Tensions in the studio as party chairpersons debate budget, pensions

Chairpersons of the parliamentary parties on ETV's
Chairpersons of the parliamentary parties on ETV's "Esimene stuudio" on Wednesday night. Sept. 11, 2019. Source: Kairit Leibold/ERR

ETV's "Esimene stuudio" hosted the chairpersons of Estonia's five parliamentary political parties on Wednesday night to debate on topics including the state budget, investments, pension increases and the second pension pillar. Halfway through the program, the discussion started getting heated as participants increasingly talked over one another.

On the subject of the state budget, Centre Party chairman and Prime Minister Jüri Ratas said that in the case of a state budget drawn up in cooling economic conditions, wages in the fields of internal security, education and medicine would not be touched, but he couldn't yet discuss any more specifics.

"We need to review the full budget," Ratas said. "We will submit a very good and proper budget to the Riigikogu."

Kaja Kallas, chairwoman of the opposition Reform Party, said that the drawing up of the state budget is tense because Ratas' government has spent beyond its means.

Best practices call for increasing reserves during the good times in order to better weather the bad times, but as Ratas' government has spent everything during the good times, now that the economy is showing signs of cooling, there is no extra money, as none was saved, she noted.

State budget to be audited

Conservative People's Party of Estonia (EKRE) chairman and Minister of the Interior Mart Helme retorted that under Reform's leadership, the state was made much too expensive, as a result of which the state budget should be audited.

"We're going to root out everything that is draining the state budget, that isn't necessary and that was first included there maybe 15 years ago," Helme said. "The Reform Party was in the government for 17 years, and in that time created a state that is fat, lazy and ineffective."

He promised to find millions in the budget which could be rerouted to promote the Estonian economy. Ratas, in turn, confirmed the government's plans to audit the budget.

Isamaa chairman Helir-Valdor Seeder said that the state budget is no more tense than preceding budgets were, and that the situation has been shaped by officials' economic forecasts, which have changed significantly, and so it isn't necessary to look for someone to blame.

This government is looking forward, Seeder asserted, by focusing on optimizing the state's fixed costs and long-term investments.

"We'll be sure to find potential savings," he promised. "The budget will be submitted in accordance with the law."

Kallas, however, criticized the ruling Centre-EKRE-Isamaa coalition for lacking a view on long-term investments, saying that they should begin by fulfilling the promised 1 percent GDP investment into research and development, upon which Estonian society's development and wealth hinges in the long term.

Ratas did not agree with Kallas, citing climate- and environment-related decisions among long-term investments, including the electrification of Estonia's railways, a matter that awaited a decision for 15 years, but also the long-awaited construction of new or renovation of existing buildings for Estonian Public Broadcasting (ERR), the National Library of Estonia as well as the National Archives of Estonia.

Seeder noted that defense spending, which is a priority, would definitely not see any cuts, but also added that research and development funding would increase in tandem with Estonia's economic growth; the goal remains 1 percent of the GDP, but the state will not reach this mark next year.

Creative approach to investments, recession

Helme promised that the field of internal security would not see any layoffs. "The police chief will not have to start laying people off," he said.

Forward-thinking investments, however, are being planned. "It's not true that we are not looking to the future," he continued. "But we're looking creatively, not in a stagnating way. We're looking for opportunities to get what is necessary done."

According to the EKRE chairman, Estonia cannot keep expanding its highways to 2+2 lanes ten kilometers at a time, or else it will take a century to get it done and the first parts to be finished will already need to be redone.

"If we do so creatively, we can complete these roads quickly," he promised.

Helme described as creative the plan to redirect a surplus of people who will end up unemployed during the upcoming recession into the roadwork sector. "That is a buffer that will help us overcome the slump," he said.

Kallas drew attention to the fact that the government hasn't even begun preparing for the construction of four-lane highways. In order to be able to start building them within the next couple of years, planning for them should begin now already, but thus far the government has nothing to show for themselves regarding this project.

Funding for extraordinary pension hike

Regarding pension increases, Ratas repeated what had already been stated this week, saying that pensions are expected to increase on average 8 percent next year thanks to their indexation, but within the next two to three weeks, it will become clear whether the government will be able to find enough money for an extraordinary pension hike.

"We can't say for sure right now yet that an extraordinary pension hike plus indexation will be €100 by April 2020, but we are all working hard to ensure that it is as big as possible," the prime minister said.

Helme admitted that the coalition spent several hours before the broadcast calculating figures to determine their possible capability of providing an extraordinary pension hike and fulfilling other promises. Talks would continue in the Cabinet on Thursday, he added.

"It would be premature and wrong to cite specific numbers today," the EKRE chairman said. "I cannot swear on a Bible and say that this is how things will remain."

'All these years have been one big impact analysis'

The chairpersons' statements ended up sharpest in regard to the second pension pillar, by which point the politicians began talking over and interrupting one another.

Ratas fended off criticism from the Bank of Estonia according to which the government's planned pension reform was being carried out without an impact analysis.

"It can't be said that there is and will be no impact analysis," he said. "All these years have been one big impact analysis of what is in our accounts. The productivity of the second pension pillar isn't nearly that which was promised to us from the start."

Seeder, the mastermind of the reform, promised that an actual impact analysis would be completed as well. He also claimed that debt collectors could not lay claim to an individual's second pension pillar funds if the latter invested it themselves, however claims could be made against an individual's free funds, and this would remain the case going forward as well.

Ratas likewise confirmed that impact analyses are likewise in the works in both the Ministry of Finance and the Ministry of Social Affairs. He did not, however, share the opposition's pessimism regarding the dismantling of the second pillar and the related increased risk of poverty among lower-income people in particular. "The people of Estonia are very smart when it comes to their finances, and in the long term are fairly conservative as well," he commented.

Helme, on his part, was angry at those who pushed the second pillar. "When the pension system was founded, every time I set foot in a bank, they tried to foist the second pension pillar onto me," he recalled. "The volume of my assets, which in this pension pillar would have only been maybe a few tens of thousands of euros, is several, several times greater thanks to the fact that my money has remained mine to spend and invest."

Social Democratic Party (SDE) chairman Indrek Saar highlighted the fact that when the Social Democrats were in the government, it was decided that pension fund management fees would be reduced, indicating a step toward improving the pension system.

"Throughout the years, the second pillar's yields have remained above the increase in the cost of living," Saar pointed out, noting that if this money had simply sat in bank accounts, it would have depreciated much more quickly. "Are we going to just throw out a carefully built system and start building a new one?"

'Poor people can remain in pillar'

The SDE chairman noted that those with the most to lose if the second pension pillar is made voluntary are those with the lowest incomes, should they decide to withdraw their funds, adding that it is really only people like Helme, who already earn generous incomes, that are capable of investing their own money.

"We're not taking away anyone's opportunity to remain in the second pillar," Helme replied. "Payments [into it] will continue if people decide not to leave the pillar. Poor people will have the opportunity to remain in the second pillar, and their investments will grow there, if you so claim. Wealthier people, however, will have the opportunity to grow their ow money if they can withdraw their savings from the pillar."

Seeder said that in the long term, the first pension pillar's yields have been better than those of the second pillar, as it has taken economic and wage growth into account, thanks to which it is growing much faster than funds' yields.

"The first pillar is significantly more solid than the second pillar, which we now want to make voluntary," he said, claiming that the Social Democrats are defending the second pillar first and foremost in financial institutions' interests.

Saar, however, warned that the first pillar's yields will only remain bigger than those of the second pillar so long as the working-age population remains bigger than the number of pensioners, as it is based on the social tax paid by working-age people. As this is set to change, however, the first pillar's yields will likewise shrink.

Ratas said that if the second pension pillar is made voluntary, an extraordinary pension hike must be made in the first pillar in addition to indexation, as more than 50 percent of Estonia's elderly population lives below the relative poverty line.

Kallas interpreted this to mean that the prime minister is in favor of withdrawing funds from the second pension pillar, as people will have to pay income tax on these withdrawals, which will then be used to fulfill the Centre Party's election promise of an extraordinary pension hike. She called Ratas' plan exceptionally cynical.

Helme, however, claimed that the demographic threat of the number of pensioners exceeding the working-age population does not exist, as unlike the chairpersons of the two opposition parties, the chairmen of the coalition parties have four to six descendants each.


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Editor: Aili Vahtla

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