TALLINN - The 2009 draft state budget, received a flood of criticism from the Estonian press following its approval by the government on Sept. 26.
The budget announced revenue of 97.8 billion kroons (6.2 billion euros), falling approximately 800 million kroons (51 million euros) short of the 98.7 billion-kroon (6.3 billion-euro) expenditure figure.
This represents the first negative balance in an annual budget since Estonia declared independence from the Soviet Union in 1991, and it has been widely denigrated in the local media.
Prime Minister Andrus Ansip has defended his government's budget, declaring before Parliament that the word "balance" describes his budget most expressively.
"Its balance in fiscal political means 's balances between incomes and expenses planned by the country. We don't spend over our options; we don't live on expense of our future," Ansip said.
The Ministry of Finance has refrained from labeling the budget a deficit on the basis that not all planned expenditures will be enacted in the next year, meaning that true expenditures will likely be lower than that calculated.
However, former Minister of Finance, Taavi Veskimagi, has pointed to these estimated expenditures as inaccuracies on behalf of the government.
"There is one kind of expenses which are estimated, in other words which must be spent as needed. I think it's the sole responsibility of the minister of finance not to plan these estimated expenses under what must be spent," Veskimagi said.
Vaskimagi also said that the government overestimated economic growth, causing an inflated perception of budget income.
"The Ministry of Finance forecast in August, which promised a state budget income of 91.6 billion kroons (5.8 billion euros), was based on belief the economy will grow 2.6 percent, which is too optimistic," he said.
The disparity between projected and actual budget income left the government with a vast 7 million-kroon (447,380-euro) void to fill, accounting for the enforcement of some deep cutbacks and revenue-raising strategies.
Significant welfare cutbacks are among those most likely to provoke the public. The government has saved an estimated 60 million kroons (3.8 million euros) by abolishing the 10-day paid paternal leave scheme, and a further 70 million kroons (4.4 million euros) by scrapping the 300-kroon (19-euro) annual dental compensation that citizens are entitled to.
On the other hand, businesses have been a primary target for revenue raising. The accommodations sector is facing a dramatic value-added tax increase 's from 5 percent to 18 percent 's while the government also requires that all state companies, even those that are underperforming, submit dividends to the state.
The chairman of the Estonian Hotel and Restaurant Association, Feliks Magus, is outraged by the tax jump, and believes the decision may violate the constitution.
"On one hand, I understand government's problems and understand the needs of state budget, but for our industry it's a short-sighted decision. First it will hit our sector and then everyone who is linked to that sphere, also state income as whole," he said.
Minister of Finance Ivari Pader has conceded that some tough decisions had to be made, but remains convinced that the government has made the best of a bad situation.
"Given the way the economic situation has changed, it's obvious that some unpopular decisions have had to be made while putting the budget together, in terms of taxes, and support that will now have to be withdrawn," said Pader.
"I'm glad the government managed to strike a balance between economy, increasing revenue and necessary expenditure, despite the narrow budgetary framework we had to work within," he said.
Budget priorities, indicated by ministries that have received minimal funding cuts, come in the form of defense and education.