Riigikogu discussed European debt crisis and its impact on Estonia
On the motion of the Rural Affairs Committee, the Restrictions on Acquisition of Immovables Bill (110 SE), initiated by the Estonian Centre Party Faction and the Social Democratic Party Faction, was rejected at the first reading. 49 members of the Riigikogu voted in favour of the motion and 38 voted against. Thus, the Bill was dropped from the legislative proceeding.
Prime Minister Andrus Ansip gave an overview of the situation of research and development activities and the Government’s policy in this sphere to the Riigikogu. Ansip confirmed that the Government had continued and increased investments in education, science and innovation during the economic crisis. “The increased research and development expenditure, growing export, improving productivity and new foreign investments are the result of a consistent activity,” Ansip said. The processing industry which creates a high added value helps manage the risks accompanying the turbulent outside environment and increase Estonia’s competitiveness in foreign markets. “In the first nine months of the year, the export volume has increased to 8.9 billion euro which is approximately 200 million euro more than the total export of the last year,” Ansip brought an example. In the Prime Minister’s view, investing in research and development in both the public and private sector is the guarantee of Estonia’s competitiveness. The decisions made in the economic crisis in the form of increasing the public sector research and development investments had helped establish a basis for the growth of the public sector development activities. In 2010, the development expenditure in the enterprise sector financed by the state had increased from 9.7 million euro to 13 million euro, as compared to 2009. At the same time, Ansip admitted that, in the comparison of states, we are still lagging behind Finland, Sweden, Denmark and Germany. The goal is to increase the volume of research and development investments to 2 per cent of GDP by 2015 and to 3 per cent of GDP by 2020. The Prime Minister gave a positive appreciation to the results of the implementation of the strategy “Knowledge-based Estonia” and he found that it is time to begin discussions for choosing new main objectives and financing priorities.
The Prime Minister continued by saying that, in the development of science and innovation, there are spheres where more carefully planned action is needed. The most important of them are the ensuring of the growth of new generations of scholars and a more reasoned supporting of the development and innovation. The financing should be focused on larger projects, and a wider environment more supportive of innovation should be created. “People and quality should be the main keywords of the next financing period,” Ansip said. He admitted that although the proportion of people who have completed higher education is higher than the European Union average, this is shadowed by the fact that our number of graduates with a Doctoral level degree who are 25 to 35 years of age is as small as 0.8 persons per 1000 people which shows that the effectiveness of Doctoral study is low. “We must find new means of motivation for engaging international top scientists in Doctoral study and science projects, and for increasing the mobility of scientists and Doctoral candidates, especially to the private sector,” Ansip said.
When speaking about the supporting and financing of innovation, Ansip referred to demand-based development, the effective and productive innovation environment created by the state, favourable availability of venture capital and successful commercialising of the outcomes of research. Ansip stated that it was the more extensive investments that had augmented in 2010 and 2011. “In March, the Government approved the road map of research infrastructure of national importance, on the basis of which investments into nine priority projects were started, and eight projects received support for beginning the preparations.” Bringing examples of several successful projects, the Prime Minister thanked the President of the Riigikogu Ene Ergma for her personal contribution to the signature of the Plan for European Cooperating State Charter with the European Space Agency.
The investment decisions made by the Riigikogu and the Government have had a positive impact on Estonia’s development, despite the complicated global economic situation. In order to maintain the success, we must carefully think through new long-term plans. “I hope that a wide-based and lively discussion on the goals of the strategy will emerge in the society which will help to move towards an economy with a high added value even faster,” Ansip summarised his overview.
Comments were presented by Ene Ergma and Aadu Must.
The European debt crisis and its impact on Estonia was deliberated as a matter of significant national importance in the Riigikogu. Reports were by of Professor of International Business at the University of Tartu, Member of the Estonian Academy of Science Urmas Varblane and economic expert Indrek Neivelt.
In his report, Urmas Varblane analysed the options of Europe and the paths that had led to the debt crisis problems, and what such a situation actually means for Europe on a wider scale in the world. Varblane stated that, in the course of the establishment of the euro zone, two totally different interests had been juxtaposed – a political desire on the one hand and an economic interest on the other. He spoke about the Maastricht criteria and, against this background, the examples of state budget deficits and the public sector debts. The report revealed that Germany and France had violated the Maastricht criteria as early as in 2002 but no sanctions had followed and reprimanding had been only formal. A feeling had emerged that these requirements could be overlooked. That had been what may be called the beginning of the crisis. Varblane stated that, according to his calculations, there is a wide scale of the public sector debt, ranging from 700 euro per capita at the one end, with Estonia and Bulgaria as examples, to up to 33 000 euro per capita at the other end, with Ireland as an example. Besides this, there is the private sector debt. According to Varblane, this is a very big problem for the whole Europe who at present is intensively looking for money for financing its debt. He went on to say that we are actually speaking about a crisis of competitiveness, that is, the states are simply no longer able to compete in the global market. On top of this are the banking crisis, the credibility crisis and, finally, the political crisis resulting from the load of problems. Europe is facing very serious marginalisation problems. The productivity of Europe is continually slowing down which is demonstrated by the fall of the five years’ average hour productivity growth of European employees. This is the problem why Mediterranean countries have been in a very big trouble. Varblane also pointed out as an example the tendencies related to the retirement age where in many countries people retire considerably earlier than attaining the official retirement age arising from law. Varblane also spoke about the capacity of the public sector to administer finance, but also about taking responsibility.
The author of the report reiterated some recommendations that would help Europe to come out of the crisis: to improve competitiveness, set stricter budget rules and impose sanctions. Decisions for the future must be strict; the issues of the regulation and supervision of the banking sector are of utmost importance. In view of Estonia’s interests, the European stabilisation mechanism should be implemented as soon as possible. In Varblane’s vision, the future of Europe lies in inflating the debt with different methods, or in the inflation growth.
Indrek Neivelt also outlined his vision of the emergence of the crisis. In Neivelt’s opinion, the decision-makers have underestimated this crisis all the time and they have constantly reacted either too cautiously or too late. The behaviour of the market has been underestimated. Neivelt predicted that, if all these trends were to continue, then soon there would be problems with France and, not much later, with Germany. “There has been an abundance of news and opinions on the crisis, the information space has been overwhelmed and actually it is very difficult to understand where the main line runs,” Neivelt said. “In principle, the problem can be divided into two issues. First, a solution must be found to the question how the countries who have excessive loans will manage their debts, and how to ensure at the same time that banking would work and the economy would function. This also covers the issue of achieving a budget balance. The second question to be answered is how to avoid a recurrence of such a crisis in the future,” Neivelt continued. He expressed an opinion that the cutting of state expenditure which is implemented as a primary measure reduces the economic growth in its turn and may lead the economy to a decrease, and then the ability to service the loan decreases even more. Inflation as a measure does facilitate the servicing of the loan but, considering the demographic situation, the fall of the purchasing power of savings is a hard blow on the pension systems of states. He pointed out that, in the current situation, it is still important to cut expenses, and to carry out reforms, and he added that the standard of living in Europe will not rise in the next few years but will tend to fall. The purchasing power of savings will also decrease and the right to make decisions in terms of politics will move more to the centre. “The question lies mainly in the speed of the processes and in how much of the power will be centralised,” Neivelt said.
The author of the report proposed the basis scenario which might foresee that, during the next five years and more, the economy in Europe would not grow but decrease. “Bigger collapses will hopefully be avoided but still there is a lot of nervousness. In the event of such a scenario, Estonia will be in a relatively good position thanks to a lower expenditure base and flexibility,” Neivelt believed.
On behalf of factions, comments were presented by Kadri Simson, Aivar Sõerd, Rannar Vassiljev and Margus Tsahkna.
On the motion of the Economic Affairs Committee, the second reading of the Bill on Amendments to the Public Transport Act and the State Fees Act (115 SE), initiated by the Government, was concluded. The aim of the Bill is to provide the amendments to the Public Transport Act arising from the relevant Regulations of the European Parliament and of the Council on common rules for access to the international market for coach and bus services. Several amendments do not concern the content but amend the wording or are of technical nature. For example, “public transport licence” will be replaced by “Community licence”. Also, under the Act which is currently in force, a licence card is a document necessary upon both carriage by bus and taxi service. According to the Bill, a licence card will be used only upon taxi service; upon carriage by bus, it will be replaced by a certified copy of a Community licence. The Bill was sent to the third reading.
On the motion of the Social Affairs Committee, the second reading of the Bill on Amendments to the Social Welfare Act (124 SE) was concluded. According to the provisions that are added to the Act, not only holders of a child care certificate but also others who have the knowledge and skills suitable therefor will be allowed to work as childcarers. The education requirements for childcarers were first established in 2007, at the same time when the professional qualification standard of childcarers was established. According to the Act which is currently in force, representatives of other specialties who, in terms of their training, fully or in a large part meet the requirements of the professional qualification standard of childcarers, having studied in some other specialty, e.g. teachers who have specialised as subject teacher, etc., would not be allowed to work as childcarers as of 2012. The Bill provides that a person who has appropriate education of the same level or even a higher level than a holder of a child care certificate will be granted the right to work as a childcarer. Another amendment added to the Act by the Bill allows appointing both a caregiver and a guardian to a person, as necessary. Today’s regulation does not allow appointing a caregiver to a person who at the same time also needs a guardian. Determination of the suitability of a person as a guardian or caregiver will remain within the competence of the court and local governments. The Bill was sent to the third reading.
On the motion of the Constitutional Committee, the first reading of the Bill on Amendments to the Government of the Republic Act, the Public Service Act, the State Public Servants Official Titles and Salary Scale Act and the Authorised Public Accountants Act (109 SE), initiated by the Social Democratic Party Faction, was concluded. The Bill eliminates the position of assistant minister from the Act. The initiators of the Bill find that there is essentially no need for this position. They confirmed that term of office of the last assistant minister had ended on 19 June 2008. The Bill was sent to the second reading.
For more details, read the verbatim record of the sitting (in Estonian):
The Riigikogu Press Service
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