Government prepares for 9 percent decline

Jan 30, 2009
TBT Staff in cooperation with BNS

TALLINN – Estonian Prime Minister Andrus Ansip has said that the government is pondering slashing the budget by 8 billion kroons (511 million euros) – and that the massive cuts would be made to accommodate for an 8.9 percent drop in GDP this year.

Ansip told Estonian public radio on Jan. 30 that he hoped the Estonian gross economic product would not fall so far, but that it was necessary to be prepared for it. On the same day, Swedbank forecast Estonia's economic fall at 7 percent.

At a Jan. 29 meeting, the Estonian Cabinet decided it would draw up a negative supplementary budget aimed at reducing the government sector shortfall by 8 billion kroons.

The prime minister said that there was no party in the government at present that would wish to make cuts at others' expense. All of them want a solution that would be acceptable for the Estonian state and the Estonian people.

"I am sure that the coalition is prepared to make important decisions for the state and we will surely reach an agreement," he said.

Ansip said that increasing the loan burden of the state was not a way out for Estonia. The government must have a practical mind even in difficult times and make cuts. The difficult decisions about the cuts must be made also because Estonia would meet the Maastricht criteria so it could adopt the euro. He said that devaluation was not an option.

BUDGET FREEZE

The comments came a day after the prime minister and Finance Minister Ivari Padar signed a decree placing temporary restrictions on budget spending.

"The decision to curb disbursement stems from poorer than anticipated inflow of budget revenues due to the fast cooling of both the global and the Estonian economy and experts', including entrepreneurs, bankers and analysts, increasingly pessimistic evaluations of the economic situation," Padar said.

"It's clear that in the changed economic situation it is necessary until the adoption of a supplementary budget to monitor public spending more closely and plan resources so that all essential activities can be performed," he said.

The order will come into effect on Feb. 1.

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