TALLINN — Estonia breathed a sigh of relief Tuesday as the International Monetary Fund gave a thumbs-up to fiscal measures being taken to steady the economy.

The IMF applauded the budget cuts Estonia is implementing and the use capital accumulated during the “Baltic Tiger” years to avoid the large deficits of is southerly neighbors Latvia and Lithuania. The IMF said it expects the Estonia to qualify for the euro by 2011.

“A full-fledged crisis has been avoided due to existing buffers and a determined response by both the public and the private sector,” an IMF press release said. “Sizable fiscal reserves accumulated during the boom years, a very low level of public debt, and, importantly, swift and far-reaching fiscal adjustment measures taken in 2008 and throughout 2009 have helped the government avoid funding problems and keep alive hopes for euro adoption in 2011.”

The good review from the IMF comes after other praise for Estonia’s handling of the crisis from the European Union’s largest member Germany, whose ruling party said they also expected the country to keep to the Maastricht criteria, the rules governing acquisition of the euro currency, and enter the eurozone by 2011.

Martin Poder, head of the EU and international department at Estonia’s Ministry of Finance told Baltic Reports he was pleased, but not surprised by the reports.

“We can say that the mission went as expected — it went well. It is confirmation that the government is making the right policy choices. This independent assessment shows we can get the Maastricht criteria,” Poder said.

But the IMF also warned the small nation about 2010, when it expects the country’s economy to contract by around 1 percent.

“Euro adoption is no panacea and the economic outlook remains challenging. While there are preliminary signs that the output decline is starting to bottom out, we expect the economy to resume growth only in the middle of 2010. Sluggish growth in Estonia’s main trading partners provides little room for an export-led recovery,” the release said.

Poder conceded that next year would be difficult. The ministry’s optimistic forecast sees the country experiencing an overall 0.1 percent contraction.

“They pointed to risks in the budget in the short and medium term. Our assessments are very similar. The local governments have risk of debt increases and this needs to be seen to fast. On the medium term the budget should be more sustainable,” Poder said, adding that he expects the country to fulfill the Maastricht criteria regardless.

Bank of Estonia President Andres Lipstok told the press that the IMF’s findings were very similar to the central bank’s.