By David Mardiste
TALLINN, Dec 1 (Reuters) - Estonian Finance Minister Jurgen
Ligi said on Tuesday he was confident the Baltic country would
join the euro currency zone in 2011.
In late November, the European Union's top monetary policy
commissioner, Joaquin Almunia, tipped Estonia as the 17th
country to join the single currency area.
Estonia's 1.3 million people could start using the euro from
Jan. 1, 2011 if the country meets the entry criteria next May.
"I would say I am 100 percent confident, but of course, it
does not only depend on my confidence. The decision will be made
by the European Union," Ligi told Reuters in an interview.
The government has been fighting contracting revenues after
the global financial crisis tipped Estonia into its deepest
recession since the end of communism two decades ago.
The economy is seen contracting 14.5 percent this year.
Despite this, the government has cut more than 16 billion
kroons ($1.5 billion) from spending this year. This should
enable it to meet the membership criteria of a budget deficit at
or below three percent of gross domestic product (GDP).
Ligi said Estonia had the lowest government debt burden in
the EU and would be one the few member states able to meet the
deficit requirement during the financial crisis.
Germany, France, Spain, the Netherlands and Portugal are
among the euro zone members in breach of the Maastricht rules.
LOCAL GOVERNMENT THREAT
Estonia met the Maastricht inflation criteria in November
and price pressures would remain subdued in 2010, Ligi said.
The main threat to its euro zone entry is the size of budget
deficits run by local government which could push the general
government deficit over the EU ceiling.
Both the Estonian central bank and the International
Monetary Fund have said the country needs to have a wider safety
margin in its budget.
"It is more a technical problem, the amount of that debt is
not so big," he said, adding that the central government has
taken steps and changed laws to curb local government borrowing.
"But we can't tell in advance what exactly the deficit
numbers will be."
Estonia in August forecast the general government sector
deficit at 2.9 percent of GDP in 2010.
Ligi said Estonia, whose plans to join the euro zone in 2007
were scuppered by soaring inflation, was working to strengthen
next year's budget ahead of a final reading this month.
An improving economy should also boost euro zone membership
hopes, he said, adding that he expected the steep decline of the
last year to end in the fourth quarter.
"GDP will be on the zero level in the fourth quarter
quarter-on-quarter," he said.
He said Estonia's currency would remain at its present fixed
rate of 15.6466 kroons to the euro until adoption in 2011. "It
is clear that the foreign exchange rate will not change," he said
Estonia has had its currency pegged to the euro since 1999.
Before then, it was pegged to the German mark.
The European Commission, the EU's executive arm, is due to
take a decision on euro zone hopefuls in June 2010.
Estonia's statistics office will release data on the general
government sector budget position at the end of March 2010.
(Reporting by David Mardiste; Editing by Victoria Main)
((david.mardiste@thomsonreuters.com, Reuters Messaging:
david.mardiste.reuters.com@reuters.net))
($1=10.407 Estonian Kroon)
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