Estonia has already entered the new phase of the economic crisis and the question now is to what extent we will be able to minimize its consequences and to survive the crisis, said the Minister of Finance of Estonia Martin Helme.
It is reported ERR.ee
“The figures show that this sharp drop from 2008. And this will have consequences in real life. The balance of the enterprises sharply reduced, and banks will begin to withdraw loans or require additional collateral. Enterprises that Finance themselves by issuing bonds, will no longer be able to do it,” said Helme on Tuesday evening in the program “Esimene Stuudio” on the ETV, commenting on the consequences of the epidemic coronavirus and a price war in the oil market on the economy.
According to the Minister of Finance, economic crisis, and the question now is how to minimize its consequences and to find ways to extract from it some benefit. However, planning in advance is almost impossible because of the unpredictable changing situation.
“We see that all happened within two months, in the European context to two weeks. The first conclusion is that such a bad “visibility,” as now in the economy, we have never had. We are not able to predict what will happen in two weeks, two months,” said Helme.
According to him, Western countries are now in a much more difficult situation than during the 2008 crisis. “As the global and European economy’s debt load higher than ten years ago. Unemployment more. Competitiveness is worse than before the 2008 crisis. Said it would be a smooth decline. Now, instead of deafening the bubble burst,” — said the Minister of Finance.
Helme noted that in every crisis there is something positive. For example, the budget rules of the Eurozone, which prevent Estonia to borrow allow the exclusion of in emergency situations. “In the European fiscal rules, there is a very clear exception: in the event of an unforeseen event these rules do not apply. If there is a fall, it will have the right to spend more to divert the budget in the negative,” — said the Minister.
According to Helme, the government does not intend to respond to the crisis with cuts in budget expenditures.
“Now we’re obviously in a phase of economic recession, and the worst thing that you can do in this phase is the reduction of public spending, which reinforces the downturn. Still a very large part of the economy tied to public investment and wages in the public sector. If we start to cut them, then we will intensify the downturn. We definitely do not” — said the Minister of Finance.
Helme confirmed that the government is not thinking about budget cuts, and the so-called “Commission of crocodiles” in the near future will not have meetings. “This way of thinking that was 10 years ago that the most important thing is a balance budget that he did not go into negative, completely alien to the current government. No crazy cuts just will not” — promised the Minister of Finance.
Helme noted that public investments in any case have a positive effect in the long term, and currently it would be unreasonable to refuse loans. “Moreover, this cost is cheap: the supply of money by Central banks was widespread, and Estonia — the “Golden” client. Budget rules allow for flexibility”, — said Helme, who said that the exact size of the loans are now very difficult to call.
The Ministry of Finance sees no anomalies and negative indicators in tax revenue, but now we need to be ready. According to Helme, one of the options to help businesses, and with a quick — tax cuts, at least for a short time or for a specific sector. “We can do immediately, it’s as stimulating injection into a vein. No matter what size we did 100, 200, 500 million, this will be in the economy,” he said.
According to helm, the fall in oil prices is temporary and prices return to the level of 60-65 USD per barrel for a maximum period of six months.
More serious concerns of the oil shale sector, which creates a sharply depreciating oil prices, and the government intends to support the sector. The helm reminded that Eesti Energia appeared in a difficult situation.
“I don’t need to comfort Eesti Energia, I hope that it me more comfort. The company previously had created a buffer in the form of forward contracts. Following the buffer — to reduce purchases. I do not agree to allow one of the most important and largest export sectors in the Estonian economy to float belly up — if needed, will be provided government assistance,” — said the Minister of Finance.
According to him, it is important to provide assistance to other businesses, as well as to prevent rising unemployment and the freezing of Bank loans.