Estonians face harsh winter with energy disruption, PM says

Kaja Kallas, Prime Minister of Estonia, on the first day of a special European Union (EU) leaders’ summit at the European Council headquarters in Brussels, Belgium, May 30, 2022. (Valeria Mongelli/Bloomberg)

The Estonian prime minister has warned that the Baltic nation will face a harsh winter as the eurozone’s highest inflation rate comes up against an energy crisis imposed by Russia’s invasion of Ukraine.

“We are facing tough times because of the energy,” Kaja Kallas, the country’s prime minister, 44, told Bloomberg News in an interview in Tallinn on Thursday. “We are likely to see even higher prices than last winter – and that is very concerning.”

Kallas, who has seen his popularity skyrocket in the country of 1.3 million due to his tough stance on Russian President Vladimir Putin, fought to stay in power this month after the collapse of his coalition amid infighting. She is in talks to form a new government as Estonia faces the region’s biggest security crisis in decades and inflation hits 20%.

The protracted war in Ukraine and the winter months in a country where temperatures drop below 20 degrees Celsius (-4 Fahrenheit) will lay bare an array of complex issues. Estonia’s most vulnerable residents need financial help at a time when the central bank warns against excessive government spending.

Unlike European Union member states that have been more hesitant, Estonia has pledged to halt Russian gas purchases, opting to switch to liquefied natural gas shipments, a prospect that will eat away at growing revenue. are already unraveling due to rising energy and food costs. According to Eurostat, electricity prices for households in Estonia jumped by more than 50% in the second half of 2021, the highest year-on-year increase in the EU.

“In our case, high inflation and slow economic growth have converged, making the situation extremely difficult,” Kallas said.

The dynamic could weigh on the coalition talks. His Reform Party, which leads in polls ahead of next year’s election, has pursued a tough austerity agenda, especially after the global financial crisis. She herself maintained this course, excluding debt-fueled spending.

This was backed by Bank of Estonia Governor Madis Muller, who recently said he was concerned about government borrowing on track to rise from 20% to 30% of gross domestic product over the past few years. next four years.

But Kallas will come under pressure from his new coalition partners, the Social Democrats and the conservative Pro Patria party, who both favor more investment, including child benefits and expanding tax exemptions. The Prime Minister has signaled that this may have to change once the parties form a coalition.

“In opposition you can come up with all kinds of ambitious ideas, but in government you are responsible for the good reputation of the country,” Kallas said.

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