Public debate lacking on debtor protection bill

  • 2010-04-14
  • From wire reports

TALLINN - The Confederation of Employers is concerned over the legislative proposal that would serve to protect those in debt and which has already been elaborated by the Pro Patria and Res Publica Union, reports Aripaev Online. The employers’ organization fears that the law would restructure all contractual obligations that have been left unfulfilled by individuals.

Although the text of the legislative proposal has not yet been made public, the law is planned to be enforced from Sept. 1, 2010, noted the Confederation of Employers in its press release, urging the political parties to follow good practices in legislation, assess all impacts of the potential law, and not hurry initiating an incomplete proposal in Riigikogu. The organization found that a proposal that will have an important economic impact needs to be introduced before taking it to the Parliament and requires additional analysis and public debate, where the Estonian Confederation of Employers as well as the Estonian Chamber of Commerce and Industry would be included.

“Theoretically, the law on protecting debtors would make it possible for all individuals who are facing financial hardships to demand reducing their debts to the extent that suits them. The plan to reduce debts would essentially mean for enterprises that their losses would increase, and business organizations cannot agree to that,” said the head of the Confederation of Employers Tarmo Kriis.

“The negative outcome of total protection of debtors will, among other things, reveal themselves through decreasing revenue in the State budget and in growing consumer prices,” added Kriis. He remarked that the so-called total protection against debts would also damage the rights of individuals with solid payment habits, as prices of goods and services would increase for them as well; options for receiving credit would decrease and jobs would be lost as well.

“Individuals’ debt burden to credit institutions alone reaches over 100 billion kroons (6.4 billion euros),” he noted, adding that unpaid bills and other obligations would increase this amount even further. The Confederation has estimated that the law would restructure debts worth billions of kroons, and that would have an immediate and extremely negative impact on the business environment.

The organization also stated that due to the economic crisis, pension funds have already changed, the VAT rate has been raised as have the excise tax rates. Restructuring of debts would be another extensive change in the economic environment. The Confederation estimated that a constantly changing business environment hurts investments and makes it difficult for companies to make long-term plans.