TALLINN - Eurozone newcomer Estonia urged fellow members on Nov. 24 to commit themselves to balanced budgets, and welcomed EU proposals to increase surveillance of national economies, reports AFP. “General rules have to be followed all over Europe. You need a balanced budget,” Estonia’s Finance Minister Jurgen Ligi said at the Baltic Economic Forum in Riga.
“Europe tends to think a three percent deficit is good and we can live in deficit all the time,” Ligi underlined. “Crisis management hasn’t convinced the markets so far,” he said.
“We need balanced or surplus budgets for everyone,” Ligi noted.
Estonia adopted the euro in January this year. With 1.3 million people, the former Soviet-ruled republic is one of the eurozone’s smallest members.
Estonia has long held to fiscal policies set down in the 1992 Maastricht Treaty that created EU economic and monetary union - repeatedly breached by a swathe of eurozone members. The treaty requires countries to keep their public deficits - the shortfall between state spending and revenue - below three percent of gross domestic product, but the vast majority of the EU’s 27 members have breached that repeatedly.
In contrast, Estonia posted surpluses from 2002 to 2007 as its economy boomed. It was hit hard by the global crisis, plunging into a double-digit recession in 2009, but is enjoying a robust recovery.
Its center-right government, which held to conservative fiscal policies even before the slump, slashed public spending to confront the crisis and maintain the drive to adopt the euro. The 2009 deficit was 1.7 percent. Estonia posted a 0.1 percent surplus in 2010, and forecasts a 0.2 percent surplus this year. Revived spending in 2012 is expected to bring a 2.1 percent deficit, however.
Brussels has demanded sweeping powers to override faulted national budgets. “Countries should not be nervous about macroeconomic surveillance. We will get clear messages about how to resolve internal and external imbalances,” Ligi said.