Ratas addressed both the planned extraordinary pension hike, about which conflicting claims have been made in recent days, as well as the issue of the wages of those employees paid from the state budget.

"We have told the elderly that when pensions are indexed next year and in all likelihood the average old-age pension will be approximately €517, this will mean that the €500 tax-exempt minimum will no longer cover it," Ratas explained. "We have decided that we will add €50 for the elderly so that the average old-age pension is tax-exempt in 2020 as well."

The prime minister went on to note that the state has tried in recent years to increase the wages of police, rescuers, people working in social services, teachers as well as cultural workers with higher education as much as possible, but that these raises were coming to an end.

"The current state budget strategy does not  provide for raises next year," Ratas said. "It is not possible for the state right now. But I also see no opportunity for us to go in and cut wages in these fields either."

According to the head of government, the first hints of a tense budget situation date back to late March or early April, one cause of which was 2018 economic growth surpassing forecasts thereof, but budget receipts, including excise duties in particular, not keeping up with this growth, reported ETV news broadcast "Aktuaalne kaamera."

"This was also tied to certain overruns made in 2018," Ratas said. "Much of  them were tied to the social field, such as parental benefits; disbursements of pensions were likewise bigger. And at the end of 2018 was the knowledge that, as the budgetary position was good, which was also confirmed by the Bank of Estonia and the European Commission, certain investments should still attempt to be made at the end of 2018. And this resulted in certain overruns in investments as well."

Hundreds of millions in cuts coming

The Ministry of Finance told ERR that while expenditures of the 2020 state budget are nearly €300 million greater than the 2019 state budget, the government had reached an agreement to make cuts to ministry expenditures and support.

The state budget strategy calls for €84 million in cuts and savings in 2020, €112 million in 2021, €45 million in 2022, and €45 million in 2023.

According to current plans, specific details regarding under which ministries cuts will be made will be revealed during state budget negotiations this fall.

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