Estonian parliament to follow lead of Latvia

Dec 10, 2008
TBT staff in cooperation with BNS

Budget cuts all around

TALLINN - The Latvian government's actions in slashing the revenue and expenditure projections of the 2009 budget could serve as an example to Estonia as well, said head of the Estonian parliamentary finance committee.

"Political consensus in Latvia has moved in the right direction and hopefully this will serve as a good example to Estonian politicians as well next year," Jurgen Ligi told BNS.

 "Latvia also has importance to us as a warning: violating budget balance over a long time costs very dear," he added.

Regarding measures taken by the Latvian government, Ligi said forceful action was required to stabilize the troubled financial system, but that there probably is not enough strength for more steps in the current difficult situation.

Estonia's advantage over Latvia beside the conservative budget policy, is a financial system that does not need support and the large weight of Swedish banking, the lawmaker said.

"Estonia's situation will no doubt deteriorate some more and an even bigger problem than our troubles is the fact that finance providers view us as a single Baltic region. Because of that alone we have to keep our fingers crossed for Latvia," Ligi said.

The Latvian government decided on Dec. 9 to cut the revenues of the next year's state budget by the equivalent of approximately 20 billion kroons (1.3 b euro) and expenditure by 8.4 billion kroons.

Despite the cuts, the budget is projected to run a deficit of about 15 billion kroons which amounts to approximately 5 percent of gross domestic product.

Estonia's ruling coalition parties agreed on 2 billion kroons' worth of cuts in the draft budget for 2009, but the budget is nevertheless likely to have a deficit.

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