Reformists reject People's Union deficit proposal

  • 2005-12-07
  • From wire reports
TALLINN - The Reform Party has rejected a proposal by Villu Reiljan, leader of the People's Union, to give up the country's tradition of surplus budgets and start running a deficit.
The secretary general of the Reform Party, Kristen Michal, told the Baltic News Service that a conservative fiscal policy was one of the founding stones of Estonia's economic success, and that the Reform Party, one of three in the ruling coalition, saw no reason to change it.
"We, the Reform Party and People's Union, adhere to different positions as regards economic policy, but in the present coalition we have found common ground," Michal said. "Today's coalition definitely doesn't intend to change the principles based on which the budget is drafted."

"We are not in favor of borrowing at the expense of future generations," he stressed.

As an example, Michal said that he just returned from Jogeva county, in eastern Estonia, where the People's Union had been in power for almost 14 years. It is one of Estonia's poorest regions.

"This shows that the economic policy of the People's Union has not been the most successful," he said.

Reiljan, however, argues that Estonia should borrow more to reconstruct its roads and schools and modernize remote heating and water supply networks.

Other EU members are running budget deficits to the extent allowed by the Maastricht treaty, Reiljan said, which permits EU members to take new loans to finance important investments directed to the future.

What's more, in order to be able to use EU support, Estonia must be able to co-finance projects to their required extent, said Reiljan, who is currently the environment minister. "Now it is clear that without taking loans, the Estonian state is unable to do it and a large part of potential European investments either remain unused or are replaced with penalties," Reiljan said.

"If we don't start acting like a modern European state and continue attempts to find money for investment from current incomes, we will never have money for spending in the social sphere. To allow this to happen would be irresponsible," he said.

Latvia serves as a good example, Reiljan mentioned, because it borrows money, runs a small budget deficit and enjoys economic success.

He also dismissed the words of Res Publica chairman Taavi Veskimagi, a former finance minister, that only money earned as current tax income can be used for investment

"No country has ever been able to do it and neither will be ours," Reiljan said. "By doing it that way we'll indeed become a backwater of the EU."