Prime Minister Jüri Ratas (Center) has broadly endorsed the proposal to halt state payments into the second pension pillar, as this would help ensure the payments of current pensions. The prime minister nonetheless said that if the state should stop payments into the second pillar, but the individual themselves continues to pay into it, the state should later compensate for this regardless.
"Regarding the halting of payments into the second pension pillar by the state, this discussion is on the table," Ratas said on Vikerraadio program "Stuudios on peaminister." "It doesn't have to be as difficult as it was in 2009. The fundamental idea is that we have to pay out current pensions too, and 20 percent of the social tax already doesn't cover that. Halting the state's 4-percent payment would give us this chance. But I am also of the opinion that we will pay this 4 percent back to those who decide to continue making payments. In other words, those who continue paying in 2 percent, they will be compensated for the halting of this 4 percent."
Economy to shrink at least 10 percent
Ratas said that according to the summer 2019 economic growth forecast for 2020, Estonia was to see economic growth of 2 percent. Now, he continued, the country needs to prepare for an economic recession of at least 10 percentage points.
"The economy will fall, in general numbers, 10 percent or more," he said. "As a state, we will have to work in reverse — during the economic recession, we must make investments and support people and businesses." Much of Europe, he noted, has chosen a similar path.
Program hosts Mirko Ojakivi and Arp Müller noted that one of the three government coalition partners, Isamaa, has started talking about making cuts to state spending that the Center Party and the Conservative People's Party of Estonia (EKRE) have at least initially ruled out. Ratas remained of the opinion that this won't be done in the current stage of the crisis.
"If the state were to start immediately making cuts itself, that would be an additional blow to our economy and people," the prime minister explained. "Where will the missing money come from? Broadly speaking, the state has four sources for it. First of all, a loan. Second, reserves, the liquidity reserve and stabilization reserve if necessary. Third, European Commission measures. Fourth, bonds."
Supplementary budget to the Riigikogu on Thursday
Ratas said that the government wants to submit its supplementary budget to the Riigikogu on Thursday, and highlighted a slew of related items he considered important. For example, the supplementary budget calls for an additional €200 million to be allocated to the Health Insurance Fund for the next three months. The supplementary budget also includes several expenses connected to personal protective equipment (PPE). The Ministry of the Interior and, through it, the Police and Border Guard Board (PPA) and the volunteer Estonian Defense League, which have provided assistance during the crisis, are also to receive additional funding.
"Economic measures will be targeted," he said. "I have said several times that the window at Vikerraadio overlooks a beautiful view of Tallinn Bay with its ships. These ships are currently docked in port. Cargo shipping has continued, but passenger traffic has halted. We want to do everything we can to support our shipping."
The prime minister highlighted small and medium-sized enterprises (SMEs), support measures for which Enterprise Estonia has been tasked with working out, but also the tourism sector, which was the first to be hit by the coronavirus-induced crisis.
The supplementary budget should also provide aid and investments to local governments, culture and education.
No sectoral tax freezes planned
"Also on the table is a tax package with which to reduce certain excises in order to help the private sector and people," Ratas said. "People's incomes are falling, but utilities costs remain. In other words, we can support people by reducing excises too. This is especially important to people who end up jobless altogether; they still have to pay housing expenses."
Nonetheless, the prime minister confirmed that although representatives of various sectors have sought from the government a moratorium on social, income or value added tax (VAT), the government is not currently planning any sectoral tax freezes.
Editor: Aili Vahtla