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Estonia facing euro challenge


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Estonia will need to keep cutting costs if it is to achieve its dream of joining the euro.

The country's finance ministry has downgraded its gross domestic product (GDP) forecast and now expects a 14.5 per cent drop, rather than the 8.5 per cent contraction it predicted earlier in the year.

News of the move came after figures revealed that GDP fell by 16.6 per cent in the second quarter of 2009 when compared to the same period last year.

The decline puts further pressure on the country's euro plans, as the Maastricht criteria states that a nation's budget deficit cannot be more than three per cent of GDP if it is to join the single currency.

Earlier this month, it was revealed that Standard & Poor's has cut Estonia's sovereign rating by one grade to A-.

Marten Ross, deputy governor of Eesti Pank, stated that by joining the euro, the country would become more stable and this should lead to improved rating is future.

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