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Estonian government reaches accord on budget cuts

Estonian government ministers have reached agreement in principle to make 3.1 billion kroons ($310 million) of spending cuts to the state budget, the finance ministry said on Friday.

The Estonian government has been under scrutiny for its ability to keep its state budget at least in surplus as economic growth falls faster than expected and after the finance ministry cut its economic forecasts for 2008. The ministry said in a statement that the agreement was reached late on Thursday night, but added that on Friday the ministries have to find another 100 million kroons to cut from their own budgets to reach the 3.1 billion target.

With the agreed cuts Estonia budget expenditure will total 88.2 billion kroons, and according to the revised finance ministry forecasts issued in April, the cuts should bring the budget back into balance. The finance ministry forecast earlier that GDP growth will fall sharply to 3.7% this year, down from a previous forecast for 2008 of 5.2% growth and well below 2007’s 7.1% expansion. The slowdown is due to lower domestic demand due to tighter credit and falling property prices in a weakening global environment. The government had planned a government sector budget surplus this year of 1.3% of GDP, or 3.6 billion kroons. The finance ministry said it plans to send the budget cutting bill to parliament for approval on May 15. (Reuters)