Public spending not the answer

TALLINN-Estonia's prime minister Andrus Ansip announced that an economic recession cannot be avoided by raising public spending.

"It was refreshing to read Indrek Neivelt's comment in Saturday's paper," Andrus Ansip says, referring to the former Hansapank president's idea to consider tapping into reserve. "Not that I agree with all his views -- definitely not. But I'm glad there are people who do not think it sensible to draw up in two weeks a plan for freezing the budget."

Ansip says he does not agree with Neivelt's suggestion to let the budget go into negative numbers at the expense of the reserve: "It's not as if we didn't have any reserves: we do. We increased the cash reserve to three billion kroons (EUR 191.7 mln) last year, and the various reserve funds altogether hold about 24 billion kroons."

Neivelt's idea that the slowdown of economic growth which was excessively driven by the growth of domestic demand could be avoided by increasing public spending is in the prime minister's judgement a "surefire crash scenario."

"Increasing public spending would drain production resources also from export and that would rather be a crime regarding further growth of our economy," Ansip said.

 Prime Minister Ansip made a surprise announcement last week, stating that he was not prepared to immediately send a negative supplementary budget to parliament in order to balance the underperformance of the state budget revenue.