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President of the Republic of Estonia Proclaimed Package of Acts

17.04.2020

Today afternoon, President Kersti Kaljulaid proclaimed the 2020 Supplementary Budget Act and the Act on Amendment of the Acts Related to the Supplementary Budget Act, i.e. the measures related to the spread of the coronavirus.

Enclosed announcement of the President of the Republic upon the proclamation of the acts:

“Estonia is living in a state of emergency for the second month now and its social and economic consequences are significant. Our economy is suffering to an extent that is difficult to forecast. Unemployment is increasing and the duration of the crisis and its long-term impact on exporting companies is difficult to assess.

The economy of Estonia has achieved its current volumes solely as a result of its export capacity, participation in the European common market and in global supply chains. Therefore, increasing the expenditure of the state alone cannot be an alternative possibility of keeping the volume of the Estonian economy at the pre-crisis level. The package of acts adopted by now is rather a set of measures that help us survive the crisis, hoping that the global economy will recover soon. Measures that guarantee a better take-off acceleration to Estonian companies after the end of the crisis.

This help must quickly reach those who need it. Therefore, I proclaimed the supplementary budget and the related legal amendments that were approved in the Riigikogu on Wednesday. The steps suggested by the Government, which were approved by the Riigikogu in these draft acts, are mostly proportional and aimed at managing the crisis. They comply with the Constitution.

However, I would like to draw attention to two circumstances. Firstly, extensive reduction of the excise tax on all energy carriers is a measure the connection of which to immediate crisis management or mitigation of the impact of the crisis is not understandable. There are certainly many companies who can survive the crisis better with the help of lower fuel prices, but achieving the same goal with targeted support would not force Estonia to compromise on its long-term goal, which is a movement towards are the more energy-efficient economic model. For example, general extensive excise reductions decrease the motivation to invest in the insulation of dwellings, transfer to more economical vehicles, etc. A  lower energy excise tax will not help us become more sustainable whilst the majority of countries are trying to support the achievement of a greener future with the measures aimed at overcoming the crisis.

Secondly, the decision to suspend contributions to the second pension pillar and to later compensate for this and the returns that could have been earned in the meantime may affect the state budget in a manner that cannot be predicted. Compensating the income that retirement savers may have earned is positive in itself. However, it’s unclear why the state is prepared to basically borrow money from retirement savers with an unknown interest rate in a situation where the state’s responsible fiscal policy of the last decades and its place in the eurozone would allow it to raise money for the budget from other sources with very low and fixed interest rates. The state is taking an unnecessary budgetary risk with this step.”

The President of the Republic proclaimed the 2020 Supplementary Budget Act (171 SE) and the Act on Amendment of the Acts Related to the 2020 Supplementary Budget Act (measures related to the spread of the coronavirus that causes the COVID-19 disease (169 SE) that were initiated by the Government of the Republic.

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