While the government is trying to reduce the budget deficit through various tax hikes, politicians have sidelined a reasonable idea for cutting public sector costs.

Currently, civil servants enjoy a 35-day vacation. The Estonian Chamber of Commerce and Industry previously proposed reducing public sector vacations to 28 days, aligning them with those in the private sector. This is a sensible suggestion, and the savings could be used to fund the €1.6 billion needed for ammunition purchases. Additionally, this would allow the government to avoid measures like taxing corporate profits, which would tarnish Estonia's hallmark tax system.

The planned tax increases will dampen short-term economic growth by reducing economic activity. According to estimates from the Bank of Estonia, the changes agreed upon in the coalition agreement will reduce next year's economic growth by 1.1 percent, and by 0.2 percent in 2026. These measures will also accelerate inflation, increase unemployment and slow real wage growth.

Entrepreneur Ivo Suursoo pointed out at the Äriplaan conference last week that every additional percentage point of economic growth increases state tax revenues by approximately €200 million annually. Therefore, it seems wise to implement changes that stimulate economic growth rather than hinder it.

The government coalition and Bank of Estonia representatives counter that the planned tax increases and spending cuts will help restore fiscal stability. In addition, they argue that we need to invest further in defense capabilities to minimize the risk of war. In the short term, these decisions will have a negative impact on economic growth, but in the long term, they will benefit the country.

I don't necessarily disagree with this reasoning and agree that we need to invest in defense and reduce the budget deficit in the long run. However, I'm critical of the choices made because I believe there are better alternatives.

For example, shortening civil servants' vacation time to match that of the private sector would allow for the necessary ammunition and weapons procurement without the need to raise taxes. Of course, this would mean accepting the current budget deficit in the short term, but it seems like a less painful and less risky option.

Former Finance Minister Mart Võrklaev (Reform) said in an interview with Delfi last week that an analysis by the Ministry of Finance this spring showed that reducing civil servants' vacation time could save at least €50 million annually. This amount is roughly comparable to what the state would have to pay annually in loan interest if it decided to finance the €1.6 billion ammunition purchase through borrowing.

In the same Delfi article, Kristina Kallas, leader of the Eesti 200 party, disagreed with Võrklaev. In her view, shortening vacation time would not result in direct financial savings, which is why the proposal was not further discussed during the coalition's budget negotiations.

Kristina Kallas' claim seems unconvincing to me. I find it hard to believe that shortening vacations wouldn't lead to savings. In the simplest terms, reducing vacations by one week would mean that, in the public sector, every 53rd civil servant could be made redundant, as the remaining 52 would work one additional week per year, covering the duties of the laid-off employee.

Another argument in favor of shortening civil servants' vacation is that it would make it easier for the private sector to compete in the labor market with the public sector, and the layoffs would increase labor market supply.

It's also worth considering that reducing the number of civil servants would have a compounding positive effect on the state budget each following year, as public sector wages will increase in the future. Additionally, there are numerous other costs associated with each position – ranging from computers and furniture to travel expenses and training – that would also be reduced.

Of course, the reduction in vacation time should not be viewed solely as a cost-saving measure. If we shorten the vacation period but maintain the number of civil servants, we create the condition for the public sector to complete its work faster.

From the perspective of the civil servants, this change is undoubtedly negative, as it means one less week of vacation every year. However, considering that the state is living beyond its means, a 35-day vacation is an excessive luxury that taxpayers can no longer afford.

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