Minister of Education Kristina Kallas (Eesti 200) said that as long as the war in Ukraine continues, the budget deficit cannot be reduced ahead of schedule, as this would mean cutting defense spending. Kallas added that after the war ends, it will be possible to reassess priorities.
What does Eesti 200 plan to do to show people that it deserves to stay on the political landscape?
It is a bit early to talk about election results eight months before the vote. We cannot predict the issues that will matter to Estonians at that moment. Voters judge parties by the work they have done and their plans for the future. We have been in government for four years and carried responsibility during difficult overlapping crises, and we have not run away. Voters will judge that work, but in March they will look to the future and what parties plan for Estonia.
I have not heard Isamaa’s proposals for economic development beyond lowering taxes and raising family benefits, which is a very populist view and not possible to carry out.
The biggest question for leaders is how to ensure Estonia’s well-being and functioning services during a difficult time when war is underway in Europe and we must also work on strengthening defense capability.
I would urge parties to focus less on populism and lying to voters, because [Isamaa chair] Urmas Reinsalu knows it is not possible to lower taxes and at the same time significantly raise family benefits. He knows this. Yet he still goes to voters with false promises. The disappointment afterward is too great. The Reform Party has made this mistake once, not by lying but by failing to tell the truth about the state of public finances.
I hope Estonians see that we cannot carry out everything to the maximum when we are in a wartime situation and must focus first on defending the country.
But you agree that people expect a plan from the government? An ordinary person’s question is simple – how will things be fixed?
An ordinary person does not need to look for answers on how to structurally balance the budget. That is why they elect people to Toompea, to do that work. Those people simply must not lie.
I am unpopular because I said honestly that with pension indexation we will not manage over the next 10 years. It is very unpopular to say that. There are many unpopular things that must be said, and we must be honest about them.
Prime Minister Kristen Michal carefully watches who has spoken about pensions and often reads out the names of those who have promised to take money from pensioners.
We have had a different view from the Reform Party on whether we should say this honestly. For the next five to six years it is not yet such a critical problem, but in 10 years the index simply will not hold because the number of working-age people will fall drastically and the number of people on pensions will rise sharply.
In that case, mathematically it is not possible to maintain the indexed first pillar system we have today. It is honest to tell people that in 10 to 15 years such an indexed first pillar is not guaranteed. The state must say honestly what is happening. This will not affect current pensioners, but we must think further ahead.
I know that in preparing for the next elections, Isamaa is planning to dismantle the second pillar entirely by stopping state payments into it. This is simply criminal toward my generation and younger generations. That would eliminate any guarantee of growing well-being in retirement.
Do you know anything about next year’s salaries for teachers, rescue workers and police officers? Has this been discussed in the coalition or is everything still open?
Everything is still open. Eesti 200 firmly believes that we cannot leave salaries at zero growth because the average wage is rising and public sector pay must keep pace. Strong and qualified people are needed in the public sector. If the pay gap grows too large, even in economically difficult years, it will have a negative impact on the country as a whole.
Politicians promised teachers the moon and stars before the last Riigikogu elections. Will those promises be fulfilled by the end of the governing period, or can we already say that too much was promised?
For teachers’ calculated average salary to reach 120 percent of Estonia’s average, €90 million would be needed next year, which means a 14 percent pay rise. I have sent this calculation to the Ministry of Finance, but it is hard to predict the real possibility of a pay increase. It depends on budget performance and next year’s economic forecasts.
€90 million is difficult to find, especially considering that the Reform Party decided to start meeting budget rules ahead of schedule?
It is very difficult. Naturally, I would like to leave the government with a budget situation where we have planned the correction path, but as long as war continues in Europe, it is hard to ensure defense capability and make large investments elsewhere.
If the priority is defense capability, nothing else can be a priority at the same time. I remain pessimistic here, even though theoretically I agree that our government should work to reduce the budget deficit. But it is very hard to do that while war continues in Europe. The situation will change when the war ends. When the war in Europe ends, I think we will have a new reality and it will be possible to reassess priorities at the leadership level in Estonia.
So right now we should use the moment when Europe has agreed to suspend budget rules?
As long as we must focus on defending Estonia, defending Europe and supporting Ukraine in this war, I do not see a possibility to reduce the budget deficit ahead of schedule. That would essentially mean pulling back on defense spending, because defense costs are the main drivers of the deficit.
Raising defense spending from two percent to five percent over five years has been a very large increase, and it has not been matched by tax or other revenue growth. We inevitably must use more loan money than before, which increases the deficit. As long as defense spending is at five percent of GDP, it is extremely difficult. Unless we raise taxes again, which I do not think we will do because it would weigh heavily on the economy.
This transcript has been edited for length and clarity from original Estonian version.
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