The only way to save several hundred million euros in the state budget is by notably cutting public services and benefits, SDE member Jevgeni Ossinovski said on the "Esimene stuudio" evening talk show.
The politician said that the coalition agreement needs to be finished and signed in the next few days. He suggested that talks between the Reform Party, SDE and Eesti 200 have been constructive, while the difficult fiscal situation is causing some tension.
"Every coalition agreement is a compromise, and the sides, especially those with prior experience, realize that something needs to be surrendered to arrive at an accord. You need to settle for things that might not be your first preference, while they matter to your partner(s)," Ossinovski said.
He admitted that while politicians are usually a little sore after making such compromises, fiscal constraints exacerbate matters this time.
Ossinovski said that while proposals were made regarding the main topics of the negotiations, the Finance Ministry's initial economic forecast from the second half of last week has left much of it in disarray. "This is the reality in which we must operate and look for solutions."
The SDE politician said that the budget's considerable deficit can be remedied through austerity.
"We must seek efficiency during financially difficult times. But hoping that €200 million can be found in a ministry's basement somewhere... Long-term reforms can render some processes more efficient, save money and improve service quality, and corresponding efforts must be made. But talking about the need to save several hundred million euros [in the short term], this can happen through cutting a public service or benefits. That is the only place it can come from," Ossinovski said.
The politician admitted that a VAT hike has been discussed during talks but did not go into detail. "These are standard proposals that one almost always hears during coalition talks. It is not the Social Democrats' favorite topic, while I believe the reality will be different this time."
Excise duty hikes have also been considered, Ossinovski said, adding that he believes gradually hiking the duties on tobacco and alcohol is sensible.
Asked whether the incoming coalition might reconsider indexation of family benefits, the SDE politician said he is not ruling out any changes to the system. "We discussed this matter twice today, so it is definitely on the active agenda," he said.
Editor: Marcus Turovski