Estonia’s Ligi Says Ireland Needs More Budget Consolidation

Ireland needs more budget austerity to solve its debt problems, said Jurgen Ligi, the finance minister of Estonia, which will join the euro region in six weeks.

The European Central Bank has “a central role” in helping Ireland to resolve its banking crisis, Ligi told Bloomberg Television in an interview in Brussels today. ECB assistance “can’t be very long and unconditional,” he said. “They have their conditions for politicians as well.”

Estonia on Jan. 1 will become the third east European nation to adopt the euro, following Slovenia and Slovakia. The government raised the value-added tax, alcohol and fuel taxes and cut budget spending, with measures totaling 9 percent of gross domestic product last year, to keep the fiscal deficit below the European Union limit of 3 percent of output in 2009.

The budget measures further dented domestic demand that started declining in 2008 as a property bubble burst. The economy contracted 5.1 percent that year and 13.9 percent in 2009.

“We have big similarities with Ireland in economic structure,” Ligi said. “We had a really hard real-estate boom and crisis after that, but we started to consolidate very early and this is the first thing that has to be asked from Ireland.”

To contact the reporters on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net; Francine Lacqua in Frankfurt at flacqua@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net

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