Stenbock House, 15 June 2020 – In the Riigikogu, Prime Minister Jüri Ratas emphasised in a political statement that the European Union’s plan for economic recovery must aim for a rapid and sustainable recovery and must help prevent the health crisis from turning into a long-term economic crisis.
According to Prime Minister Ratas, the fight against the coronavirus pandemic has had a serious impact on the economy which has put countries, companies, and people in a difficult situation. “This has resulted in the biggest recession in the history of the European Union, which could lead to a much deeper recession than the Great Recession that occurred ten years ago,” said Ratas. “What is certain is that the recovery will be slow. External factors, the situation of our most important trading partners in the neighbouring regions and in the European Union, will, of course, affect us. The European economy, in turn, is strongly affected by the world economy,” said the prime minister.
“Both in the short- and long-term perspective, the goal of the recovery plan for exiting the crisis must be to prevent the health crisis from turning into a long-term economic crisis. Many sectors experienced a steep decline already at the beginning of the crisis, but other sectors will be affected with a delay,” emphasised Ratas. “Europe must find a quick and effective way to help all countries overcome the difficulties caused by the corona crisis,” said Ratas.
According to Ratas, Estonia’s share of the recovery plan of the European Union proposed by the European Commission would be more than half of the amount that has been allocated to Estonia in the current budget period. “The final details will, of course, be worked out in the forthcoming discussions, but the unanimous support of all Member States is required to launch the plan and the European Parliament must also give its consent. My clear wish is that we discuss these proposals and possible agreements before the honourable Riigikogu today and in the near future,” said the prime minister.
The prime minister emphasised that the implementation of the recovery plan must be based on clear conditions and it must certainly not be used for covering past loans and current expenses. “The long-term budget and the economic recovery plan of the European Union will help keep the focus on the future and the commonly agreed political priorities. These include, in addition to competitiveness, turning the digital and green revolution into a new economic growth strategy,” said Ratas. “Future economic growth will largely depend on these investments and reforms,” said Ratas, highlighting the need to draw up an investment plan by autumn.
Ratas added that debt reduction and compliance with the rules of the Stability and Growth Pact must be a clear focus for Europe after the direct crisis has passed. “The review of fiscal rules cannot ignore how the high levels of debt accumulated by the Member States threaten the financial sustainability of the EU, especially the euro area, as a whole,” said the prime minister, stressing the need to temporarily, for the financing period of the recovery plan, raise the own resources ceiling from 1.2 per cent to 2 per cent.
According to the prime minister, the government will submit the decision on the financing of the recovery plan to the Riigikogu for approval in the second half of the year after negotiations at the European Union level. “When making such a weighty decision, any other approach would be inconceivable,” said Ratas.
According to a proposal by the European Commission, the economic recovery plan of the European Union would total 750 billion euros, of which 500 billion euros would be given as grants and the remaining 250 million euros would be available as loans for Member States. As a result, in the next budget period of the EU, the share of funds allocated to Estonia would increase by 3.3 billion euros, of which 1.85 billion euros would consist of grants and the remaining part would be made available as a loan on favourable terms.
According to the proposal by the European Commission and the current estimates, Estonia’s share in repaying the 750 billion euro loan of the EU should total around one billion euros in 2028–2058, which is about 35 million euros a year.
The European Commission estimates that the economy of the EU could shrink by 7–16 per cent this year, and according to the European Central Bank, the euro area economy by 5–12 per cent. The European Commission estimates that Estonia could suffer a recession of 6.9 per cent, which is below the EU average. According to the latest estimate of Eesti Pank, the Estonian economy could shrink by 10 per cent compared to last year; after climbing out of the low point, economic growth may temporarily reach 8.5 per cent next year.
Full text of the statement: https://www.valitsus.ee/et/uudised/peaminister-juri-ratase-poliitiline-a...