Tsahkna: Vihula budget talks unlikely to result in popular decisions

Day one of a two-day cabinet summit at the Vihula Manor Spa and Country Club, where the 2024 state budget and the four-year state budget strategy are being discussed.
Day one of a two-day cabinet summit at the Vihula Manor Spa and Country Club, where the 2024 state budget and the four-year state budget strategy are being discussed. Source: Jürgen Randma/Government Office

Minister of Foreign Affairs Margus Tsahkna (Eesti 200) said that no popular state budget decisions are expected to be made at the Vihula meeting. The Foreign Ministry has identified up to €1.4 million in savings.

Tsahkna said that the foreign ministry's total budget is €110 million and between €1.2 and €1.4 million in savings have been identified.

"As a minister, I have had to cast a wide net. Specifically regarding bureaucracy, salaries and personnel. Administrative expenses are budgeted between €1.2 million and €1.4 million," he said.

Tsahkna also confirmed what he had previously stated, that no embassies would be closed, as this would only provide a minor financial relief, but would be extremely detrimental to Estonia's international relations. He did not, however, comment on the possible closure of consulates.

At the same time, the Ministry of Foreign Affairs requests a few tens of millions of euros from the budget to assist with the rebuilding of Ukraine. "Today, at a historical juncture, several major countries, the G7 and the European Commission, are launching a multi-billion program to rebuild Ukraine. Estonia must contribute, and Estonian businesses must have access to the reconstruction process," Tsahkna explained.

"This is an investment so that we can participate in the economic process that will take place over the next decade, which will also contribute to the revitalization of our economy. Consequently, we address the budget debate not only in terms of where we can draw from and raise tax revenue, but also in terms of whether there are measures to stimulate the economy and bring in more money," he added.

According to Tsahkna, there are major issues with national budgets for the next four years and the approaching year. The government lacks a comprehensive strategy for reorganizing public finances, he said.

"We are going into deficit today, and we're going into deficit due to the decisions of previous governments. We have decided to place 3 percent of our budget into defense spending, which we are not going to change because the security situation is as it is, and this has added an additional burden. Despite the fact that we have already made a number of decisions on income tax and VAT tax changes, the gap is still enormous. And I would like to know how this shortfall is going to be resolved. Otherwise, we will have to borrow more, and our interest payments to the banks are already over 1 percent of GDP, which is equivalent to half of our current defense expenditures. This is unacceptable and should not be allowed," the minister said.

According to him, major decisions have to be made in relation to the budget. "We need to change policies. We need to make bigger and more fundamental decisions, and whether we are ready for that and what exactly they will be, is what we need to discuss."

Tsahkna pointed out that the tax burden should be around 35 percent to establish the type of country that people want to live in, namely a Nordic-style country with higher salaries and excellent services, but in his opinion further tax burden increases in Estonia are undesirable.

"So, the question is whether we should eliminate certain policies or substantially revise others. And I have nothing to say at the moment because we have just begun our discussions. Increasing the flat tax, which we have already done, will not happen overnight. In fact, even when we were negotiating the coalition agreement, all coalition parties voiced the justifiable concern that prior to the elections, nobody discussed tax increases and how dire our fiscal situation was, except for Eesti 200," Tsahkna said.

According to him, Eesti 200 would like to carry out a zero-based budget audit to learn, where taxpayer funds are spent, as well as a personal state reform. He added, however, that this would not immediately generate the necessary revenue for the following year's budget.

Tsahkna said that nothing good can be expected from the budget discussion in Vihula.

"Because the mood in government is so positive, I am keen to see if we can acknowledge the problem and begin solving it right away, or whether we simply postpone it. I believe that the longer it is delayed, the more agonizing it will be in the future. This Vihula meeting is not likely to produce any popular outcomes," the foreign minister said.


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Editor: Merili Nael, Kristina Kersa

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