OREANDA-NEWS. February 10, 2009. At the cabinet meeting the government approved, in principle, the negative supplementary budget in the approximate amount of EEK 8 billion. One of the major items of saving is the decrease of the wage costs of the people who are paid wages from the state budget by 10 per cent, reported the Official website www.valitsus.ee.

“Estonia must be able to pay wages to teachers, firemen and policemen and pensions to the elderly, in the long run, as well,” said Prime Minister Andrus Ansip when explaining the need for saving. When making the decision, the government took into account the recommendations made by both the Bank of Estonia and the expert group consisting of scholars, including Raul Eamets, Jaak Leimann, Marten Ross and Urmas Varblane.

The government decided to reduce the wage fund of the people who are paid wages from the state budget by 10 per cent, which includes the funds frozen in earlier budgets in the amount of 3 per cent for operating costs in the budget for 2009.

The government decided that as of April of this year, pensions will be increased by 5 per cent, which means that pensions will increase by EEK 230.

As of 1 April, the first days of sick leave will not be indemnified from the health insurance. The cost-sharing of the insured person will be three days instead of one and the costs related to the following five days will be incurred by employers. As of the ninth day of sick leave, the sick days will be compensated for by the Health Insurance Fund. As a result of this change, the Health Insurance Fund will have reserves in the amount of about MEEK 460, which had previously been planned to be used for compensating sick days.

According to the decision of the government, the income tax percentage received by local governments will also decrease by 0.83 percentage points, so that it will be 11.1% instead of the former 11.93%. The adoption of the Local Government Unit Financial Management Act will also set boundaries on the lending activities of local governments.

Defence expenditures for this year will continue to be 1.75 per cent of GDP.

In addition, about MEEK 800 was saved on the funds invested in road construction – with the help of the changes in the forecast for the receipt of fuel excise duty and the replacement of the funds planned on account of the tax proceeds of the state budget with the funds of the European Union.

The funds planned for the national programmes of the Environmental Investment Centre will be decreased by MEEK 350 and agricultural refunds will be cut down by about MEEK 100.

According to the risk scenario of the Bank of Estonia, the economic recession in Estonia may amount to 8.9 per cent this year. Should the risk scenario be realised and the state fails to reduce budget expenses, the reserves that the state has collected until 2008 would be quickly exhausted. As at the end of December, the state had reserves in the amount of EEK 20 billion. “When collecting reserves, we have thus far been foresighted, so we should not lose this foresight now,” Prime Minister Ansip said.

On Monday, the cabinet will assemble on extraordinary terms to specify the division of the saving on operational costs between ministries. In two weeks, the Ministry of Finance will establish a draft supplementary budget together with all required amendments in legal instruments in cooperation with other ministries. The government plans to approve the supplementary budget at the extraordinary meeting to be held on Wednesday, 18 February, and present it to the Riigikogu on 19 February.