Estonia looks to dip into reserves

  • 2009-04-22
  • By Ella Karapetyan
TALLINN - Local media has reported that the government is planning on taking emergency measures, including taking additional credit and utilizing stabilization reserves, in an effort to stave off the growing financial crisis.

On April 17, the Estonian-language daily Eesti Ekspress reported that the government is preparing documents to get permission from the social council of Parliament to use 7.3 billion kroons (465 million euros) of reserves.

Additionally, the government has not excluded the possibility of borrowing more than 8.6 billion kroons from international lenders. A supplementary budget that was accepted in February allows the government to take a credit line of up to 12 billion kroons without special permission from the legislature.

The news portal reported that the Finance Ministry has forecasted that by the end of April the budget deficit will reach 4 billion kroons, and that it could reach 13 billion kroons by year's end.
Some of the country's leading economists, meanwhile, have said the government needs to take immediate action in order to prevent the country from going bankrupt.

Janno Reiljan, a Professor of International Economics at Tartu University, said inactivity on the part of the government would bring about the worst possible situation.

Reiljan said it is very important to inject money into the economy of the country, as most governments of other countries do. The government of Estonia continues to cut expenses instead of investing money in the economy 's a strategy that could end up only making things worse.

"It is possible that [the situation] could  be worse 's whereas all the other governments  bring in a great number of resources in the economy of their countries, the government of Estonia still keeps on cutting its expenses and participation," Reiljan told

Vladimir Nemtsinov, a professor at the Estonian-American Business Academy, has also prompted the government to take drastic action to try to improve the financial situation in the country.

Nemtsinov mentioned the possibility of raising the surtax rate to 26 percent as a possible concrete step the government could take to help avoid the worst possible scenario. He also said the government needs to create an action plan that takes into account the critical conditions suffered by the state, enterprises and private persons.

He said the government needed to reject any thoughts of taking a fast track to the euro.