Estonia: Seeking to accelerate Euro entry
Overview:
Despite being one of the leaders in the economic reform process, Estonia allowed a credit boom to lead to the build-up of a number of economic vulnerabilities similar to those seen in the other Baltic States. The economy is now, then, having to undergo a dramatic contraction similar to that in Latvia and Lithuania as credit is now less readily available. Estonia’s strong fiscal track record has kept public debt low and allowed the accumulation of a large fiscal buffer although fiscal discipline has weakened in the last couple of years. The Currency Board Arrangement has proved sustainable and the financial system stable. However, the authorities are nevertheless committed to ERMII/Euro entry as soon as possible. Significant fiscal adjustments have been (and will be) necessary, then, to keep the deficit below 3% of GDP.