Today, the Riigikogu deliberated the financial policy of the state as a matter of significant national importance. Reports were by the Minister of Finance Jürgen Ligi, Deputy Governor of Eesti Pank Märten Ross and Chairman of the Finance Committee Sven Sester.
The Minister of Finance Jürgen Ligi noted in his report that the economic growth which began in the European Union last year is expected to continue and to amount to 1.5 per cent. At the same time, he stated that the pace of overcoming the crisis leaves to be desired in many countries, considering the depth of the crisis. In Ligi’s opinion, it is the price paid for overcoming the crisis that makes the economic situation of developed countries problematic. The speed of recovery of economic growth and the sustainability of the reduction of the debt has in its turn a direct impact on the credibility of the financial system and banking sector. “Estonia has come out of the crisis stronger in terms of structure and we can look at the coming years with a mild optimism. Export, industrial production and productivity began to grow rapidly at the beginning of last year and it will continue in 2011. Estonia’s current account is in surplus and the export of goods and services exceeds import. This confirms the desire, will and skills of the society and the economy to reorganise its activities and to cope in rapidly changing circumstances. In addition to the rapid growth of industry and the export of goods and services, the share of domestic demand, that is, of investments and consumption, in economic growth will also increase during 2011,” said the Minister. He stressed that the main objective of economic and financial policy is to uphold the credibility of the state also in complicated times and to create preconditions for the economy to adapt in changing circumstances. This is the only way to ensure the trust of investors, continuing productive investments and creation of new jobs. “The problems of public finances cannot be left for coming generations to solve, they must be addressed at once,” Ligi was convinced. In the Minister’s words, in 2011, the cycle of policy planning was started with new and comprehensive organisation of work. He informed that, previous Thursday, the Government had approved the state budget strategy from 2011 to 2015 as the basic document of the financial and economic policy. The budget strategy also serves as the basis for Estonia’s stability programme and Estonia’s competitiveness plan, approved by the Government, on the basis of which the European Union and the euro zone will assess the conformity of the policies with common European goals. Ligi highlighted four principles in the budget policy of the coming years:
1) the government sector budget will be in surplus by 2013 and the surplus will increase to 1 per cent of GDP by 2015;
2) during the whole programme period, the level of the government sector’s net assets will be maintained, that is, liquid assets will exceed the debt burden, and, starting from 2015, assets and liabilities will begin to be increased;
3) tax burden will decrease to pre-economic recession level and labour related taxes will decrease in the first place (tax burden will be reduced thanks to resumption of mandatory funded pension contributions by 2012 as well as compensations to those people who continued contributions; in order to increase the profitability of work, the Government will lower the income tax rate to 20% and decrease unemployment insurance premium rates); and
4) increase of tax revenues by 6 per cent per year on average from 2012 to 2015 (receipt of taxes will improve thanks to the accelerating economic growth and growing employment; in addition, dividends of companies, the additional rise of tobacco excise duty in 2013 and lowering of the maximum amount of the income tax incentive will also contribute to state revenues).
In his report, Ligi also referred to the steps agreed upon by the European Council and the Council of Ministers of the European Union in 2010 and in the first half of 2011, such as organisation of the financial policy of the state, cleansing the financial sector of bad loans and placing it into strengthened frames, as well as carrying out structural reforms in order to increase competitiveness and to be ready for long-term challenges such as the aging of the population. Ligi: “All the while, not only has Estonia’s economic policy been at the forefront but it has to a significant extent anticipated agreements at the European level.”
In his report, Deputy Governor of Eesti Pank Märten Ross paid attention to four issues: price and monetary stability of the euro zone; macroeconomic stability in Estonia; the European budgetary framework and also, briefly, financial stability.
Chairman of the Finance Committee Sven Sester stated that, in previous years, the interest of the Finance Committee had been focused first of all on overviews of the budget strategy and the convergence programme. The Finance Committee initiated the deliberation of the financial policy with the aim of creating a tradition, envisaging that the deliberations held in spring would focus on budget strategy documents on a wider scale. The legislative proceeding of the state budget of the corresponding year would take place in autumn, respectively. In Sester’s words, the Committee attached importance to the need to discuss and negotiate the state budget strategy not only in the Finance Committee but in the Riigikogu plenary assembly together with other topics concerning financial policy. This way, an opportunity to present reports, opinions and questions will be given to all members of the Riigikogu, with the aim of bringing the information and problems to a wider public through a compact discussion tackling several important issues. In the Committee’s view, the most important aspect is to obtain a whole picture of the current situation of public finances and the planned changes in this area.
Sester also gave an overview of the discussions which had been held in the Committee with the participation of representatives of the Ministry of Finance and Eesti Pank. The Chairman of the Finance Committee drew attention to the OECD overview concerning Estonia in which Estonia’s strong budget position is highlighted. Estonia has never been under the European Union’s excessive deficit procedure and the debt is the lowest among OECD countries. He also considered it important to recall the three great touchstones, underlined in the International Monetary Fund statement, that Estonia is facing which will have to be withstood in order to maintain the growth. They are the following:
1) ensuring the consolidation of the budget and establishing a counter-cycle budgetary policy,
2) financing of the recovery of the economy and maintaining of the endurance of the financial sector, and
3) the full use of potential resources and restoration of competitiveness. Sester: “All today’s reports and the materials they are based on have been prepared with the aim of ensuring long-term sustainability of the public finances and a balanced budget.”
Comments were presented by Members of the Riigikogu Aivar Sõerd, Eiki Nestor, Jüri Ratas, Margus Tsahkna, Lembit Kaljuvee, Taavi Rõivas and Tõnis Lukas.
The Riigikogu concluded the first reading of three Bills initiated by the Constitutional Committee:
1) Draft Resolution on formation of the state budget control select committee
), according to which Members of the Riigikogu Arto Aas
, Annely Akkermann
, Margus Hanson
, Kajar Lember
, Inara Luigas
, Priit Sibul
, Mihhail Stalnuhhin
and Neeme Suur
will be included in the committee.
2) Draft Resolution on formation of the security authorities surveillance select committee (16 OE), according to which Members of the Riigikogu Peep Aru, Kalev Kallo, Väino Linde, Aadu Must, Heljo Pikhof, Marko Pomerants, Indrek Raudne and Jaan Õunapuu will be included in the committee.
3) Draft Resolution on formation of the select committee on the application of the Anti-corruption Act
), according to which Members of the Riigikogu Rein Aidma
, Andres Anvelt
, Kalev Kotkas
, Lauri Laasi
, Meelis Mälberg
, Erki Nool
, Aivar Riisalu
and Andrus Saare
will be included in the committee.
For more details, read the verbatim record of the sitting (in Estonian):
The Riigikogu Press Service