Reform supports Bank of Estonia’s proposal to reduce deficit | News

“We call on all Estonian political parties to support the goal of reducing the state budget deficit gradually and thoughtfully. Next year we will set the objective that the deficit may reach four percent of GDP, after which we must continue reducing the deficit at the same pace: to 3.5 percent in 2028, then to three percent, and thereafter to a maximum of 2.5 percent of GDP,” the statement said.

The statement added that savings will not come at the expense of defense.

The party said reasonable borrowing may be necessary during crises, but a permanent and growing deficit cannot become the new normal.

“This means savings, but not paralysing the functioning of the state. It means responsible and systematic work: every year opportunities must be found to make the state more efficient, spend taxpayers’ money more wisely, abandon expenditures that are no longer unavoidable, and gradually bring state revenues and expenditures into better balance,” the Reform Party’s statement says.

Statement released two hours before party leaders’ meeting

Reform’s statement was released two hours before a party leaders’ meeting organized by the Social Democratic Party Chairman, Lauri Läänemets, and Ülo Kaasik, president of the Bank of Estonia, to discuss the country’s finances,

Reform Party MP Maris Lauri told ERR that the party board’s decision was not an attempt to score political points against the opposition. She said Reform had discussed its plan for several weeks already.

However, Läänemets said both the prime minister and the finance minister dismissed the idea a week ago.

“It seems that the Reform Party’s proposal has been made in haste, because the plan they have formulated does not fit together very well. There is also another possibility, that they are continuing with a policy of ‘after us, the flood,’ because the idea they have put forward would immediately lead the next government to that,” said the chairman.

He added that Reform’s plan would also mean freezing all wages, education and healthcare spending for four or more years and imposing on the new government an obligation to find €1.8 billion starting from 2028.

Government – Reform and Eesti 200 – and opposition politicians – Isamaa, EKRE and SDE – also remain divided on how realistic the plan is and how much money can be saved.

Lauri said that saving half a percent amounts to about €300 million per year. Where exactly this would come from is a matter for negotiations on the state budget and the State Budget Strategy.

“Our principle is that we do not harm security, meaning security-related expenditures must be made. The changes must be such that the economy can continue to grow and people’s welfare does not deteriorate, meaning we must also take social aspects into account. This will certainly be a very difficult process,” she said.

However, Läänemets put the figure closer to €400 million next year, and €800 million to €1 billion in the following years.

“Moreover, for the next four years, all wages would have to be frozen, including in healthcare – no additional money could be put into healthcare – the crisis in special care services would remain unresolved, and higher education and everything else would be left without additional funding,” he said.

Lauri referred to the Bank of Estonia, which has pointed out that although Estonia’s debt is the lowest in Europe, it is growing rapidly. Interest payments are also beginning to rise, which means they will start affecting the budget, she said.

Läänemets responded that he cannot imagine a new government taking office in May 2027 being capable of making decisions to find €1.8 billion for the state budget, especially since, if tax decisions are involved, the laws would have to be enacted by July 2027.

The parliamentary elections will take place on 7 March next year.

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