TALLINN — Estonia’s government today reaffirmed its intentions to join the eurozone by Jan. 1, 2011 as it announced its 2010 budget containing lowered forecasts for unemployment spending and local government deficit.
The Cabinet set the overall deficit at 6.2 billion krooni, or 2.95 percent of gross domestic product — in keeping with the 3 percent Maastricht criteria required to gain the euro.
“Our budget policy has been one of the most responsible in the European Union, keeping a very low level of debt,” Finance Minister Jürgen Ligi said at a press conference today. “Euro adoption is a means for sustainable finances and not an end in itself.”
The budget includes defense spending of 1.86 percent of gross domestic product and will use one billion krooni (€63 billion) in EU funding for education purposes.
The government does not plan to reduce pensions and parental benefits next year, but plans to sell some state real estate to recoup funds. EU grants in 2010 are expected to increase by around 15 percent to 14.5 billion krooni (€926 million), which will be used to stimulate the economy and increase employment among other things.
The Cabinet, which commands 50 seats in the 101-member parliament, needs majority support to pass the budget. Prime Minister Andrus Ansip is banking on support from the Green Party, which supported the Cabinet earlier in summer.
Blind optimism
On Monday, the International Monetary Fund called the country’s attempt at entering the eurozone “very, very ambitious,” given the growing shortfalls in revenue. The Estonian economy has shrunk considerably this year, with second quarter figures showing a 16.1 percent contraction year-on-year.
Ligi said his country would not seek special treatment from the European Central Bank (ECB) or European Commission when applying for the euro.
Neither the EU nor ECB have been open to adjusting the Maastricht criteria in light of the economic crisis.
Lithuania was rejected from eurozone entry in 2006 after missing the inflation target by 0.1 percentage point. After the crisis inflated both countries deficits well above the Maastricht criteria, Lithuania and Latvia are predicted by analysts to enter the eurozone no earlier than 2013 and 2014, respectively.
