Estonian Finance Minister Jurgen Ligi said the euro area needs stricter fiscal controls to ensure existing members adhere to the rules.
Estonia, which on May 12 won European Commission backing to become currency bloc’s 17th member in January, is “of course” worried about the euro’s health, Ligi said in an interview with Bloomberg Radio today, adding “bad news” surrounding the euro region hurts Estonian support for the single currency.
“In general we support stricter rules and control mechanisms that would prevent such financial problems in different countries,” Ligi said. “The idea of a common currency doesn’t work if fiscal policies are so different as they are at the moment.”
The Baltic state, with a population of 1.3 million, is the European Union’s least indebted, with a debt ratio to gross domestic product of 7.2 percent last year, compared with a euro area average of 78.7 percent and 115.1 percent in Greece. Estonia would be “ready” to contribute to the EU’s 750 billion euro ($923 billion) rescue package, Ligi signaled today.
The Tallinn-based government pushed through budget cuts equivalent to 9 percent of GDP last year to achieve a deficit of 1.7 percent of GDP, and an estimated 2.4 percent in 2010. Those cuts were achieved because the population has a “realistic” understanding of the need for austerity, Ligi said today.