas. My deepest condolences to his family and loved ones.