Exiting the crisis successfully will require support for retraining says Madis Müller

Governor of Eesti Pank Madis Müller told the Riigikogu in his speech on Tuesday that the state should be ready to give people more support than before for retraining because unemployment will start to rise following the coronavirus crisis and there will be changes in the jobs needed in the economy.

“It is worth investing in aligning people’s skills as closely as possible with the needs of the labour market, because that is how we can improve the well-being of people in Estonia. If wage support lasts for too long, we may be using taxpayers’ money to extend the activities of businesses that are no longer viable in the changed circumstances. It would be better to provide people with retraining alongside the social support so that new jobs can be created”, he said.

His second economic policy recommendation was that broader and better-targeted support should be given to overcoming Estonia’s backwardness in digitalisation in industry. “After the crisis Estonian manufacturing companies may have new opportunities from changes in global supply chains, and we have to be ready to take advantage of such opportunities”.

Mr Müller’s third recommendation was to consider at the launch of large investment projects whether they met the climate goals that the Estonian state had already accepted and that both the state and the private sector had to make a major contribution to achieving.

He also noted that when the state provides support to large companies through loans or guarantees, it would be wise to consider the opinions of market participants about whether the particular company and its business model would still remain competitive in the future. He said it would be better to prefer state guarantees to loans as that maintains the important second level of control given by the opinion of the bank as the lender about the long-term sustainability of the company. The conditions on loans from Kredex and the Rural Development Foundation do not need to be very favourable as they should primarily be intended as the final option for companies that cannot borrow from banks.

Mr Müller added that it would be better if there was a requirement that large companies should only receive state support on condition that the owners or new investors make an additional contribution. “The state should start from the goal for strategic sectors and businesses of only supporting the continuation of strategically important business, not the current owners of a particular company”, he said.

Eesti Pank Governor Madis Müller presented the Eesti Pank annual report for 2019 to the Riigikogu on Tuesday, when he spoke not only about the activities of the previous year but also about Eesti Pank’s opinions on the economy and its recommendations for exiting the crisis.

The annual report from last year can be found on the website of the central bank.

For further information:
Viljar Rääsk
Head of Communications
Eesti Pank
6680 745, 5275 055
Email: viljar.raask [at] eestipank.ee
Press enquiries: press [at] eestipank.ee