Non-Coalition Parties Maintain Opposition to Ratification of ESM (9)

Published: 08.08.2012 16:57

The Centre Party faction reviewed the ESM bill in Parliament today.
( Photo: ERR )

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The two opposition parties in Parliament maintained that there were fundamental problems with the ratification bill of the Treaty Establishing the European Stability Mechanism, which passed the first reading today.

MPs for the Centre Party proposed the legislation be rejected, and divided into two parts, one being the ratification itself and the other being the treaty's domestic implementation.  

Voicing general objections to the treaty, which was deemed constitutional by a narrow majority of the Supreme Court justices in July, MP Jüri Ratas said that ESM should not be rushed.

"In a situation where Estonia's government debt is only 6.6 percent - but our child allowance is 19 euros a month, the average old-age pension is 318 euros per month and one-fifth of the population is living below the poverty line - it is understandable that many people in Estonia take a critical attitude toward lending to more affluent countries," Ratas said in remarks in Parliament.

According to his interpretation, the Supreme Court found that the referendum on joining the EU could only go so far and the people had not consented to delegating additional national powers to the EU.

Ratas noted that many countries in the EU were, essentially, slouches when it came to public finances, and emphasized that the Maastricht criteria could not just be one-time conditions upon joining the EU. "All member states must proceed from them daily," Ratas said.

For the Social Democrats, MPs argued that the draft law was unconstitutional as is, and that unless it were amended the party could not vote for it.

Rannar Vassiljev, deputy chairman of the Finance Committee, said that the bill was "steeped" with a position Vassiljev attributed to the finance minister, Jürgen Ligi: that ESM matters were a rarefied preserve not up for public debate.

"This has resulted in as many legal acts as possible being brought to the level of the European Affairs Committee instead of plenary session, which is in conflict with constitutional parliamentary rules of order and procedure," he said in a statement to the media.

The draft legislation, he said, empowers the Cabinet to decide selectively what should be sent to committee or to the general session. Nor is the Cabinet obliged to consider the position of either instance, according to Vassiljev.

The Social Democrats say that a host of amendments to the draft legislation is forthcoming.

The second reading will take place on August 30.

The ESM is funded to 700 billion euros, with Estonia's contribution totaling 1.3 billion. If the treaty is passed, Estonia would be obliged to pay 149 million euros into the fund and guarantee another 1.15 billion euros in loans.

 

Kristopher Rikken

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Comments (9)

  • Jacob Colley

    09.08.2012 00:39

    I'm English and have been to Estonia on a few occasions to see my partner. When she told me of the possible ratification of this bill I was horrified. True Estonia has a small government debt, but the focus and responsible use of increasing that government debt has to be, and remain, the economic progression and modernisation of the republic as a whole. There seems to be a new trend in Estonia toward "more Europe" whatever the cost may be, the cost to your politicians on this occasion may well be the blind following of failing European policies. One point i would like to make is: - The failure of the European parliament and commission to understand the underlying problem. This is a market driven crisis, but it is the market that is to blame. For example, a hedge fund would not consider buying government bonds of a failing state, this is clear enough. Now consider whether or not a hedge fund would lend to a failing state that has access to the EFSM or ESM? I believe they would, but, at a higher interest rate. Assuming this is correct, interest rates continue to rise, more money is needed from the ESM/EFSM and a cycle takes root. The only people who benefit from bailouts are the large scale bond market investors. One way to resolve this crisis is to let failing countries fail. A strong economy is not created by feeding a weak one money to waste. The Estonian economy is strong and dynamic, don't let it fall prey to the shackles of other, larger overspending EU economies and a painfully inappropriate "More Europe" ideology. Thank you for taking the time to read this. Jacob D Colley

  • avatar

    knut_albers

    09.08.2012 08:58

    I'd be better careful about the motivations of the Center Party, but Ratas assertion is sthraightforward right, because Estonia is the poorest country among the Eurozone with a hug gap in wealth, even compared to troubled countries in the Eurozone. Additionally, the average pensioner that is poor because of the poor economic performance during Soviet occuption. But still, this is a generational confilict also in Estonia, where the young people have to take the major burden of the crisis, not just through income and payroll taxes as I already stated earlier in the other article, but also through high youth long-term unemployment that is still well above the 20% mark. Since the invoice for the ESM mechanism is to be paid in decades from now, the burden is passed on not only to todays youth, but also to my child and to children that are born in the years to come, caused by their political grandparents today among the Eurozone and beyond. Such a policy, can be only declared as unfair and unjust, and doesn't save, nor stabilizes the future of our country at all. It rather creates generational ditches and that can't be in the best interest of anyone.

  • Pensioner

    09.08.2012 09:28

    Knut, "...the average pensioner that is poor because of the poor economic performance during Soviet occuption". This is incorrect. Estonia has a pension system based on redistribution of insurance premiums of the working polulation, not a funds system. So the pensioner is poor because the current wages in Estonia are low.

  • avatar

    knut_albers

    09.08.2012 11:46

    Pensioner, the current pensions are low because of the mismanagement of the Soviet Union that barred to allow the economy and wages to grow for half a decade. Hence, Estonia lacks behind of the West and this will still go on for a while and the more that is direclty and indirectly taxed away from the working population, the longer it takes (e.g. payroll taxes in Estonia are currently at 33% that is payed by the employer on top of the gross salary and therefore does not contribute to employees income at all). A pension system based on redistribution of insurance premiums of the working polulation for those in pension today is nothing but a generational contract, and therefore subject of discussions on generational conflicts and interests.

  • Pensioner

    09.08.2012 13:56

    Knut, you bend it as you want. So the pensions are low because of soviet union and high in the west because of? And exactly this high pensions you criticize as faulty and unjust, so I assume you are a communist :)

  • avatar

    knut_albers

    09.08.2012 15:26

    "So the pensions are low because of soviet union and high in the west because of" free minds and free markets. "And exactly this high pensions" I did not critizie, but that the young have to pay for that at cost of their own prosperity. See, in times where the money supply become tight, all have to compromise on this issue. Therefore, we should lower the tax rates that affects the young the most also, as they are ultimatley the future of a country. And I don't want to see a situation where the young are standing at the end of their lives with empty pockets, because their parents and grandparents burned down their money in the past. That's communism indeed within, keeping a certain level of lifestyle, at the cost of others future.

  • Jake D C

    09.08.2012 17:38

    knut, please do not confuse a well fair state operating within a capitalist system for communism. Your not recognising that regardless of whether or not support for the elderly takes the form of state pensions, it would still require the efforts of individual younger family members to support the elderly. The state pension is a way of fairly sharing that burden between the young, something I'm sure you would support, should you find yourself in a low paying job with a grand parent to support.

  • avatar

    knut_albers

    10.08.2012 12:19

    Jake, my statements are not about cutting down current pensions (there's also not much to cut down in Estonia, given the low avarage pension rates paid out). It is about the unfair burden arsing in the attempts of resolving the Euro crisis distributed to the young and future generations. Now, among most of the Eurozone, including Estonia, on one hand the young face the situation that they have to stock up their future pensions from their own pockest through private pension plans because their pension will be cut down. This is due to demogrpahic changes in most of Europe, though. On the other hand, they will face the additional burden of paying back the loans that are issued now and in the nearby future to resolve or ease the current Euro crisis. Allthough the young did not cause the crisis, they're are heavily loaded with additional liabilities that fairly cuts down their living standards, not those of current pensioners and the elderly souvereign implememting these policies (and future generations will really appreciate the policies that are eating up their assets in the future). That is whay I say something's got to give by lowering the income tax rates for the young that their lives are and will not be compromised too much.

  • avatar

    knut_albers

    10.08.2012 13:19

    Now you might think, hmm, why lower tax rates on incomes (and payroll taxes, I forgot to mention about) and where to take the money from that is lost through lower tax rates? Well, first off all, lowering the income tax rate and payroll tax rate means higher consumption power among employees, including the young, and on employers, simply because the employees have more money left to spend and employers have more room to increase wages. An increase of spending power means additional opportunities for the economy to grow domestically. And that's how you compensate the losses on taxes collected though incomes, by increasing the consumption spending that not only allows an increase of taxes collected through value-added taxes for compensation, but also creates new jobs that can bring down the high long-term unemployment rate among the youth and compensates the losses even further. Considering the current trend in Estonia, where surprisingly the tax receipts exceed expectations on one hand due to better than expected collection of value-added taxes, and on the other hand the year-on-year growth of 30.3% of income tax on dividends, this makes perfeclty sense. And off the record, isn't it unjust that the tax rate in Estonia on employees is around 40%, meanwhile (mostly) the elderly equity holders just pay around 27% on their dividends as the current tax receipts cleraly show that less means more.