Interview | Mart Laar: The current crisis should be capitalized on

Mart Laar served as prime minister from 1992-1994 and again from 1999-2002.
Mart Laar served as prime minister from 1992-1994 and again from 1999-2002. Source: Siim Lõvi/ERR

Former prime minister Mart Laar (Isamaa) finds that while the government's borrowing was justified, it should dial back the state apparatus heading into state budget talks. Laar does not plan to join Isamaa's Parempoolsed (Right-wingers) group, nor does he support the planned marriage referendum as he says Estonia has more pressing issues to worry about.

The government is set to discuss next year's state budget. You were a proponent of fiscal balance as prime minister. You even proposed complementing the Constitution with a fiscal balance rule. Is this really the time to be spending?

I still believe we should strive for fiscal balance. This issue is made up of two separate parts. Looking at the global economic crisis, the need for expenses is clear. That is why the government's decision to borrow is entirely understandable. However, we should very carefully consider where we spend that money and avoid all manner of "interesting" investments. Whether we should aim for fiscal balance is another matter. And the answer is yes! Had we not maintained balance back in the day, the government could not borrow on such favorable terms today.

Which expenses would you have forgone?

I certainly have my opinion when it comes to a lot of expenses, but I would need more information so as not to be shooting from the hip. While the government has maintained a conservative line in general, there were a few situations I would have handled differently. However, these things are up to current decisionmakers.

Is this a time to do something radically different in Estonia? Should we take advantage of the crisis somehow?

We should definitely capitalize on this crisis. We need to find new momentum in fields where we have traditionally been strong. One area I would support is research. It will ensure the future of our country. Our e-state needs investments into support systems. Our education systems needs a second look. This is where crisis experience is invaluable in terms of making future decisions.

E-medicine needs to be launched alongside e-education. We need to give experimenters room to experiment. Not all of it will go to plan, but we cannot move on without taking risks. We need to be ready to fail, while failures may be more useful than successes in the end. Money is being buried where none is needed today.

The government likes to talk about major infrastructure and especially roadbuilding projects today. Is it the way to go?

I will say right away that I'm not a fan of this approach. It is from the previous century. Major roadbuilding projects and colossal investments are from the 20th century. It seems to me we are living in the 21st.

Should the public sector be cut?

This is a good opportunity for pruning the public sector as it lies heavy on Estonia's shoulders. It is more difficult to do in times of economic growth, but everyone is suffering in a crisis. It is easier to take unpleasant steps in difficult times.

I would dial things back in the state budget. Estonia's bureaucratic and administrative apparatus is out of hand and there are plenty of avenues for cost-cutting.

The Center Party and Conservative People's Party (EKRE) love to spend. Will Isamaa be the one to apply the brakes?

EKRE and Center really do love to spend. But Isamaa has already applied the brakes and will do so more decisively in the near future. We have told our partners as much.

However, is this not the time to spend as interest rates are negative and one needs to repay less than one borrowed?

Look, if we start spending uncontrollably, interest rates will soon be quite different. We should consider future generations as someone will have to repay these loans eventually. Interest rates will recover and we will still have to return more than we borrowed.

We have big spenders in politics today. They wanted to spend back in the day but were held back. Had we not stood our ground back then, they would not have access to loans today – when we really do need them.

What would you do were you in charge of the government's spending decisions?

The first step would be to freeze public sector budgets as it would hurt no one. Public administration costs cannot be allowed to balloon, while it would also show solidarity with the people. All signs suggest we are heading into difficult times, both in Estonia and the entire world.

As chairman of the Bank of Estonia supervisory board, are you not afraid Estonia is leaving the path of conservative fiscal policy?

I am not, because the world is leaving that path. Crises force us to reevaluate things and one needs to handle these things sensibly. One cannot keep the pedal to the metal at all times on principle as roads have twists and turns. We are in the middle of such a turn today. The important thing is to maintain stability and most importantly national defense. Threats have not disappeared and could manifest in places where we least expect them. The world around us is restless.

We need to ensure defense spending at 2 percent of GDP and avoid all manner of experiments to benefit ministers or outfit them with their personal internal security armies. This kind of fragmentation only serves the interests of our eastern neighbor.

Have you joined Isamaa's Parempoolsed (Right-wingers)?

No, definitely not. I like to be by myself and am not one to seek association.

Is the emergence of the group a reflection of management issues inside Isamaa?

Rather, I hope it is a reflection of positive development. But it is one thing to promise to do something and another to actually do it. Because the Parempoolsed have not done anything yet, it is difficult to evaluate them.

There has been a lot of talk about the so-called marriage referendum in recent weeks. In your opinion, should it be held alongside local government council elections?

It should not. We have plenty of things that need tending to, if only financial and fiscal matters that are in dire need of solutions.


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Editor: Marcus Turovski

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