Kristina Kallas: Incoming coalition goes down overspending path

Eesti 200 leader Kristina Kallas.
Eesti 200 leader Kristina Kallas. Source: Kairit Leibold/ERR

Head of the non-parliamentary Eesti 200 party Kristina Kallas says that while it is good Estonia is on track to get a new government, the coalition going down the path of overspending is worrying.

Kallas said, pointing to the Tuesday report by the Estonian Institute of Economic Research, that the Estonian economy will continue to contract in the next six months. This means that people and companies will need support by the start of next year at the latest as a wave of bankruptcies and growing unemployment loom.

However, the treasury might be empty by then as the government has pledged increased tax receipt for new expenses, Kallas said, giving the example of planned family benefits hikes.

"The family benefits hike is massive, with indexation the most critical part of it – introducing a very high base for a very long time, as well as fixed growth. Simply giving people the money will not solve the problems Estonians have raising children. They are mostly tied to availability of services – whether we have enough kindergarten places, whether education is accessible and whether schools are close to where people live. None of it is being addressed," she said.

Kallas said that the incoming government will add to already considerable fiscal deficit.

"They are piling it on, saddling future generations with serious expenses. These things are being agreed on today. At the same time, for years, politicians have been unable to agree on reforms that could pay for these expenses. It is going down the path of Greece. We will wake up one morning with massive debt and decades worth of outstanding reforms. We will be spending well beyond our means and will be unable to even service interest payments. I hold this to be irresponsible," Kallas noted.

The Eesti 200 leader said that state reform is urgently needed, adding that there are plenty of things the state should not be doing and plenty of unnecessary regulation.

"I believe we have a lot of administrative spending in the social welfare system. We could have a much more effective system by reforming it to make sure help and support actually reaches people. We have a number of enterprise organizations that simply employ officials to manage regulations. I believe that a massive reform to dial these things back is needed. To curb the number of officials," Kallas suggested.

She also said that Estonia should make more effective use of big data and administration should be more electronic and personal. "We have worked with entrepreneurs to calculate how much an effective digital state would save us annually, and it is between €150-300 million. It is the same kind of money that will be spent on hiking family benefits."

Commenting on the Reform Party, SDE and Isamaa coalition's energy benefits package, Kallas said that temporary support measures are welcome as the winter heralds high energy prices and inflation. However, she described as problematic Eesti Energia's obligation to sell electricity at non-market prices.

"This will cause the green transition to be paused for a long while. There will be little motivation for other energy producers to invest in the conditions of a price ceiling. The price of electricity will not be determined by the market or the difference in supply and demand but instead by an agreement between the government and Eesti Energia. In a way, it is giving Eesti Energia back its monopoly position, returning to where we came from. Market entry will become much more difficult for new renewable energy producers," Kallas warned.

It is good that the coalition agreed on a time frame for switching to Estonian education, which she added has been postponed long enough.

"However, I remain somewhat skeptical of their ability to populate it with content. Funding of teacher training and higher education should be doubled when it comes to language immersion teachers and those teaching Estonian as a second language," Kallas said.

She said that it remains unclear how Estonia plans to switch to fully Estonian preschool education in 2024. The switch to Estonian of first and fourth grades also remains unclear.

"It requires thousands of students to be switched to a different study method, meaning the need to replace hundreds of teachers," the Eesti 200 chairman said.


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Editor: Marcus Turovski

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