Estonia will still need to find a further 1.5 billion kroons (96 million euros)in order to keep within the EU's budget-deficit threshold of 3 percent of gross domestic product this year. The government has made joining the euro zone from Jan. 1, 2011 its policy goal and hopes to meet the requirements for membership late this year. However, head of the central bank's monetary policy department Andres Saarniit said further harsh cuts were necessary to reduce the budget deficit. The government has already made more than 16 billion kroons of cuts to the budget this year. The government is using reserves collected from several years of budget surpluses to fund its deficit. The country has also borrowed from the European Investment Bank.
AS Estonian Air, Estonia's national carrier, said its losses more than tripled last year as fuel prices rose and demand slumped, Bloomberg reports. The company's net loss increased to 170.5 million kroons (10.90 million euros), up from losses of 52 million kroons a year earlier, the Tallinn-based company said on its Web site on June 30. Revenue rose 6 percent to 1.46 billion kroons. The company, which has been unprofitable since 2006, said it expects "to achieve better results" through measures such as "realizing a cost-cutting plan and widening the revenue basis." Estonian Air operates scheduled services to 22 destinations in Europe. The airline is owned by the Estonian government, SAS Group and AS Cresco Investment Bank.
One-fifth of Estonian companies plan layoffs following the introduction of the new Employment Act, according to research by Aripaev. In a poll conducted at the end of June 20 percent of companies said they planned layoffs. Sixty-six percent said they did not plan any sackings; while14 percent of respondents have already done all necessary layoffs. The new Employment Act, which came into force on July 1, changes the conditions of termination within employment contracts. Under new terms employers now have to pay smaller redundancy benefit. Harry Taliga, the head of Central Union of Trade Unions, has estimated some 20,000-25,000 people will be laid off in July.