According to the paper, growing budget deficit means that in spite of falling inflation, Estonia may lose the hope to meet the eurozone entry criteria for budget deficit and could have a budget deficit of over 3 percent already in 2009.
“This would be a disaster,” says Taavi Veskimägi, former Minister of Finance and a current MP for IRL. Veskimägi says that if the government fails to launch key structural reforms for cutting public spending now Estonia will have a budget deficit above the Maastricht criteria in 2010.
“To say that the 2009 draft budget is balanced is fiction. Budget is balanced not when the government says it is balanced, but when budget revenues actually covers budget expenditure,” adds the MP.
Estonian Finance Minister Ivari Padar says that no-one knows exactly what will happen in 2009. “Even Lehman Brothers was happily making hay last summer,” he said, commenting the rapid collapse of one of the largest US investment banks.
One institution that is critical of Finance Ministry’s optimism is central bank that this week published its economic outlook. Eesti Pank said that it expects the economy to contract 2.1 percent fro this year in 2009, but did not rule out that the decline may be as high as 4 percent.
Moreover, the Ministry forecasts that wages will grow 7.5 percent next year. Eesti Pank says that this is a fairy tale and expects zero growth.