Estonia: Government maintains commitment to EMU
Overview:
As a result of undergoing huge economic contractions, both Latvia and Lithuania have had to give up on efforts to keep their fiscal deficits below 3% of GDP. They have, therefore, effectively had to delay their prospective Euro adoption dates. Estonia, however, continues to battle on regardless, unveiling yet more fiscal measures to try and keep its budget deficit below 3% of GDP both this year and next in order to join the Euro as planned in January 2011. This massive effort comes against the backdrop of political noise, the threat of deflation and a sharp rise in unemployment. If the authorities maintain their discipline they may well manage to meet these targets. However, they will also need to convince the European authorities that the fiscal deficit can be kept down on a sustainable basis to ensure Euro entry.