Government launches €2 billion economic support package

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Prime Minister Jüri Ratas.
Prime Minister Jüri Ratas. Source: Priit Mürk/ERR

The government decided on Thursday to launch a €2 billion package of measures to boost the economy and mitigate the effects of the crisis caused by the coronavirus, Prime Minister Jüri Ratas (Center) said.

"The members of the government gave their approval to a package of measures of €2 billion, which represents nearly 7 percent of GDP. The aim of the measures is to mitigate the most difficult initial stage of the crisis in order to support and protect Estonian working people and businesses," said Ratas. "The State will do everything in its power to ensure the functioning of the Estonian economy in exceptional circumstances."

State funds will be used to support businesses through KredEx (link in English) and the Rural Development Foundation. The package also includes support for the Estonian Unemployment Insurance Fund's labor market support (Töötukassa), sickness and tax benefits.

The package will allow tax debt to be postponed for 18 months, there will be a temporary suspension of the second pillar pension contributions, as well as partial compensation for the direct costs of canceled events.

From March to May, the State will reimburse employees for the first three days of sick leave for all certificates of incapacity for work. 

KredEx Foundation measures:

(As published by the government)

Loan collateral amounting to €1 billion for bank loans already issued in order to allow for repayment schedule adjustments (maximum €600 million for the surety collection), under the following conditions:

  1. If the bank relaxes the repayment schedule of the existing bank loan which has not been secured by KredEx Foundation, then KredEx Foundation will secure the loan;
  2. The maximum guaranteed amount is €5 million per company,
  3. If possible, a fixed-guarantee will be restored or the guaranteed rate will be increased to cover more than 80 percent of the guaranteed liability.

KredEx Foundation business loan – amounting to €500 million, subject to the following conditions:

  1. KredEx Foundation issues a revolving business loan to a company in order to overcome liquidity problems caused by the coronavirus, including, where necessary, the payment of bank loans,
  2. The maximum loan amount is €5 million per company,
  3. The interest rate will be approximately 4 percent per year.

KredEx Foundation investment loan – amounting to €50 million, under the following conditions:

  1. KredEx Foundation grants an investment loan to the company so it will be possible to take advantages of business opportunities created by the coronavirus, and other new business opportunities.
  2. The maximum loan amount is €5 million per company,
  3. The interest rate is approximately 4 percent per year.

The labour market service provided by the Estonian Unemployment Insurance Fund to cover for wage reduction – amounting to €250 million, under the following conditions:

  1. The benefit can be used by a compliant employer to cover the period of two months from March to May 2020;
  2. The benefit of no more than €1,000 per month per employee in need of the support is paid as gross amount.
  3. The benefit is calculated based on the gross wages of the employee over the period of the previous 12 months, plus remuneration payable by the employer to the employee which is no less than €150 in gross amount. The Unemployment Insurance Fund and the employer will pay all labour taxes on wages and benefits.

For the period of March to May, the state will compensate the first three days of sick leave for all incapacity leave applications.

Rural companies can apply to the Rural Development Foundation for guarantees (up to €50 million), business loans (up to €100 million) or land capital financing (up to €50 million).

Self-employed workers are subject to an advance social tax support measure.

Payments into the II pillar of the pension fund are temporarily suspended.

The State compensates for the direct costs of cultural and sporting events cancelled due to coronavirus in March-April, up to €3 million.

The Members of the Government supported the proposal of the Minister of Finance to suspend the tax interest calculation for a period of two months and to allow tax debt to be rescheduled at lower interest rates than are currently in force.

The Minister of Finance was instructed to develop and submit the draft supplementary budget for discussion and decision at the latest on April 16, 2020.


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Editor: Helen Wright

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