Minister: Cuts coming but need not mean 2021 state budget will be smaller

Minister of Economic Affairs and Communications Taavi Aas (Center).
Minister of Economic Affairs and Communications Taavi Aas (Center). Source: ERR

The 2021 state budget will entail looking at public sector cuts, but this need not mean the overall figure will be dramatically higher or lower than in previous years, economic affairs minister Taavi Aas (Center) said Wednesday.

Aas added that the European Commission-approved state bailout of state-owned airline Nordica was solely the result of the coronavirus pandemic and its economic effects, but did not mean the airline will start flying out of Tallinn, as it had done before the crisis, right away.

Appearing on ERR politics discussion show "Otse uudistemajast" Wednesday, Aas said that consideration of areas in the public budget which could be cut would go ahead, but could not outline these yet, nor say whether the overall state budget will be cut.

Budget discussions start in early September, with the final draft budget due to go to the Riigikogu for debate late on that month. This year's budget considerations will are obviously likely to be dominated by the fallout from the coronavirus pandemic.

The 2020 state budget comprised revenue of €11.7 billion and expenses of €11.8 billion, and passed in December 2019.

April's supplementary budget comprised a €2-billion package of measures to help stimulate the economy at the peak of the COVID-19 pandemic.

Aas did say that no supplementary budget was being planned ahead of the main 2021 budget. A supplementary budget was issued in spring as the pandemic spread.

"We will definitely try to find savings in the government sphere," Aas told interviewer Indrek Kiisler, adding that this means primarily cutting public sector management costs.

Nordica not flying from Tallinn just yet

As to Nordica, which the European Commission gave the go ahead for a €30 million state bailout Tuesday evening, Aas said that the news did not mean that the airline would start flying from Tallinn again immediately, as this would still not make financial sense.

"This depends on two factors: the epidemiological situation in the country of destination and the competitive situation – it simplyis not reasonable to fly at a loss," said Aas. 

"Flying from Tallinn at present cannot be profitable," he stressed.

At the same time, Aas said that had the pandemic not interrupted flights – at the peak in April nearly all scheduled flights in and out of Tallinn were canceled – Nordica would be profitable today.

Nordica has so far behaved very sensibly in not rushing to reopen routes, and other airlines which have done so have not reaped much success, Aas added.

The 2021 forthcoming budget needs to be seen in the light of a €3 billion loan the state has taken, money which has not been used in its entirety, and some of which may go on public sector construction projects.

With regard to the pandemic, Aas said that Estonia had fared relatively well compared with some western European countries, for instance, but that the influence of these economies still have their effect on Estonia.

The Estonian state's plan to buy out the 49 percent share Polish operator LOT owns in Regional Jet, a Nordica subsidiary, had not been affected by the state aid getting the European Commission seal of approval, Aas added. Regional Jet's main earnings have been via wet-leasing agreements with regional airlines in Sweden and other nordic countries, he said.

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Editor: Andrew Whyte

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