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Macroeconomic News

Estonia plans more spending cuts amid slowdown

Fri, 30th Jan 2009 08:38

TALLINN, Jan 30 (Reuters) - The Estonian government is to lop 8 billion kr
oons ($668.9 million) off its 2009 budget deficit in an effort to reduce a looming budget gap as it eyes future adoption of the euro, the government said.

Estonia, like neighbours Latvia and Lithuania, faces a prolonged economic slump and a sharp fall in budget revenues.

'The government decided ... that it will, over the next two weeks, draw up a negative supplementary budget that has the aim of lowering the 2009 government sector budget deficit by eight billion kroons,' the government said late on Thursday.

'We must be ready for negative developments,' Prime Minister Andrus Ansip added in a statement.

Finance Minister Ivari Padar said in a separate statement that he had ordered temporary restrictions on all government institutions' spending in order to enforce fiscal discipline.

With the economy in recession and price growth falling, the government has made euro zone membership a high priority, including a commitment to hold the budget deficit under the 3 percent of gross domestic product EU criteria.

'It is clear that in the new economic situation it is necessary to watch public spending more closely and plan resources so that all essential activities can be carried out until the adoption of a supplementary budget,' Padar added.

(Reporting by David Mardiste; editing by Patrick Graham) ($1=11.960 Estonian Kroon) Keywords: ESTONIA BUDGET/

(Tallinn Newsroom, +372 5290992,

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