Jürgen Ligi, deputy chair of the Reform Party and member of the Riigikogu, said on ETV show "Direct from the Newsroom," that due to the inexperience of the new coalition partners, there is a lot of nonsense in the coalition agreement. Ligi also said, that the government will not be setting a minimum wage.
According to the latest Norstat ratings, the decline in support for the Reform Party after the Riigikogu elections appears to have come to an end this week. However, Reform deputy chair Jürgen Ligi says, he does not expect it to stop completely just yet. "There is a bit more rationality. We have not been good explainers and our wording has failed, at least at the level of headline. But don't worry, 24 percent is a very high percentage, it's usually enough to win elections. However, it doesn't make us happy. And the decisions that have to be made don't make us happy either," Ligi said.
"There's more voter rationality than is sometimes thought. A tax increase of the kind that drives people crazy needs rational justification. Maybe the fact that we are in a very bad fiscal situation will start to sink in," Ligi said.
According to Ligi, in recent years, the government has engaged in permanent expenditure increases without there also being any permanent revenue increases. "The last time we were in such a bad situation was in the boom years of 2006-2007, when we had a structural deficit of five percent, and then we evaluated it afterwards. We made supplementary budgets and put money aside. Now that structural calculations have been forgotten about, a deficit of 3.5 percent has been reached, at least against the backdrop of this crisis. There has been no means of covering for these expenditures," he said.
Whereas before, those involved put themselves in a bad position because they did not know how to correctly assess the budgetary situation, now those with the requisite knowledge are not being listened to, Ligi said.
"Of course, the recession was a much worse situation (than now), we came from a much worse position - if we are just talking about the budget deficit - there was a far worse hidden deficit. While in nominal terms, during the boom, there was a sort of surplus. Now we are much wiser in our assessments, but we have stopped the valuation. At that time, the level of improvement step was nine percent of GDP a year. Before that it was between four and five percent. What we did then required a much bigger effort, a much larger consensus," Ligi said.
Asked whether the Reform Party can continue to call itself a party for entrepreneurs, Ligi said that no party should label itself as party for just one interest group. "We must always present ourselves as standing for the public interest," he said, adding that business has always been important to the party.
Governments fighting central bank
Ligi went on to say, that over the years there have also been several reassessments of what economic growth actually is. "The economy itself is no longer so materials-intensive. The structure of the economy has changed a lot and people's expectations of consumption and welfare are different," he said.
Compensating so widely for electricity price rises was foolish, Ligi said, and the universal service was a gross interference in the market.
"It increased consumption, deficits and raised the price on the stock exchange. Such fundamental mistakes were also made with the attitude that everything (should) come from the state. The state would set the prices and compensate (people for) the prices, as if everyone was in need and everyone had to be helped. As a result, inflation accelerated," he said.
As the economy grows, so do the demands on the budget, Ligi said. "We become more prosperous with economic growth, but the structural deficit is not outpacing economic growth. We either have to do nothing or do something about it. Do nothing about wage increases and compensation, in which case it will improve. But we've been fueling ourselves using subsidies and wage increases precisely where there are already deficits and inflation," he said.
At the same time as the central bank is fighting inflation, governments are fighting the central bank. "On the one hand we are firing up the furnace, while on the other hand they have a freezer trying to cool it down all the time. It's a cacophony of economic policy and that's where politicians have to take a look at themselves. This is why we are in a financial situation where we have to make exceptionally tough decisions," Ligi said.
There is a lot of nonsense in the coalition agreement
The coalition's planned tax reforms will lead to more sustainable public finances, Ligi said. "Sound finances are one of the foundations of prosperity, and we are a long way from having sound finances," he said.
Ligi said, that the new government coalition agreement contains all kinds of nonsense. He believes, that the coalition partners, due to their lack of experience, have written down a lot of things that they consider important but are difficult to achieve in practice.
According to Ligi, Social Democratic Party (SDE) leader Lauri Läänemets' view, that tax increases cannot be abolished without also increasing the minimum wage, is nonsense.
"Läänemets is too green to be so obedient. The leader of a party may be a novice, but (these are) basic things that I have told him in several debates. Don't push this minimum wage increase, you won't decide it, you will never decide it," Ligi said. "This is a matter for negotiation between employers and employees. The government is not going to set the minimum wage."
"There won't be any government-defined [minimum wage]. Nor will it be linked to other financial decisions," he said.
"Obviously, we will discuss with employers, whether very low wages are appropriate and whether, at the end of the day, that argument outweighs the risks of workers losing their jobs. We have to look at the employers' ability to pay and we must not play games when it comes to that," Ligi said.
Ligi said, that he would not be standing in the 2024 European parliamentary elections. He added that he wanted to work in Estonia and sees his role in the Riigikogu as that of a debater and adviser.
Editor: Michael Cole