Finance minister: We have an economic crisis

Loora-Elisabet Lomp
Martin Helme.
Martin Helme. Photo: Sander Ilvest

We have entered a new economic crisis already, and the question now is how we can minimize the consequences and survive the crisis, Estonian Finance Minister Martin Helme said on the ETV “Esimene Stuudio” (First Studio) talk show of public broadcaster ERR on Tuesday night.  

“The tale that figures tell us is that we haven’t had such steep falls since 2008. And this is with consequences for real life. The balance sheet value of businesses is declining steeply and banks are beginning to recall loans or demand additional guarantees. The businesses that finance themselves through refinancing of bonds cannot do it,” Helme said, describing the impact of the coronavirus and the oil war on the economy. 

Helme said that the crisis is here and that it’s all about how to minimize the consequences and find an opportunity for something useful to be garnered from the crisis. All sort of planning meanwhile is rendered practically impossible by the situation having become unpredictable, he said.

According to the Estonian Conservative People’s Party (EKRE) minister, countries of the West are in many respects in a more difficult situation in 2020 than they were in 2008.

“Both the global economy and European economy are under a bigger debt burden now than they were ten years ago. Unemployment is higher. Competitiveness is weaker than it was before the crisis of 2008. It used to be said that we’re in for a gentle decline. Now the bubble has burst with a bang instead,” Helme said.

Helme said there’s something positive in every crisis. For instance, the EU budgetary rules which prevent Estonia from borrowing allow for exceptions in emergencies. 

“When there is a decline, you do have the right to spend more, go more into the red with the budget,” said Helme, who has previously said that the current Estonian government will face off the new crisis not saving but spending. 

According to the minister of finance, state investments are a positive thing anyway in the long run and it would be a sin to refuse borrowing now.

While there are still no anomalies or negative signs in tax revenue for the first months of the year, one has to be prepared for it now. For ensuring the functioning of business, one of the possibilities and the fastest means, according to Helme, is lowering taxes – even if for a short term and possibly with a specific sector in mind.

“This we can do right away – it’s like an invigorating injection into a vein. No matter on what scale we make it – 100, 200, 500 million – it will reach the economy right away,” he said.

Helme said that no cuts are being considered at this point and no austerity committees are about to be convened by the government. 

“This mode of thinking that we had ten years ago – that fiscal balance is paramount, for it [the budget] to not go into the red – is totally alien for the present government. There isn’t going to be any frenzied cost-cutting,” the minister said.

The decline in global oil prices, according to Helme, is a temporary phenomenon and the price is due to hit $60-65 a barrel again in six months at the latest as a result of efforts by the United States. The difficulties in the Estonian oil shale sector caused by the decline in oil prices are a bigger concern, and the government definitely will not leave that sector in trouble, Helme added.