Estonia to introduce €2 billion package of economic support measures

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PHOTO: Elmo Riig

Estonia is to introduce a package of economic measures aimed at mitigating the effects of the coronavirus. The total cost of the package is €2 billion, representing nearly 7 percent of GDP, the state will also temporarily halt contributions to the second pillar pension fund, Estonian Prime Minister Jüri Ratas said.

The package seeks to mitigate the most difficult initial stage of the crisis and ensure the functioning of the economy and its return to growth, the premier said at a press conference on Thursday.

The state’s resources will be allocated for supporting businesses through the state-owned financial institution Kredex and the Estonian Rural Development Foundation, spokespeople for the government said.

In addition, the state will temporarily suspend contributions to the second pillar fund.

Measures by Kredex loan collateral amounting to €1 billion for bank loans already issued in order to allow for repayment schedule adjustments with a maximum of €600 million for the surety collection.

Kredex guarantee will be provided to existing loans provided that the issuing bank alleviates the loan’s repayment schedule and the loan has not already been secured by Kredex. Maximum guaranteed amount is €5 million per company. If possible, fixed guarantee will be restored or the guarantee rate will be increased to cover more than 80 percent of the guaranteed liability.

Kredex will also provide business loans in the amount of €500 million. Kredex revolving business loans are issued to help businesses overcome liquidity problems caused by the coronavirus outbreak including for the purpose of repaying bank loans, if needed. The maximum loan per business is €5 million with an interest rate of approximately 4 percent per year.

As part of the package, Kredex is also to provide investment loans in the amount of €50 million. Investment loans are aimed at helping businesses realize investment opportunities provided by the outbreak as well as other business opportunities. The maximum loan amount to one business is €5 million with an interest rate of approximately 4 percent per year.

The supervisory board of the Unemployment Insurance Fund on Wednesday evening reached an agreement that in order to prevent layoffs at businesses that are undergoing difficulties, the Unemployment Insurance Fund will cover 70 percent of workers’ income for two months. The total cost of the measure is €250 million.

All eligible employers can use the support to partially cover an employee’s two months’ labor costs during a period from March to May. The gross amount payable per employee per month is €1,000.

The benefit is calculated based on the gross wages of the employee over the period of the previous 12 months, plus remuneration payable by the employer to the employee which is no less than €150 in gross amount.  The Unemployment Insurance Fund and the employer will pay all labor taxes on wages and benefits.

From March to May, the state will reimburse employees for the first three days of sick leave for all certificates of incapacity for work. 

Rural companies can apply to the Rural Development Foundation for guarantees of up to €50 million, business loans of up to €100 million or land capital financing of up to €50 million.

Self-employed workers are subject to an advance social tax support measure.

The state compensates for the direct costs of cultural and sporting events cancelled due to coronavirus in March-April, for up to €3 million euros.

The members of the government supported the proposal of the minister of finance to suspend the tax interest calculation for a period of two months and to allow tax debt to be rescheduled at lower interest rates than are currently in force.

The Minister of Finance was instructed to develop and submit the draft supplementary budget for discussion and decision at the latest on April 16, 2020.

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