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Some promises have to be sacrificed for euro - Estonian minister


BRUSSELS, Jan 20, BNS - Estonia needs to carry out structural reforms and abandon some political promises to meet the criteria for adoption of the euro, Finance Minister Ivari Padar said on Tuesday.

"Today we should deal with the structural reforms that will directly influence fiscal policy in the years 2011-2013," Padar, who was attending an EU finance ministers meeting in Brussels, told BNS.

Padar said he was referring to administrative reform, but also the social policy and reforms concerning the financing of health care.

The finance minister said that for drafting of the budget for 2010 laws need to be changed, and in addition the very cemented political promises will have to be reviewed in the context of 2009.

Padar highlighted the fear that meeting of the Maastricht criterion as regards fiscal deficit may be jeopardized by the debt burden of local governments.

"When we speak about government sector deficit -- and the Maastrict criterion is about government sector deficit -- then it's the state budget together with local governments. It is very important for local governments to be statesmanly in this kind of crunch and pre-election situation," he said.

According to an Eurostat survey published at the end of last year loans of local governments in Estonia make up a larger part of the government sector debt burden than in any other EU member state. Central government debt accounts for about 25 percent and debts of local government for about 75 percent of the country's total debt. Much of the rest of the EU has a local government debt burden making up around 20 percent of total debt, the next after Estonia being Luxembourg with a ratio of 30 percent.

According to a forecast published by the European Commission on Monday, Estonia's government sector debt in 2008 amounted to 4.3 percent of GDP. If the current policy continues it is set to grow to 6.1 percent of GDP in 2009 and to 7.6 percent in 2010.

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