Government's austerity demands causing confusion and frustration

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Minister of Finance and Prime Minister. Source: Priit Mürk/ERR

The plan to close the Defense Forces Orchestra published last week has developed into the symbol of the state's austerity plan. The government wants to cut €60 million, all ministries need to look for saving spots.

Leading a state with reasonable expenses and fewer resources is the right thing to do, ETV's current affairs show "Aktuaalne kaamera" said on Sunday while looking at the reaction to budget cuts. However, it's a question of taste when it comes to announcing plans to the public. According to the current information, softer areas will suffer the most such as hobby education, music and clergies.

"I understand the dissatisfaction. I think it would be more reasonable to figure out a comprehensive plan in sub-institutions and then come out with this, not drip individual ideas," Minister of the Finance Keit-Pentus Rosimannus (Reform) said.

"Currently, an optimization road has been chosen, which is more common among companies. A certain savings target is set, but the state should go more in-depth and look at every field and see what are the possibilities to make savings," an entrepreneur and one of the initiators of the State Reform Jüri Käo said.

This way, it would be possible to save more than €60 million. As there are 590,000 taxpayers in Estonia, this already puts pressure on the budget expenses and limits.

"Another question is whether it is currently the right time to save. With this step, at least as I understand, the government wants to give a signal that says "wait, friends, let's slow down". The loan has to be paid back and we have to start saving," Käo said.

"In fact, a couple of years ago, we already had a situation where we spent more than we had," Pentus-Rosimannus said. "By the time the coronavirus crisis started, we had a deficit of over €430 million created by bigger expenses than income. Now, the shortcomings related to the crisis have been added. The alternative is a tax increase," Rosimannus said.

The volume of the budget expenses is €13 billion. Member of the Riigikogu's Economic Affairs Committee and opposition Riina Sikkut (SDE) said that making cuts of €60 million is not effective.

"Not to make cuts mathematically but to make cuts with the heart. Now we see that one ministry has decided to add the cuts and expenses on local governments and cut back on children's hobby education. Another is giving up on something not as important in its opinion - the orchestra of the Defense Forces. The third - the Chancellery of the Riigikogu - has decided to make cuts at the expense of the 'brains'- the Development Monitoring Center and the Riigikogu proceedings. We can argue whether this is the right way or the other way around, but none of these cuts will allow the government to achieve its goals," Sikkut said.

Urmas Reinsalu (Isamaa), a member of the Riigikogu's Special Committee on State Budget Control and member of the opposition, said: "This cut in defense spending is a very bad signal for our allies. Where is the money going? The new government has decided to put €10 million into a large new building - the Ministry of Environment. This shows their fiscal policy choices."

Pentus-Rosimannus said: "I can honestly describe and give the different areas of government the framework that is financially possible for the state. The limits within which decisions can be made."

Käo points to successful administrative reform, during which local governments were merged and county governments were removed.

"I will give one example. There is a gap of €300 million in Kredex. This is 1 percent of GDP, which is intended or reserved for economic recovery. Whether we use them or not. €300 million! I asked the Minister for Enterprise Andres Sutt (Reform) a week ago what they are going to do with this money. He said they will see if there's going to be a great idea regarding how to use that money. It actually illustrates this situation now, with this €60 million cut," Reinsalu noted.

In general, the idea remained that the content of the state budget cannot be understood, AK said. The Chancellor of Justice's recent analysis also says that it is a complex document that does not show how much public money is actually spent in one area or another. An expert, not a voter, understands.

"It's similar in all countries, but the task of politicians and officials, especially officials, is to write the state budget to the people and explain these lines," Käo said.

The orchestra of the Defense Forces has become a kind of symbol in this austerity plan. Its fate has not yet been written into the draft budget when it has already been decided to close it. The budget has been implemented before it is approved.

"Often, well-expressed emotional examples have been chosen to express such opposition, in which case I hope that it will finally be resolved as the Minister of Defense has said," Pentus-Rosimannus said.

Social Democrat Sven Mikser does not rule out that the case of the orchestra may have been an accident because when orders are received, the subordinates initially offer these most impossible cuts.

The planning of defense budgets, in general, is somewhat different from the budgets of other areas, as it is done once a decade.

"If we imagine that we have planned all the expected money for 10 years in advance, but the economy does not grow by the expected 4 percent a year, but by 1 percent, for example, then in the 8th, 9th and 10th years the difference between plans and reality may be pretty big," Mikser explained.

The government must submit its proposals and plan to the Riigikogu by October 1.

"In the current stressful environment, the government must be a stabilizing, crisis-leading institution of the state," Reinsalu said.

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Editor: Roberta Vaino

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