Search for cuts means coalition may ease self-imposed state budget rules

The Vihula Manor Country Club and Spa, venue for the current government state budget talks and meetings.
The Vihula Manor Country Club and Spa, venue for the current government state budget talks and meetings. Source: Raigo Pajula

Coalition politicians do not rule relaxing or otherwise changing state budget regulations they set for themselves during the coalition negotiations in spring, given the changed budgetary and economic situation compared with that forecast at the time, and the new-found need to make cuts of €200 million next year.

While the coalition is due to hand over its state budget bill to the Riigikogu for processing the week after next, the next few days are crucial in terms of providing the Ministry of Finance time to draft the bill and the accompanying explanatory memorandum.

These days are being spent at the Vihula Manor (Vihula mõis) Country Club and Spa in Lääne-Viru County, rather than in Tallinn.

Prime Minister Kaja Kallas says her party, Reform, has always been of the opinion that the existing budget regulations must be adhered to.

"However, we are in an extremely difficult situation, so I think we have to discuss all options. As a result I would not rule in or out any options ahead of the discussion," Kallas said.

ERR reports that the first task facing the negotiators is to find common ground on the major goal, namely the pace at which there will be a move towards a balanced budget. 

That will make it clearer how much money is missing, then discussions can start on plugging that gap.

 Finance Minister Mart Võrklaev (Reform) said on Wednesday that if all the agreements so far, including the cuts agreed on in the summer, are put down on paper, then €200 million is missing from the state budget.

The basic law pertaining to the state budget requires a move towards balance in increments of 0.5 percent of GDP per annum, in other words €200 million in respect of next year.

Sven Kirsipuu, deputy undersecretary for budget policy at the Ministry of Finance, said: "Our state budget law is a bit stricter than the requirements of the EU."

"You could speculate that there is perhaps some room for change within the law. But does this not make up a part of the discussions going on there [in Vihula]," Kirsipuu added.

Eesti 200 vice-chair, and education minister, Kristina Kallas, said that while during the coalition talks in April, all parties pledged to adhere to the budget regulations, as of now, the situation has changed, which means the issue needs to be brought back to the table.

"Not that we should abandon it in principle, but that we have to recognize that at the time we agreed this, the budget figures were a little bit different, and the economic forecast numbers too were a little bit different," she said.

Social Democrats leader Lauri Läänemets said that budget rules are not dogma.

"Though dismantling them is not reasonable in my opinion," he qualified.

"The issue is not that we want to keep the state budget in order. The issue is that in the past we have been permitted to spend all kinds of funds on the voters and we have also said that we will reduce taxes. In fact, we must honestly say that if we want to make some services better, this also involves taxation," Läänemets added.

Once presented to the Riigikogu, which as noted must happen by the end of September, the 2024 state budget bill is subject to debate, amendment and voting, across three readings, with the aim of getting it passed by year-end.


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Editor: Andrew Whyte, Urmet Kook

Source: ERR Radio News, interviewer Madis Hindre.

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