The Ministry of Finance forecast, released Thursday, shows the deficit climbing to a record 4.9 percent of GDP in 2027 and remaining around the EU's 4.5 percent ceiling in the following years, said Social Democratic Party (SDE) chair Lauri Läänemets.

This outlook is worse than previously expected, he noted, blaming recent tax changes.

"The forecast again warns of the poor state of our public finances," Läänemets said, adding that the deficit trajectory leaves little room to respond in a crisis.

He said weak finances could limit raises for teachers, police and rescuers in the coming years, as well as investment in higher education and economic growth.

Läänemets noted that rising interest costs, now around €450 million, and a rapidly growing debt burden also pose risks.

"In a situation like this, the next economic crisis could push Estonia's finances into a state that would deal a painful blow to the economy," he warned.

Reinsalu: Budget rules have been scrapped

Isamaa leader Urmas Reinsalu noted the government is projecting nearly €1 billion in additional deficits over the next three years and sharply rising debt. A forecast like this, he said, should prompt Finance Minister Jürgen Ligi (Reform) to step down from politics.

"Domestic budget rules have effectively been scrapped, and under the current forecast, the government's planned spending policy would violate EU rules most years as well," Reinsalu said.

"Without borrowing, the economy would still be in decline," he pointed out, calling the projected 2.3 percent growth "debt-driven" and warning it may not even fully materialize.

He urged spending cuts and a new budget framework, arguing current policies risk long-term instability.

Center Party MP Lauri Laats said the government should cut administrative costs, consider a bank tax and temporarily lower VAT to boost the economy.

"If we don't stimulate consumption, we can't expect economic growth," he said, warning that weak consumer confidence will also limit additional state revenue and keep the budget stuck in a downturn.

Perling: Control over our own finances is at risk

Parempoolsed chair Lavly Perling said the absence of a proposed negative budget alongside the forecast is putting Estonia on a "path to ruin."

"At a time when the Reform Party is talking about a pre-election supplementary budget that would increase spending even further, the state should actually be cutting costs," she said.

Failure to act, Perling continued, could eventually limit Estonia's control over its own fiscal policy if EU deficit rules tighten again.

"We risk losing our independence in deciding our own finances, with that role shifting to outsiders from international financial institutions," she warned.

Perling said a negative budget is unavoidable, even if politically difficult the year before an election year.

The next Riigikogu elections will take place in March 2027.

--

Follow ERR News on Facebook and X and never miss an update!