Bloomberg News

Estonia Employers Clash With Cabinet Over Consolidating Reserves

November 23, 2011

Nov. 23 (Bloomberg) -- Estonia’s main employers’ lobby said it will end cooperation with the government in managing public health-care and unemployment-insurance funds after the clashing with the Cabinet on the consolidation of the funds.

The council of the Estonian Employers’ Confederation recalled its representatives from the boards of the Unemployment Insurance Fund and Health Insurance Fund, the confederation said in an e-mailed statement today.

The Finance Ministry said in September it plans to consolidate the management of all assets of state institutions under the State Treasury from 2012, eliminating the need to borrow elsewhere through 2015. Both the employers and unions have said such a consolidation raises the risk the funds won’t be controlled properly.

“A constructive three-party dialog will be impossible on the boards of these funds after this draft bill is implemented,” the confederation said. “To achieve bigger synergies and savings, both funds should be nationalized and their functions passed to the Ministry of Social Affairs.”

The ministry last month rejected the employers’ offer that the Treasury and the unemployment insurance fund sign a loan agreement and amend the unemployment insurance law. The Trade Union Confederation gathered about 13,000 signatures in the past two months protesting the initiative, it said on Nov. 8.

Cost Savings

The State Treasury has been managing the reserves of the health-care insurance fund “for years” without any problems and it should be able to guarantee payouts of unemployment insurance funds “much more” than the private banks now managing the reserves of the unemployment insurance fund, Social Affairs Minister Hanno Pevkur said today in parliament. The Cabinet’s move would save Estonia up to 25 million euros ($33.4 million) in interest costs, he added.

Consolidating reserves under the Treasury would cut the planned state debt to 5.3 percent of gross domestic product by 2015 from an April forecast of 11.8 percent, the ministry said Sept. 7. Estonia had the lowest level of public debt in the 27- member European Union last year at 6.7 percent of GDP.

--Editor: Alan Crosby

-0- Nov/23/2011 18:28 GMT

-0- Nov/23/2011 18:52 GMT

-0- Nov/23/2011 18:55 GMT

To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net -0- Nov/23/2011 18:12 GMT


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