The ruling coalition in Estonia is set for a
make- or-break vote in parliament after it reached agreement on a money- saving
amended budget in the early hours of Thursday morning, dpa reported.
The plan includes cost-cutting measures that would slash 8 billion kroons (685
million dollars) from state expenses.
Controversial measures include an across-the-board reduction of 10 per cent in
public sector wages which would save an estimated 2 billion kroons (171 million
dollars) and a provision to raise pensions by 5 per cent from April.
Pensioners had been promised a 14 per cent increase and are set to protest in
the Estonian capital, Tallinn, next week.
A spokesperson for Finance Minister Ivari Padar told Deutsche Presse-Agentur
dpa the supplementary budget was necessary due to "fast and drastic
changes" in both the Estonian and world economies.
"As difficult times will probably continue into next year, it is
reasonable to also adjust state expenditure to a corresponding level," the
finance ministry said.
The proposals would also help protect Estonia's state reserves of around 19
billion kroons (1.6 billion dollars).
The cuts will be presented to the Estonian parliament or Riigikogu in two weeks'
time.
At a press conference on Thursday, Prime Minister Andrus Ansip upped the ante
further when he said such was the importance of the proposals, the budget vote
could be linked to a vote of confidence in his administration.
"The proposal of linking it with a confidence vote is one that could be
taken into consideration," Ansip said.
Under such circumstances, failure to pass the budget could result in the
resignation of the three-party coalition government.
Ministers were set to confirm whether the confidence vote would take place
after a cabinet meeting on Thursday evening.
The Estonian economy has been in recession since mid-2008 and several rounds of
cutbacks have already resulted in substantial job losses in the public sector.
However, with the global economic outlook worsening, Estonia is being forced to
cut even more deeply.
On Thursday the Estonian central bank, Eesti Pank, issued a downbeat flash
estimate of the Baltic nation's medium-term prospects.
"As external demand has eased considerably, Estonia's real GDP may decline
up to 5.5 per cent this year," the bank said.
"If the economies of Estonia's trading partners decrease 3 per cent on
average, Estonia's economy may decline up to 9 per cent," it warned.
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