Employers urge Estonia to cap debt at 30 percent of GDP

Estonia’s Employers’ Confederation has proposed capping state debt at 30 percent of gross domestic product, reducing the number of municipalities, linking education funding to results and reforming the family doctor system, ERR reported.

The government began state budget negotiations this week. On Thursday, the Employers’ Confederation published a manifesto calling on political parties and Parliament to make improving economic competitiveness and productivity the main goals of the next two election cycles.

The employers said Estonia’s economy should grow faster than the European Union average and that the country should offer a predictable, favourable environment that encourages investment and attracts companies. State spending must also remain under control, they said.

“Government-sector spending has grown significantly faster than the economy over the past seven years, resulting in the fastest increase in the tax and debt burden in Europe. Harmful effects begin to intensify when state debt exceeds 30 percent of GDP,” the confederation said.

It proposed balancing tax revenues and current spending within clear limits, keeping state debt below 30 percent of GDP and the tax burden below 35 percent of GDP.

The employers also called for a clear plan to attract strategic investments to Estonia and for the development of business tourism. They suggested that Estonia could seek to host an annual meeting of the European Bank for Reconstruction and Development or the World Bank.

The Tallinn Stock Exchange should be included among developed markets, while Estonia’s credit rating should be raised to at least AA and, in the longer term, to AAA, the confederation said. The funded pension system should not be dismantled or weakened.

Employers say Estonia has too many municipalities

The employers said Estonia’s 79 municipalities were too many because some lacked sufficient people and money to organise high-quality services. They called for the administrative reform to continue.

“It would be appropriate for Estonia to establish local governments at the level of county centres, meaning 15 county centres and subdivisions of Tallinn and Tartu, as recommended by the State Reform Foundation,” they said.

Municipalities whose education spending accounts for more than half of their budgets should be merged, the confederation proposed.

The number of public-sector employees has grown by about 5 percent in four years, while employment in the private sector has generally declined. The employers said the state’s share of the economy should decrease rather than grow.

They called for a reduction in the functions of the government sector and in the state’s involvement in areas where the market functions. State-owned companies that are not strategic should be privatised or listed on the stock exchange.

The confederation also called for continued reductions in administrative burdens and bureaucracy. The volume of regulations should fall, excessive reporting obligations should be cut by at least a quarter, and data exchange between the state and companies should be automated so that information submitted once is not requested again.

European regulations should be transposed into Estonian law only to the minimum extent, without adding national requirements, the employers said.

Planning procedures should also be simplified at both state and municipal level, particularly for strategic projects.

Employers call for lower electricity prices

Developers of additional electricity generation and storage capacity need a clear, market-based plan from the state because investment decisions are made decades ahead, the confederation said.

The employers said they supported the goal set out in the Energy Economy Development Plan ENMAK 2035 of keeping Estonia’s final electricity price below the average for the Baltic Sea region.