Background

The establishment of fiscal councils was laid down in the amendments to the European Union’s economic governance framework adopted in 2011–2013 (Council Directive 2011/85/EU, the 2012 “Fiscal Compact”, and the 2013 “Two-Pack”). These reforms stipulated that national legislation must include numerical rules for the conduct of fiscal policy and that compliance with these rules must be assessed by an independent fiscal council. In addition, Member States were required to ensure that the macroeconomic forecasts underlying fiscal policy planning are either prepared by an independent forecasting body or endorsed by an independent fiscal council.

To comply with these requirements, the Estonian State Budget Act was amended in 2014. The structural balance rule was introduced and the Fiscal Council of Estonia was established to assess compliance with domestic fiscal rules. As the state’s official macroeconomic forecasts in Estonia are prepared by the Ministry of Finance, a second core task of the Fiscal Council became the endorsement of the Ministry of Finance’s forecasts immediately after their publication.

In Estonia, responsibility for supporting the work of the Fiscal Council is assigned to Eesti Pank. For this purpose, a Fiscal Council Secretariat operates within Eesti Pank, providing analytical and administrative support to the members of the Council. In a somewhat similar manner, the functions of fiscal councils are partly linked to central banks in, for example, Austria and Slovakia. However, as an independent advisory council, the members of the Fiscal Council do not receive instructions in the performance of their duties from Eesti Pank, the government, or any other public or private institutions.

The six-member composition of the Fiscal Council is appointed simultaneously and for a term of five years; however, membership is not limited to a single term. On 14 May 2014, the first composition of the Fiscal Council was appointed, comprising Raul Eamets (Chair), Andrus Alber (Vice-Chair), Ülo Kaasik, Martti Randveer, Urmas Varblane and Andres Võrk. On 26 March 2019, the same composition was confirmed for a second term. The current composition of the Fiscal Council has been in operation since spring 2024. Members of the Fiscal Council are appointed by the Supervisory Board of Eesti Pank upon the proposal of the Governor of Eesti Pank.

Members of the Fiscal Council receive a monthly remuneration, the level of which is adjusted annually in accordance with the indexation procedure also applied to the salaries of higher state servants and pensions. The activities of the Fiscal Council are financed by Eesti Pank from its own budget; however, the central bank may apply for reimbursement of these costs from the state budget.

Each spring, the Fiscal Council prepares a report on its activities for the previous year for the information of the Governor and the Supervisory Board of Eesti Pank, providing an overview of its main publications, meetings and activities. In addition, every four years the activities of the Fiscal Council are reviewed by an external evaluator appointed by the Supervisory Board of Eesti Pank.

The main domestic public institutions with which the Fiscal Council interacts in the performance of its tasks are the Ministry of Finance and Statistics Estonia. A memorandum of understanding signed in 2018 between the Fiscal Council and the Ministry of Finance governs the exchange of information between the two institutions.

International cooperation also plays an important role in the work of the Fiscal Council. Since 2015, the Network of EU Independent Fiscal Institutions has been in operation, meeting regularly to exchange knowledge and discuss common work areas. An annual meeting of the Baltic and Nordic fiscal councils has become an established tradition. In addition, specialised meetings for fiscal councils are organised by the European Commission, the OECD and the European Central Bank. Since 2016, the European Fiscal Board has operated as an independent advisory body of the European Commission, with the task of monitoring developments in public finances and compliance with fiscal rules from a broader, EU-wide perspective.

While the establishment of fiscal councils was initially mandatory only in the euro area, the 2024 reform of the European Union’s economic governance framework extended this requirement to all EU member states. As a result, functioning fiscal councils have by now been established in almost all EU countries. In this context, member states are required, in accordance with Council Directive (EU) 2024/1265, to ensure that:

• fiscal councils should be established by national laws, regulations or binding administrative provisions;
• members of fiscal councils should have relevant expertise and be appointed via transparent procedures;
• fiscal councils should have sufficient resources to perform their tasks and these resources should be stable over time;
• fiscal councils should have timely access to all information they need to fulfil their tasks;
• fiscal councils should not take instructions from anyone;
• fiscal councils should have the right and means to freely communicate its opinions;
• member states shall comply with the assessments of the fiscal councils or explain publicly why they do not intend to follow them;
• fiscal councils should participate in regular hearings and discussions at the national parliament if they are invited to do so;
• fiscal councils should be subject to regular external evaluations by independent evaluators.