Would LHV give Estonia a loan were it a private company?

"I would paint a sadder picture still. Were the government LHV's management board, we'd already be bankrupt," said Rain Lõhmus, founder of Estonian bank LHV.

The government is working on reducing Estonia's massive government sector deficit and agreed on a negative supplementary budget of €175 million last week. Around €100 of this will be come in the form of cuts in various ministries.

"Cutting €175 million is pretending and not real austerity as it makes up a negligible part of our €18 billion state budget. To borrow Jüri Ratas' example of a man weighing 100 kilograms going on a diet, it would amount to losing 400 grams after a year of "brutal" cuts and effort. In dieting terms, it's enough to skip a single meal to get there. That's the state of public finances today," said former Prime Minister Andrus Ansip (Reform).

Ansip, who was head of government during the financially difficult late 2000s, finds that politicians need the people's support before major reform can be introduced. The latter in turn requires explaining what needs to be done and why, instead of blaming everything on increased defense spending.

"Budget expenditure has grown by €6.4 billion while the national defense budget has only grown by €574 million – a mere tenth or less has gone toward national defense, while the rest has gone somewhere. We should start by getting an idea of where it's ending up. National defense is a good scapegoat as it's universally understandable, with people tuning in to news from the war every evening. But it really amounts to lying to the people," Ansip said.

Economic analyst Kaspar Oja said that social spending has grown by quite a lot over the last decade and concerning more than just benefits.

"A lot of this growth [in terms of expenses] is reflected in hospitals' salary funds. Costs there have grown by around 0.5 percent of GDP. The same goes for other healthcare spending. Then there are family benefits on the social side of things, even though the problem is perhaps less acute there, since they're not indexed. They'll balance out as time goes by. Pensions have also gone up following several extraordinary hikes. And in a situation where none of it has been offset by introducing long-term tax changes it's clearly not sustainable," Oja said.

Many experts suggest the government should highlight priorities at the expense of less important areas. A family looking for saving cannot very well not pay their water or heating bills after all.

"We have developed a lot of fields where costs seemingly cannot be cut, areas that constitute political preferences. But looking at what's left, it's not enough to meaningfully change the budget," Kaspar Oja noted.

Next to cuts, tax changes will have to continue. But Andrus Ansip said that these need to be clearly relevant, which cannot be said of the government's sugared drinks or car taxes.

"Talking to experts, many have suggested that postponing the planned abolition of the 'tax hump' (Estonia's gradual basic exemption reduction scheme – ed.) would help postpone problems at least over the next few years," Oja remarked.

What the experts seem to agree on is that improving the fiscal situation is stuck less behind lack of ideas or opportunities and rather amounts to a management problem.

"It has been somewhat surprising that efforts to improve the state budget position haven't really gotten anywhere. I was quite sure it would be achieved and the fiscal position improved as recently as earlier this year," the analyst said.

If the reason is simply inability to agree, a one-off cut based on simple rules is probably the only thing that works, Oja suggested.

"The number one thing is being decisive and united. Looking at the government today, it reminds be of LHV before we became a bank. Back then, it was said LHV was like the swan, pike and crawfish – everyone trying to go in their own direction. There was a lot of fighting which didn't get resolved until the separation. It sometimes happens that a group of people just cannot make decisions. But once we took those difficult decisions, we've been doing pretty well since," Rain Lõhmus said.

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