The Estonian state needs to cut spending, both due to the fact that resources are limited, and that the budgetary position is poor as a result of state overinvestment during boom times being detrimental to the private sector, Jürgen Ligi, deputy chairman of the Reform Party, told ETV politics show 'Esimene stuudio' on Thursday evening.
The effects are especially felt in connection with the construction sector, Ligi, a former finance minister, said. The Reform Party is currently in office with the Center Party.
Commenting on austerity plans doled out to the ministries by the government, Ligi said that the €60 million worth of cuts is not a substantial amount - more cuts will be needed - but the current government had to start somewhere, in order to compensate for the previous government's omissions and commissions.
"We're not doing anything special. What was strange, was this year's budget; it carried the biggest structural deficit in the whole of Europe at 6.5 percent of the structural deficit, which is what we have to deal with," Ligi said.
The 2021 state budget was drawn up by the Center/EKRE/Isamaa coalition in late 2020. The Reform/Center coalition entered office in late January.
Ligi said that the overall picture of state finances is not a pretty sight, adding that much more than €60 million needs to be cut, and not just to improve the structural position of the state budget.
"Experts also confirm overinvestment is currently harmful. Estonia has been the largest investor in Europe. Especially in construction. The contribution of the state is very huge at a time when the construction boom is approaching, where contracts are canceled because the new contract is better. The state's overspending is devastating for the private sector," Ligi said.
In Ligi's opinion, it is logical that politicians are thinking about raising the taxes in the current situation.
"Yes, this is an alternative to where Estonia has been on its way to tax increases because reserves have been eaten up and the target is massively out of place. As of 2019, we had 2.1 percent of structural GDP deficit, which is the component of defense expenses. Then the crisis came. Fortunately, it has been agreed that we will not raise taxes, we will correct mistakes and set the right goal. Gradually we will reach the balance," Ligi said.
It is estimated that Estonia's economic growth will be rapid after the crisis, he added.
"The economic boom will be strong because we are doing well with vaccination. The question is whether the international economy will recover, Estonia desperately needs it. Europe has been a bit sleepy in vaccination, but it is clearly moving in the direction that it will no longer the main issue in autumn," Ligi said.
Ratas should not run for president
Regarding the autumn's presidential election, Ligi said that he has nothing against Kersti Kaljulaid continuing, but her style of polarizing society means that it will be difficult for her to find the necessary political support to pass a Riigikogu vote.
"There are others, certain women, that could work," Ligi added.
Regarding former prime minister Jüri Ratas' (Center) possible candidacy, Ligi said that Ratas should not nominate himself as a candidate, for two reasons.
"I hope he sees two things: That party chairmen do not run for president. Otherwise, they would abandon their party. [And second] The problem with the Center Party is its ratings right now, before the local election," Ligi said.
Center has been trailing the Conservative People's Party of Estonia (EKRE), which is in opposition, in recent weeks, according to some opinion polls.
The local elections take place October 17, preceded by an advance voting period, which also has an interface with the presidential elections.
While local elections are direct - all Estonian residents are eligible to take part - the president is only decided by the Riigikogu or, if that fails, the local electoral colleges.
Editor: Roberta Vaino