Estonian Talk show: Economy not the main issue for parties in this election

Browsing through the Estonian political parties’ election manifestos, it is clear that the economy is not the main issue in the upcoming Riigikogu elections. Speaking on talk show “UV Faktor,” economics experts said, that when it comes to issues related to the Estonian economy, many of the parties propose to deal with them through subsidies.

Viljar Arakas, CEO of commercial real estate fund manager EfTEN Capital, said that the political parties’ election manifestoes look more like wish-lists than sets of concrete ideas about how to turn the economy around.

“It was clearly understood that the economy is not the main issue in this election. It is not that the case that there are 20,000 to 30,000 people in Estonia making their income from business, so there is no need to worry about them. Ten times as many people will get old-age pensions,” Arakas said.

Urmas Varblane, professor of economics at the University of Tartu, said that a lot of the parties’ strategies to tackle inflation and rising prices revolve around providing subsidies and lowering excise duties.

“It is almost a race to see who will offer the biggest reduction in excise duties. The hope is that if they lower them, then trade prices won’t go back up. However, you can’t count on that too much,” said Varblane.

The professor cited the example of Latvia, which reduced VAT on vegetables, only for prices to subsequently shoot back up.

Head of medical supplies company Raumedic Estonia Emöke Sogenbits, noted that when searching for the word “industry” in the parties’ electoral programs, she received a total of just eight matches.

“The important thing was that ‘we support investment,’ though how was not clear. Yes, there is (disappointment). Industry accounts for two thirds of (Estonia’s) total exports, employs 125,000 people and indirectly employs just as many, if not more (than that). Since the mantra is that industry has to be self-sufficient, the focus is more on raising pensions. How industry has to manage on its own has been, to put it mildly, overshadowed by other promises,” said Sogenbits.

Tea Danilov, head of the Foresight Center, said that while reading the parties’ programs, she got the impression that they all understand the economy is at a major crossroads, and that they are all trying to make a contribution to alleviate the problems. Danilov pointed to the tax breaks and incentives being offered by the parties for research and development, as a positive sign. “That is a big shift in political thinking,” she said.

Arakas said, that he was not so optimistic, pointing out that the sections of the parties’ programs on financing the economy were very superficial. He also added, that solutions need to be found to finance the creation of intellectual property.

The experts were more positive about the potential implementation of a personalized state, which would involve targeted subsidies instead of the current one-size-fits-all approach. The result of this, would be savings for the state.

“There has been a big increase in social benefits. It is not that old-age pensions should be reduced, but all other forms (of state social support) should be personalized. All the data (on people) is out there, but (subsidies) are distributed broadly to everyone. There is no will to make political choices about who gets it and who doesn’t, or where you draw the line,” Arakas said. 

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