Estonian MPs dispute whether to freeze their pay increases

Estonian Parliament is in hot debate over whether to make a publicly popular gesture and freeze its pay increases.

Postimees writes that one of the main advocates of the pay freeze is Urmas Reinsalu, MP for IRL. Reinsalu said yesterday in his speech that at tough times MPs need to be solidary with the country’s people.

“If we were to freeze also pay of other higher officials, the country could save EEK 45 million,” said Reinsalu. Including the freezing of expense accounts of the President of Estonia, MPs and government ministers and wages of ambassadors, the state could save tens of millions more, said Reinsalu who is also chairman of the parliamentary constitutional committee.

The only obstacle to the plan is that according to Section 74 of the Constitution, sitting Parliament is not allowed to change its own wages and can only change wages of the incoming Parliament.

President of Estonia Toomas Hendrik Ilves has already said that he would not be able to proclaim a law that violates the Constitution. Also his legal adviser Aaro Mõttus considers the prohibition absolute and say that before a pay freeze can be implemented the Parliament needs to amend the Constitution.

Advocates of the pay freeze such as Minister of Justice Rein Lang, Law Chancellor Indrek Teder and others claim that the Constitution should not be interpreted based on its text, but based on the objective of its provisions.

The pay freeze is opposed, among others, by MPs of Centre Party and Reform Party.

Under the current system where MP pay is linked to the national averages wages, MPs would see their pay go up by 6,000 kroons next April.

The average wage in Estonia that will grow to EEK 14,000 a month in the fourth quarter raises automatically the wages of MPs, ministries and other state officials in March 2009 as their monthly income is linked to the average wage.

At the moment, an MP earns EEK 49,080 a month or four times 12,270 krooons. Next March the salary will total EEK 56,000.

The MPs are also paid a representative fee that is 30 pct of their wage or nearly EEK 17,000.
“We don’t second that the constitution should be changed but it touches the feeling of justice,” Peep Peterson, the chairman of the Association of Estonian Transport Workers citing the President’s statement that the Parliament should not cut or freeze their wages since it would be unconstitutional.

Peterson added that the system that determines MPs wages should be changed. “If we are facing tough times, they say to the people: We have to cut back! At the same time there seem to be wage rates that cannot be changed. It is painful to see that,” Peterson said.

Source: BBN


Bank of Estonia: Estonia’s economy needs time to recover

Today, October 8, MARTIN LINDPERE, economist of the Economics Department of Eesti Pank, gave a presentation “The current situation and outlooks of the Estonian economy” at the seminar “Estonia’s economic forecast for the next two years” organised within the framework of the Tartu Entrepreneurship Week.

At the seminar, Martin Lindpere provided an overview of the factors affecting the current situation and the development outlooks of the global economy. “Estonia’s small and open economy is largely dependent on the economic success of our major trading partners. The financial systems of Europe and the USA have entered a vicious circle with distrust creating even more distrust. In addition, economic development is affected by high commodity prices and, in some countries, the low of the real estate market. All these factors have contributed to rising uncertainties and pessimism as regards further growth outlooks throughout the world. In larger economic areas, the likelihood of a recession, i.e, a decline in the volume of the economy, has notably increased during the past couple of months and economic growth outlooks have been revised downward,” he said.

He added that for the Estonian economy the key issues are still the questions whether the competitiveness of out enterprises is going to persist and whether the labour market will be able to react to changes flexibly enough. Moreover, we need to take into account that now our economy will have to manage with reduced credit assistance. “Estonia’s economy needs time to recover from the rapid, mainly credit-growth-based period of growth and for the necessary rearrangements in the labour market to take place. The start of a new upward cycle depends on the speed at which markets settle, trust in the financial markets recovers and pessimism withdraws,” Lindpere said.

Source: Bank of Estonia