Public spending not the answer

  • 2008-04-18
  • In cooperation with BNS

TALLINN-Estonia'sprime minister Andrus Ansip announced that an economic recession cannot beavoided by raising public spending.

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

Ansip says he does not agree with Neivelt's suggestion tolet 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 cashreserve to three billion kroons (EUR 191.7 mln) last year, and the variousreserve funds altogether hold about 24 billion kroons."

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

"Increasing public spending would drain productionresources also from export and that would rather be a crime regarding furthergrowth of our economy," Ansip said.

 Prime Minister Ansip made a surprise announcementlast week, stating that he was not prepared to immediately send a negativesupplementary budget to parliament in order to balance the underperformance ofthe state budget revenue.