Siim Kallas: Estonian economy needs up to €9 billion to survive crisis

Siim Kallas.
Siim Kallas. Source: Ken Mürk/ERR

The Estonian economy will need up to €9 billion to survive the crisis caused by the novel coronavirus, Second Vice-President of the Riigikogu Siim Kallas (Reform) said in an article published by daily Postimees.

The former prime minister and former vice-president of the European Commission said that the estimated €9 billion would be necessary over a period of one year, provided that the crisis lasts one year.

"The setback will apparently be big, of course depending on how long the virus will keep us in its grip," Kallas said. "But during this time, we must not let business die."

State support must help businesses survive, he added.

"On the basis of an estimate that definitely isn't very scientific, but based somewhat on what has happened in other countries, I believe that the economy will need about €9 billion a year to survive this crisis," Kallas said, noting that it would likely be less, but better to reckon with the maximum.

"Businesses have been helped in different ways," he continued. "One possibility is that the state will put money in companies' equity, acquiring shares and thereby financing the survival of businesses. When times change, the shares will be sold. This is largely the American model, and it has worked surprisingly well."

The U.S. government got back money it invested in business during the 2008-2012 crisis rather quickly, he highlighted, explaining that this is also one of the most acceptable options for taxpayers.

"The second option to support businesses is all sorts of loans and facilitations of credit, of course" Kallas continued. "Third, you may offer tax breaks. Fourth, the state may provide state aid directly to businesses as well. But that is risky, as practice has shown that such subsidies will see all manner of scammers flock together who are extremely well-versed in tricking the state out of subsidy funds."

€9 billion is of course a lot of money, he admitted. "It'll be that much when the crisis lasts a whole year," he noted. "But it is possible to get it together. To cut something, use reserves, and borrow as well."


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Editor: Aili Vahtla

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