Simson: How Would Estonia Pay for a Worst-Case ESM Scenario?
Kadri Simson, chair of the opposition Center Party's faction in Parliament, has said that today's Supreme Court decision on the ESM treaty resolves legal issues but leaves open other questions, such as how Estonia could come up with the money were a large Eurozone country to default on its debt.
"The question is how to avoid obligations that are beyond Estonia's means. The Supreme Court also drew attention to the economic risks when it gave a parliamentary majority the right to assume financial obligations on behalf of the Estonian state," Simson said in a statement to the media.
"The Supreme Court decision stated that it limits the possibilities of Parliament to make new political choices in the future," said Simson. "A Parliament that adopts a law that results in long-term obligations for the state does not just limit its own possibilities for exercising financial capacity within a budget for a given year, it restricts the budgetary policy choices of future Parliaments."
Simson said there had been a shift away from the original vision of ESM toward one where private investors would be on board. "An investor's job is to look for projects that produce income, but the state's duty is to stand for the good of the people."
She also expressed concern about the ultimate cost of the mechanism.
"Estonia will have to pay close to 150 million euros into the ESM in real money, and it will take on the obligation - one many times bigger - to be liable for future loans taken by debtor states," she said, adding that it could not be completely ruled out that Estonia would have to pony up the money - well over 1 billion euros.
She said the Cabinet lacked the power of predicting how expensive the debt crisis could be for Estonia. "Every guarantee can turn against the surety, but to this point no answer has been found to the question of where money will be found for the worst-case scenario."
Kristopher Rikken