Minister: Government has reached agreement on budget strategy

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Minister for Public Administration Jaak Aab (Center). Source: Siim Lõvi /ERR

Minister of Public Administration Jaak Aab (Center) confirmed that the government has reached a compromise on the state budget strategy discussions and the strategy will be approved on Thursday.

"We have agreed in principle. It is not like anyone is jumping for joy for this strategy. There are problems and we have had to fill the deficit. At the same time, we have agreed on fundamental things that are important to us," Aab told ERR.

"As of the current plan, [the strategy] will be at tomorrow's government sitting and it will be approved," Aab said.

The minister pointed to pension and salary hikes as wins for Center Party and noted that there are worldview differences with coalition partner Reform Party. A compromise has been made on the budget strategy, however. "Reform did not get as much as they wanted. We did not get as much as we wanted. It has always been like this," Aab said.

"Reform's desire has been to move toward a structural balance. That is why we have had to save more. We would not have done that, but we must agree on something. And that is how it is," the public administration minister added.

Aab said statements made by his fellow Center MP Jaanus Karilaid about suspending the budget strategy due to a clash between ideologies will not lead to a government crisis. "It does not, that is the short answer. We have agreed on everything in government," Aab noted.

Center deputy chairman hopes government does not approve budget strategy

Center Party deputy chairman Jaanus Karilaid said earlier on Wednesday that he would recommend the government not approve the budgetary strategy bill (RES) because he does not consider cuts and layoffs reasonable during the coronavirus crisis.

Karilaid announced that he recommends the government seriously consider if it needs to approve the proposed state budget strategy. "To cut such fields as childrens' hobby activities, interior security and slow down investments and loan money, is not a smart direction," Karilaid posted on social media on Wednesday.

"Planning cuts and layoffs is not reasonable after a pandemic. Also, defense capabilities cannot have contradictory messages. The crisis' frontline needs larger compensation. These are just a few keywords. And this document should move forward in the Riigikogu," Karilaid added.

The Center MP told ERR that the state budget bill should be suspended for the time being. He added that the document reaching the Riigikogu would be reasonable. "If the government approves it on Thursday, it is foreseeable that it would bring much tension in the second half of the summer," Karilaid said.

He added that the government could involve further loans and continue road construction and active constructions in the economy and said he does not agree with Minister of Justice Maris Lauri (Reform), when she said that too many developments in the construction sector could lead to the economy overheating.

Karilaid said Reform's budgetary balance ideology will begin to interfere with the government's work at some point. "When Center was [in government] with Isamaa and EKRE, we had a principle of all three being equal and the face of each party should be visible," he said.

"I hope that Reform does not bring back this old way of thinking. That they understand that there are two parity partners in government. That we have diametrically different opinions in monetary policy and we need to find a better compromise," Karilaid noted.

The government began discussions on the 2022-2025 budget strategy in April with the hopes of confirming the bill by April 30 at the latest.

The current valid budget strategy sees a new strategy to be drawn up in the spring. It is a longer document, where the government attempts to forecast the revenues and expenses of the Estonian state budget for the next four years.

Jaanus Karilaid. Source: Priit Mürk/ERR

Potential plans for the budget strategy

Minister of Finance Keit Pentus-Rosimannus (Reform) said last week that there are cuts to be made on fixed costs.

Among many things, the strategy also plans to increase salaries for teachers, cultural workers and emergency workers by at least 3 percent.

"We can look at the upcoming years on the arrival of new economic forecasts. As a message, I think this is good and necessary - that the most prioritized groups who have also made an effort during the crisis can have their salaries increased without increasing our budgetary deficit," the finance minister said.

The strategy also sets aside €1.8 billion for the green transition and €340 million for digital transition. In the period from 2023 to 2025, investments by the government sector will rise to a record level, with the government sector investing at least €2 billion every year. This however will entail a threat of overheating of the economy, according to the minister. 

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Editor: Kristjan Kallaste

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