The ruling coalition needs to change course and do it now. Its painful and ultimately avoidable austerity policy is hurting the rating of the coalition parties and playing into the hands of the rowdy and demagogic radical conservatives, James Rock and Robert Kiisler write.
Yet another crisis is growing smaller in the rear view mirror, the economy is recovering and the Estonian GDP going up. However, Kaja Kallas' administration has decided that companies are more important than working people and set about peeling another layer off Estonia's already ethereal welfare state. The only thing these unnecessary cuts will achieve is gifting the Conservative People's Party (EKRE) the next Riigikogu elections victory.
The ruling coalition is made up of two economically incompatible forces. The Reform Party represents right-wing neoliberalism and primarily protects the interests of the wealthy and major companies. The Center Party has maintained a more Keynesian line and occupies a position in the political center, being slightly left of Reform.
However, the former seems to be holding the reins in the coalition as the government's economic policy has not a whiff of centrism, not to mention the left.
The Reform Party categorically refuses to hike taxes or borrow even to exit the economic crisis (despite Estonia sporting the lowest public sector debt in Europe), preferring austerity and cost-cutting to developing a welfare state instead. This tactic is not just holding back economic recovery, it is also putting working people on the spot and dragging down the ratings of both ruling parties.
Kaja Kallas' government lays off the Estonian Defense Forces band and abolishes the chaplaincy, takes away children's free hobby education, cuts education spending in GDP by a fifth and abolishes the tax exemption for home loan interest that has been helping young families find their feet. Slashing hobby education funding will save €7 million or 0.05 percent of the 2021 state budget. Annual upkeep of the Defense Forces band costs just 0.01 percent of the budget. Saving 0.06 percent is extremely difficult to justify considering the damage these decisions will cause.
Efforts by the Estonian Rescue Workers Union managed to thwart cuts that would have seen several rescue commandos closed and close to one hundred rescuers finding themselves out of work. Unfortunately, it has proved impossible to convince the government to hike rescue workers' shamefully low salaries, which is why most of them are still forced to work two jobs.
All of the aforementioned cuts are perfectly avoidable and harmful not just for the Estonian state and people but also – in a situation where nothing else seems to deter Kaja Kallas – for the Reform Party's rating.
"If the public sector refuses to dial back, the private sector will suffer. And the private sector has suffered a lot in this crisis," the PM said. Unfortunately, the crisis has primarily hit the working class, people with special needs, children forced to put up with remote learning and struggling small businesses whom Kaja Kallas lumps in with major corporations as the "private sector."
The cuts Reform is seeking are unpopular with the people for good reason. Who should they vote for at the next elections in a situation where both government partners have betrayed them?
The Reform Party remains a proponent of failed austerity policy and only represents the interests of the wealthy. The Center Party, left weakened by yet another corruption scandal, can do nothing to restrain its partner. The coalition as a whole has reacted inadequately in the COVID-19 crisis and is facing the third wave virtually with eyes closed.
At the same time, the party setting itself in contrast with the coalition the most is gradually growing in support. The Conservative People's Party (EKRE) is by far the largest opposition force and takes the cream of media attention with its sharp statements. Even though EKRE is not the Reform Party's ideological opposite, as both sport right-wing economic views, EKRE is captivating the attention of voters by resorting to accusations, insults and unbridled noise, turning the government's failures into its success.
The national conservatives' rhetoric centers around contrasting themselves to the ruling parties. For example, EKRE sports diametrically opposite positions when it comes to climate change, vaccination and the obligation to wear a mask. "The government's austerity policy will do a disservice to 146,000 children and their parents through dialing back hobby activity possibilities," EKRE wrote in their no-confidence motion against PM Kallas. Taking the leftist approach serves them well here as the government's austerity policy is hugely unpopular with the voters.
And yet, all semblance of leftism in EKRE ideology is a mirage and consciously misleading, necessitated only by the inescapable need to contrast to Reform's neoliberalism. "It suits me just fine that EKRE stands on one side of the divide and all other parties on the other, just as it is with a lot of other issues," EKRE leader Martin Helme said at the party congress. The Social Democrats remain the only party offering a real alternative to right-wing policy and still collecting signatures against slashing hobby education funding as these words are being written.
The ruling coalition needs to change course and do it now. Its painful and ultimately avoidable austerity policy is hurting the rating of the coalition parties and playing into the hands of the rowdy and demagogic radical conservatives. It is not unlikely for EKRE to win the next parliamentary elections or become indispensable in forming a coalition should the current administration last out its term.
Instead of leaving EDF musicians out of work and robbing children of hobby activities all over Estonia, the coalition needs to realize that there are alternatives to austerity. Estonia has the lowest public debt in the EU: over two times smaller than that of Latvia and Lithuania and over three times smaller than Finland's. Hiking national debt by just 1 percent would pay for children's hobby education, the armed forces band and facilitate a pay rise of over 10 percent for teachers.
Estonia also sports one of the lowest tax burdens in Europe. To cover costs, the government could finally lay down a progressive income tax system that almost all European countries have or shift the emphasis from labor to taxing property for a change. Both would bring the budget a pretty penny and work to reduce financial inequality the coronavirus crisis has only deepened.
Instead of pursuing harmful cuts, the coalition should be concentrating on exiting the crisis as painlessly as possible. This requires dropping outdated austerity policy and working to strengthen the welfare state instead of undermining it. The quality of life of the Estonian people is more important than a tiny deficit on paper.
Editor: Marcus Turovski