Opposition falls in line to agree on common goal

TALLINN - Estonia’s parliament backed the 2010 budget in the final reading on Dec. 9, adopting the document with its planned public sector deficit of 2.8 percent of gross domestic product for next year, reports postimees.ee. This leaves Finance Minister Jurgen Ligi upbeat on meeting the euro entry criteria. The 2010 budget passed with 55 votes in favor and 39 votes against in the 101-member house, showing an 89.7 billion kroons (5.7 billion euro) package.

“Eurozone accession has been a long-standing goal of the Estonian government, and the current conservative coalition is trying to make the crisis a speed bump instead of the detour that it’s become for Latvia and Lithuania, whose government finances have also been ravaged by the economic downturn,” said Ligi. Prime Minister Andrus Ansip at a press conference said “Estonia sees uniting with the eurozone, [keeping] strict fiscal policies and sustainable financial development as the premise for creating a growing environment for the economy.”

Ligi said that the 2010 budget had been tough to draw up for the recession-hit nation due to spending cuts and losses in tax revenue, before adding that “It is probable that we will fulfill all the Maastricht criteria already in 2009.” Estonia’s economy is forecast to shrink by 14 percent this year, but the government is counting on a target of 2011 for euro adoption. It has to cap the public sector deficit at 3 percent of GDP, and this has been seen as the main challenge for the government this year and next as inflation has been tamed by the crisis, turning into deflation this year.

Between the second and the third reading parliament squeezed 410 million kroons’ worth of savings in the state budget with planned increases in excise duties on fuel and electricity. It also made some more funding available for rescue workers, the agricultural sector and local governments. “Importantly, the budget does foresee tax revenue falling next year and that is right,” said Swedbank Estonia market analyst Elina Allikalt.

“They did revise it according to the European Commission’s forecasts, which said in the autumn that the budget would not meet the criteria, so the government made more cuts and it should be correct now.” A representative of the Greens said that the Estonian state has committed itself to euro adoption to such an extent that the best way was to support the draft budget. Opposition politicians said that the budget could formally ensure that Estonia meets the conditions for switching to the euro in 2011, but it would make life very tough for the people.

The opposition also criticized the decision to allocate 86 million kroons toward setting up an energy and climate agency, which was a condition of the Greens, in exchange for supporting the draft budget. Taavi Roivas, chairman of the Riigikogu finance committee and member of the Estonian Reform Party characterized the budget as “affordable and a boost to the country’s image abroad, as the budget deficit is one of the smallest in the European Union despite the [negative] 15 percent GDP.” He said that “We can say that the budget is executable and we don’t have to take large loans, as many other countries have to.”