PÄRNU — The Pärnu city council approved a 15.6 million krooni (€997,000) of budget cuts on Thursday to save the financially struggling  municipal government from insolvency.

The bulk of the cuts, 11.4 million krooni (€728,000) is in salaries. This includes a 20 percent salary cut for city hall officials and 10 percent for other municipal employees.

Pärnu, a coastal city in southwest Estonia with 45,000 residents, faces a major cash shortfall. Reduced income tax revenue and debt taken on by the former municipal government has left the municipal finances deep in red ink. Pärnu’s debt today is 44.5 million krooni (€2.8 million) of which 17 million krooni (€1 million) is formed by unpaid bills.

Mayor Toomas Kivimägi said most of the 2010 Christmas bonuses will be canceled, too.

“Our goal is that the wages would be at least 90 percent of the actual income, not 50 percent salary and another 50 percent bonuses,” Kivimägi told Delfi.

Some job cuts are likely, too as Mayor Toomas Tammiste has told municipal department heads to reduce their number of employees as the total salary fund is going to be 10 percent smaller.