Hans H. Luik: The central bank will not hike interest rates
Owner of Ekspress Grupp Hans H. Luik said on the "Otse uudistemajast" webcast that Estonia is too late to the borrowing party and that interest rates in Europe will not go up meaningfully any time soon. Luik said that Estonia should consider introducing an inheritance tax, while collecting existing taxes should be prioritized over new ones.
In terms of accelerating inflation, Luik said that Estonia is too late to the borrowing party. "The money we will get is not what it was two or three years ago. First of all, we should have borrowed after adopting the euro, during Ansip's day. The loan would be paid by the taxpayer on the one hand and inflation on the other, just as inflation is helping to pay everyone's loans," he said.
"The situation today is that every person has to find better ways of taking care of their money than it lying in a bank account," Luik said.
The businessman said that interest rates will not go up in Europe any time soon as it would have a negative impact on states sporting considerable loan burdens. "ECB President Christine Lagarde cannot hike the interests of euro loans as it would send the Mediterranean states into a fit."
"We only need to outrun our competition – the Mediterranean states. We need to borrow less but enough," he said.
Luik said that several major projects remain outstanding in Estonia because loans were not taken when the time was right. "Estonia's loan bag is quite empty compared to Portugal, Italy, Greece and Spain. They will not stand for it. The ECB will hike interest rates but not by much. Inflation will remain considerable."
Luik does not believe Bank of Estonia inflation forecasts.
"They missed the mark by the widest margin during the previous financial crisis in 2009-2010. We were total losers when it came to predictions. They forecast growth at 5 percent, while what we got was a recession of 9 percent. A mistake of 14 percentage points, accompanied by the same rhetoric – do not borrow because a loan is a major burden," Luik recalled.
Luik said that many young people cannot afford real estate in the conditions of soaring prices and proposed the solution of state rental real estate. "Several countries have done it and seen good results. If those people are specialists, salary advance will allow them to get a loan later in life.
State should stop restricting data
Luik said that Estonia should look at what it taxes and how. He proposed an inheritance tax.
He said that the main problem is the state's inability to collect existing taxes as data is not pooled. "A real estate tax would not be difficult to collect, while databases should be fixed up," he remarked.
The businessman also said that existing data could help better aim support instruments, such as the school lunches benefit. "Why pay universal benefits? The same goes for taxes," he said. "Taxes should be collected before they are hiked."
"In addition to economic inequality, we also have public health inequality, data access inequality. As concerns those same databases – a nascent business that wants information from the national business register has no such access today. The business register is not machine-readable today," he said. Better access to information would help people make better decisions to improve their health and financial situation.
Vaccination important to avoid new strains
Concerning the spread of the coronavirus, Luik said that vaccination is key as the virus spreading rapidly among unvaccinated people allows it to mutate quickly.
"What worries me is that unvaccinated people allow the virus to keep flipping the coin. A hundred or thousand flips might give us Omicron, while we might eventually get a variant where the mortality rate is not 1 percent but maybe 30 percent," he suggested.
Luik pointed out that the Omicron strain mutation came from a country where a fifth of people are immunodeficient because of HIV. "We will keep seeing new waves unless vaccines reach people everywhere in the world. And the virus can flip that coin very quickly in unvaccinated people. That is the threat, not the mere fact people are unvaccinated," he said.
"If Martin Helme's voters or Varro Vooglaid's supporters want to remain unvaccinated and contract Covid, let them have it. People I know who have recovered from it describe it as an extraordinarily nasty disease that can have unknown consequences. If that is what they want for their voters – have at it," he said.
Luik said that the Conservative People's Party (EKRE) did one thing right in the government, that Martin Helme understood the new fiscal theory as finance minister, "Martin Helme realized that Estonia should have borrowed and even wanted PPP projects or to include private capital in roadbuilding. It is clear that we don't even have the projects today, and the EU will cut our financing once we do," he said.
Should EKRE be part of the next government after Riigikogu elections, a coalition with Isamaa and the Reform Party could switch all schools to teaching in Estonian. "I want it to prove possible to solve one source of inequality in Estonia – to switch Russian schools to teaching in Estonian," he said.
"It should be implemented, especially now, when Putin's propaganda looks like everyone in the Kremlin has drank bog water, to integrate Russians – Estonian and European values."
Private media advertising revenue has recovered in the pandemic
Hans H. Luik said that private media companies' advertising sales are up as companies have started to advertise campaigns online. "In addition, our algorithms allow us – Delfi is one of the largest IT establishments in the Baltics – to very accurately aim advertising. Being able to aim advertising very accurately instead of relying on universal banners is one new capability we have," the media businessman said.
The number of Ekspress Grupp digital subscribers has grown by 50 percent to around 100,000 this year.
But the company is struggling with a few other investments. Ekspress Grupp acquired two digital companies in ticket sales and conferences before the pandemic. "We have those debts and a major digital enterprise working at half capacity if that," Luik said.
Ekspress Grupp announced its acquisition of Geenius Meedia this week.
Luik said that the publication will continue independently and there are currently no plans for a merger. "We will be keeping it separate. It has its own business model and pricing," he said.
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Editor: Marcus Turovski