Keldo on state budget plan: spending must be cut, some investments postponed

For the second week running, Estonia’s government has been holding lengthy meetings at Stenbock House to work on budget strategy. In recent years state spending has exceeded revenue substantially. Coalition parties blame the need to strengthen defence, while the opposition argues the root cause lies in the ruling parties’ decision to remove the so-called tax hump.

The Reform Party and Eesti 200 have promised to stop the deficit from growing. Minister of Economic Affairs and Industry Erki Keldo (Reform Party) said negotiations are difficult, but the aim is to keep the budget deficit below 4.5% of GDP. That means both administrative and technical spending will need further cuts, and some investments will have to be dropped. When a very large share of the budget goes to defence, certain other investments inevitably have to be postponed, Keldo explained.

Minister of the Interior Igor Taro (Eesti 200) noted that the Finance Ministry has put forward initial proposals to reduce the deficit. Not everyone likes them, and some measures may cause discomfort, but they need to be analysed. He warned against expecting a Santa Claus-style budget, adding that the deficit has to be reduced and there are additional needs linked to security.

The negotiations are due to finish next week so that the Finance Ministry can draw up the budget bill and explanatory text and send them to parliament at the end of the month. However, the governing parties no longer have a majority in the Riigikogu and can only rely on the goodwill of opposition members.

Riina Sikkut, deputy chair of the Social Democratic Party, said a minority government should approach budget preparation differently from usual. She suggested inviting opposition factions and independent MPs to the negotiating table right away, as well as sharing economic forecasts and plans for using European Union funds. Without that kind of early consultation, the prime minister will find it much harder to secure the necessary support in parliament, she argued.