TALLINN — Two Center Party proposals to stimulate the deeply shaken Estonian economy are going nowhere after receiving a negative response from the coalition parties.

The loan obligation reform was sent to Parliament at the end of Sept. 2009, but soon stalled out. The draft acts sought to protect those who took a mortgage during the “Baltic Tiger” boom unaware of the problems behind the corner.

If passed, the act would stipulate that banks would no longer be allowed to require clients to cover the total due of an outstanding mortgage after it is repossessed by the bank. Today loan payers have to continue their loan payments even though real estate across the country lost value and a selling the property does not cover the full loan.

Kadri Simson, a Center Party parliamentarian said that under the current situation the scales are tilted to in favor of the banks and all of the risks coming from the loan deals have been pushed on the shoulders of the loan holders.

“The banks get back their money anyhow, but the loan holders will lose their home and the additional bailment or have to continue paying the rest of the loan for years,” Simson told Baltic Reports.

Simson asserted that while the banks would yield a somewhat smaller return on the loan, the mortgage holder is on the edge of financial catastrophe of which many won’t recover within a lifetime and that the lack of risk for the banks is exactly the reason why the banks did not feel the need to avoid over-lending and inflating the real estate bubble.

However, the coalition said the measure would increase interest rates and discourage lending at a time when the government is eager to get lines of credit flowing into the economy again.

“It’s clear that it would be very hard to get a loan for those who are not able to pay a huge contribution,” Taavi Rõivas, chairman of the Riigikogu finance committee and Reform Party member told Baltic Reports. “A significant proportion of the reasons of current global financial crisis, comes from the United State’s interference to the local home loan market.”

In U.S. a mortgage holder is no longer obligated to pay outstanding debt on a loan after a home is foreclosed upon.

Center’s other bill is stuck in neutral, too. If passed, the Social Tax Amendment Act would simplify the return to work for those who have been unemployed for longer time by allowing an employer for forgo paying a social tax for employing someone that has been out of work more than three months.

“Social tax exemption would be a significant relief for the employer,” Seeman said. “It would also motivate the creation of new jobs.”

The coalition derided the bill as unnecessary given that similar measures have already been implemented. Rõivas said that the Ministry of Social Affairs already created a wage support system which means that half of the salary paid to a person who has been jobless for three months comes from European Union job market funds.

“This is already working and is much more efficient than the tax discount offered by Center Party,” Rõivas said. “The opposition is trying to do good, but as it often happens, they are a few months behind from the real life and break in from the door that is already open.”