Government endorses 5.8 percent pension rise

The Estonian government on March 13, 2014 endorsed 1.058 as the value of the index of state pensions effective from April 1, 2014, which means that pensions will rise by 5.8 percent on average.

The value of the index is calculated to the extent of 80 percent based on the change in last year’s social tax receipts and to the extent of 20 percent based on the change in the consumer price index (CPI). According to data of Statistics Estonia, CPI rose 2.8 percent last year while figures available from the Finance Ministry show that 7.3 percent more social tax money than the year before flowed into pension insurance.

The index endorsed for 2014 is smaller by 0.6 percent than the calculated index because in the crisis years 2009-2011 the calculated value of the pension index was below 1.0 but pensions were not cut. The State Pension Insurance Act obliges the government to add or clear the part of index that was not increased or reduced within five years, and the reduction of 0.6 percent this year is the last reduction to offset the effect of the smaller receipts in 2009-2011.

The pension increase this year is estimated to take 62 million euros from the state budget.

The change would raise the old-age pension of a person with 15 years of pensionable service to 209.37 euros a month. With 44 years of pensionable service the new size of the state pension will be 353.33 euros a month.

Source: BNS / Estonian Review

Andrus Ansip’s last day as Europe’s longest-serving PM

March 26, 2014 was the final day of Andrus Ansip (57) as Prime Minister of Estonia. He was PM just short of nine years, specifically 8 years, 11 months and two weeks, wrote Postimees.

In an interview to Postimees, Ansip said that he was very grateful to the Estonian people for their confidence in him.

“Last week Turu-uuringute AS published its survey of public confidence in institutions. It showed that the government is trusted by 46% of the population. This is very high, especially compared to the rest of Europe where governments are usually supported by around 25% of the population,” he added.

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President asks Taavi Rõivas to form next Cabinet

Taavi RõivasOn Friday, President Toomas Hendrik Ilves picked Taavi Rõivas, the Reform Party’s current and second choice for prime minister, to form the next government.

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Taavi Rõivas CV

Siim Kallas withdraws his candidacy as PM

European Commissioner Siim Kallas who was Reform Party’s candidate for prime minister announced today that he is not going to seek the job.

“A situation has arisen where instead of dealing with decisions that pertain to Estonian life, both my loyal assistants and I spend endless time countering accusations, suspicions, all sorts of questions, finally resulting in the opinion that the ‘explanations were not sufficient,'” Kallas said. “A prime minister cannot work effectively in such a situation. It’s a burden on the party, Cabinet and coalition partner.”

Reform Party announced later that their candidate for PM is Taavi Rõivas


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Estonian president starts consultations with parliament parties

Estonian President Toomas Hendrik Ilves on Monday started consultations with parliament parties about forming a new government.

The president met first with representatives of the opposition Social Democratic Party (SDE) and is to meet with a delegation of the junior partner in the present ruling coalition, Pro Patria and Res Publica Union (IRL), later in the day.

The meeting with representatives of the other opposition force, the Centre Party, is set for Tuesday and politicians from the prime minister’s Reform Party are to meet with the president on Wednesday. The Centre Party said it will convene a board meeting before the talks with Ilves.

“I really hope that when representatives of the parliamentary parties arrive, they have their own propositions, their vision on how to proceed, with whom to cooperate,” Ilves said last week after Prime Minister Andrus Ansip tendered his resignation.

The president has 14 days starting from last Tuesday to nominate a prime minister candidate.

The Reform Party and SDE started talks about forming a government coalition at the end of last week.

Source: BNS / Estonian Review

Estonian 2013 state budget revenue was 7.61 billion euros

According to the Ministry of Finance, the 2013 state budget revenue was 7.61 billion euros or 101.7 per cent of the planned figure. Budget expenditure was 7.74 billion euros or 99.4 per cent of the planned figure. By the end of November the government sector’s budget position stayed close to balance.
When including cross-over revenue, the planned 2013 budget’s revenue was 7.48 billion and the expenditure along with the resources transferred from last year was planned at 7.78 billion euros.
The budget received a revenue of 7.61 billion euros along with pre-payments and cross-over revenue. Tax revenue along with cross-over taxes was 6.14 billion euros and non-tax income stood at 1.45 billion euros. Accrued tax revenue formed 101.4 per cent and non-tax revenue 101.7 per cent of the plan. In 2012, the state budget received 103.2 per cent of planned revenue.

The biggest revenue types were social tax, 2.07 billion euros or 100.1 per cent of the plan, and VAT, 1.55 billion euros or 100.1 per cent of the plan. Compared to the budget, the biggest over-performance came from the corporate income tax that was received in the amount of 326.6 million euros, 139.6 per cent of the planned figure. Such solid showing was ensured by the 46-per cent annual growth of private sector dividend payments the main causes of which were the increase in the entrepreneurs’ feeling of stability and the undivided profits that had accumulated over the years. One partial reason might also have been the reduced need for companies to invest. Fuel excise tax was received less than expected (92 per cent) due to the fall in declared gasoline amounts.

Compared to 2012, budget revenue was 129 million euros or 1.7 per cent larger and this is mainly related to the 6.1 per cent increase in tax revenue; corporate income tax was received 29.4 per cent, personal income tax 15.3 per cent, social tax 7.2 per cent, and VAT 3.8 per cent more than expected. As for non-tax profits, the revenue gained from CO2 quota sales increased by 9.1 million euros, environmental fees by 6.4 million euros, and pollution fees by 5.8 million euros. However, subsidies were received 194.7 million euros less and financial revenue 35.6 million euros less than before, primarily due to the partial timing of dividend payments to this year.

The expenditure in 2013 used almost all of the budgeted figure – 7.74 billion euros, 99.6 per cent of the plan. Compared to last year, expenditure rose by 3.3 per cent. Some of the biggest articles of expense were social benefits, 2.83 billion euros or 5.9 per cent more than last year. The increase in social benefits was predominantly due to the increase in pension expenditure and health insurance cost.

691 million euros or 96 per cent of the planned expenditure was directed at investments. As expected, most of the resources earmarked for investments were paid out in the second part of the year, especially in the last month. The investment volume in 2013 lost out to the previous year, mostly due to lower sales revenue from pollution quotas but also due to foreign support that had been reduced as the period ended.

By the end of 2013, 1.19 billion euros or 99 per cent of the budgeted figure had been used for the state’s labor and administration expenses. The breakdown of this figure saw 624 million euros go to labor costs and 564 million euros to administrative expenses. Comparable labor and administrative expenses grew by 45 million euros or 4 per cent when looking at 2012. The primary reason behind the cost increase was the rise of wages.

By the end of December, foreign subsidies had been paid out to the extent of 869 million euros or 91 per cent of the budget. Due to the end of the project and program period and a smaller foreign support budget, these expenses lost out to last year by 24 million euros. Along with agricultural subsidies, a total of 77 per cent of the 4.2 billion euros set for the period 2007-2013 were used. The target levels set by the European Commission for paying out structural subsidies in 2013 were reached successfully. Four out of five fund-based target levels have already reached their 2014 mark.
The volume of liquid financial assets, ie. deposits and bonds, in the state treasury reached 1.42 billion euros at the end of 2013, falling by 2.5 per cent or 37 million euros in a year. By the end of the year, the treasure reserve had 1.06 billion euros of liquid financial assets and the Stabilization Reserve Fund had 0.36 billion euros.
By the end of November, the government sector’s budgetary position had a deficit of 90 million euros (0.5 per cent of the GDP). This is in line with the Ministry of Finance’s summer economic prediction, adjusted on the basis of 2014 state budget processing decisions, according to which the government sector’s 2013 budget deficit should be 120 million euros or 0.6 per cent of the GDP.

Source: Ministry of Finance of the Republic of Estonia

Estonian Prime Minister Andrus Ansip will resign

On the 23rd of February, Estonian Prime Minister, Andrus Ansip (Reform Party), announced that he will submit a resignation to the President on the 4th of March.

Two years ago Ansip said that he was not going to run for the PM again in the next elections in spring 2015. He has been on that position already since 2005.

On the 21st of February, the Board of the Reform Party decided to nominate Siim Kallas (currently working as a Commissioner at the European Commission) as a PM candidate, if Ansip would resign. In principle, it is intended castling between Kallas and Ansip – Ansip would replace Kallas in the European Commission. Kallas has said that the replacement has been discussed with Barroso, as well. Kallas has repeatedly notified that he would like to come back and continue his career in Estonia. He would be the first Commissioner, who would continue on the PM position immediately after resignation.

Kallas has introduced some of his main principles to the public already:

1. To focus economic policy towards raising incomes of Estonian population and reduce the difference between the Nordic partners.

2. Estonia should get by without loans and debts.

3. Main principles of the security policy will not change; Estonia will continue to pay 2% in national defence.

4. He supports the current principles of the reform of municipalities, ie. no forced mergers.

The first principle sounds quite populist as wage growth is already very high in Estonia. Another issue is how to raise competitiveness and based on that increase incomes. The reform of the municipalities has delayed for a too long time and its success is far from satisfactory.

Kallas intends to compose a government that meets the best to the expectations of the Estonian society. At the same time, both Reform Party and the current coalition are less popular than opposition parties, according the recent poll. This is one of the reasons, why Ansip has decided to give way to somebody else. Renewal of the government was long-awaited as the current one has been blamed in fatigue in implementing reforms in Estonia. At the same time, several accusations haven’t been enough explicit. Kallas has said that his main objective is to steer Reform Party to victory during the next parliamentary elections in 2015.

However, only President can nominate the candidate of PM in Estonia, while parliament (Riigikogu) provides the mandate to the PM to form the government. Estonia will get the new government by the first part of April (11 April), at the latest. It is expected that Reform Party will continue together with the same coalition with Union of Pro Patria and Res Publica (having together 56 out of 101 seats in Riigikogu), but some ministers will be replaced. At the same time, it cannot be excluded that Social Democratic Party will be invited to the coalition as well in order to get additional support votes. Inviting social democrats to the coalition could mean the violation of coalition agreement.

In summary, we do not expect the change of the main principles of the economic policy between the next elections in 2015.

Source: Swedbank

Andrus Ansip endorses Siim Kallas as possible PM

The likelihood that European Commission vice president and Transport Commissioner Siim Kallas is preparing a comeback into Estonian politics is growing, writes Eesti Päevaleht.

It’s been ten years in 2014 since Andrus Ansip took over chairmanship of the Reform Party from Kallas. Yesterday Ansip said that Kallas would make a good PM and that the international grasp of Kallas would also be useful when Estonia becomes EU president in 2018.

Kallas also said last week he will not run for the European Parliament, as he does not want to compete against his daughter, Kaja Kallas, and would like to return home.

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Estonian state budget came close to breaking even

Factoring in adjustments for actual revenue and expenditure, last year’s state budget came close to breaking even.

The state collected 7.61 billion euros last year, which represents 101.7 percent of the plan, while expenditure was clocked at 7.74 billion, 99.5 percent of the initial budget, the Ministry of Finance revealed today.

The deficit was predicted at 300 million euros, but has now been revealed to be only 130 million.

The increase was mainly driven by tax on business profits, which increased by 40 percent as many companies opted to pay dividends for the first time in years. Personal income tax, social tax and VAT also increased, by 15.3, 7.2 and 3.8 respectively.

Fuel excise duty was the worst performer, as only 92 percent of the planned sum was collected.

Social benefits made up the biggest slice of the expenditure, 2.83 billion euros, an 5.9 percent increase compared to 2012.

Since 2003, the nation’s budget has ended up in the red half exactly of the times, with the last surplus recorded in 2010. This year’s budget has forecast 8.00 billion in income and 8.06 billion going the other way, but the norm in Estonia is to underestimate income and overestimate expenses.

Source: Estonian Review / ERR

Standard & Poor’s affirms Estonia’s rating at AA-

The international rating agency Standard & Poor’s (S&P) has affirmed its long-term sovereign credit rating on Estonia at the present high level of AA- with stable outlook.

Estonia has the European Union’s lowest debt-to-GDP ratio, a stable political environment and a highly adaptable economy, the agency said.

Source: BBN


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