Ruling parties have given in to the temptation of going after votes using the state budget and promising everyone everything leading up to elections. This policy of squandering is having a disastrous effect on the sustainability of the Estonian economy and the prosperity of the people, Lavly Perling writes.
News of recession, layoffs and difficulties coping has become daily. The government's first task is to contain price advance, mitigate the effects of the slump to come and put the economy back on a growth trajectory. For some reason, this is not being done. On the contrary, unfortunate choices are rendering the future even more unavoidably difficult than it could be.
We need to trust the experts
Decisive choices are due in difficult times. Political leaders need to set an example and be the first to admit that everyone, the state and people, has gotten a little poorer and that costs need to be dialed back somewhere. Everyone will have to go over their expenses, from the government sector all the way to individual households.
In this light, Estonia's "elections budget" currently in Riigikogu proceedings comes off as shameless populism and stands to seriously undermine Estonia's interests today and in the future. Forecasts the state budget is based on are deemed unrealistic by both the Bank of Estonia and the government's own fiscal council.
Estonia's fiscal policy has been criticized and labeled unsustainable by several leading experts.
We need to trust and listen to the experts even when the news is not good. Showering everyone with money is only adding to inflation, deepening inequality and difficulty coping, lowering competitive ability and will result in long-term obligations we cannot afford.
Using high-interest loan money to pay for social benefits and salary hikes will leave whichever future government with nothing but very bad choices: whether to keep borrowing to service mounting obligations, hike taxes or go down the path of painful austerity. Problems need to be tackled immediately instead of saddling one's successor with them.
Having ignored expert advice, Estonia is hurtling towards an economic disaster and the success story we have built over 30 years is very close to being lost amid lessons of history. Structural fiscal deficit is mounting alongside the public loan burden, while every new forecast speaks of an increasingly unavoidable and steep crisis. Estonia's expenses will outstrip revenue by €2 billion next year.
Solutions exist for getting our house in order and ensuring a dignified future but are being ignored. Different governments have managed to exhibit statesmanlike conduct and ordered cost-cutting on the verge of economic crises since Estonia regained its independence. Of course, this meant unpopular decisions, but tough times were met with a steady gaze and responsibility. This made it possible for the country and economy to move forward with little baggage and exit the crisis stronger and more successful than before.
Firstly, we need to end populism and wooing voters using the state budget. This requires postponing the minimum exemption hike, dropping unfair €860 monthly family benefits that fail to consider the real needs of Estonian families and switching to a data and necessity-based social benefits system to make sure we're not just throwing public funds out the window. This would allow us to save hundreds of millions of taxpayer euros.
Secondly, the crisis provides a good opportunity to put the public sector in order and shed ballast from good times. We should immediately launch a state activity and expenses audit, stop the bureaucracy from growing and apply the brakes to sprawling legal drafting of questionable value. It would be a good principle to handle future legal acts using the current number of officials, instead of hiring dozens of new ones as recently happened in connection with new family benefits.
Thirdly, the time has come to launch the long-awaited state reform to lower administrative and labor costs and switch to data-based public administration befitting a smart e-state.
This requires merging agencies with duplicate tasks, basing services on people's actual needs and handing over as many tasks as possible to the private sector. We should also launch state company privatization and involve more private funding for key services, such as education and medicine. This can help us render the state more effective as a whole and offer better services where and how people need them.
The immediate prosperity of our people, jobs, competitive ability of companies, security and the future of Estonia hinges on the government's ability to make relevant and future-oriented decisions. This can only be done by cutting costs.
Editor: Marcus Turovski