President of the Bank of Estonia Andres Lipstok replied to the interpellation (No. 157) concerning the Maastricht criteria of price stability and the state budget strategy, submitted on 30 May by Members of the Riigikogu Marko Pomerants, Taavi Veskimägi and Olari Taal.
President of the Bank of Estonia stressed the need to continue the conservative economic policy after adopting the common currency Euro in Estonia. The spring prognosis of the Bank of Estonia predicted the inflation in 2005 and 2006 to be 3.4 per cent and 2.7 per cent respectively. “This prognosis gave rise to hope that meeting the inflation criteria is possible, at least marginally, but the spring prognosis could not foresee the increase in oil prices to the level seen in the last months,” Mr. Lipstok stated. According to the 2005 summer prognosis of the Ministry of Finance, the growth of consumer price index may reach 3.6 per cent in 2005 and 2.6 per cent by the year 2006. The Bank of Estonia will publish the changes to the prognosis on 21 September. Due to the rapid increase in oil prices, higher inflation than estimated can also be expected in the other states of the European Union, first of all in the Euro region. In view of the fact that fuel takes up a higher share of the Estonian consumer’s shopping basket as compared to that of consumers of the old Member States, the difference in inflation between Estonia and the Euro region may become even more pronounced. “Therefore the fulfilment of the inflation criteria may become more doubtful during the coming months and we will meet problems with fulfilling the conditions laid down to us,” President of the Bank of Estonia warned.
“The Bank of Estonia considers important that the state economic policy would be guided by the obligations that the state has assumed,” Mr. Lipstok stressed. He stated that the pillar of the Estonian economic policy is still the conservative budget policy, and that the Bank of Estonia does not support the relaxation of the budget policy in the conditions of an almost record-level economic growth. Although it is a positive sign that a major part of the Supplementary Budget of 2005 will be appointed to the reserves, the present economic situation warrants a budget summary to be in a clear surplus in the current as well as the next year. But the growth of the Government sector expenditure by more than 15 per cent in the budget plan of 2006 does not comply with that objective. Mr. Lipstok reminded that budget problems of many states of the European Union, such as the failure to fulfil the conditions of the pact of stability growth, were caused by the fact that in the years of good economic growth the budget was not held in surplus, but the expenses had been increased. Mr. Lipstok said that the Bank of Estonia did not recommend to make such a mistake here in Estonia.
On 1 September 2005 the government approved the plan to adopt Euro, with the objective to start using Euro on 1 January 2007. Mr. Lipstok drew attention to the fact that in case Estonia could not fulfil the criteria of price stability during the first half of the next year, then the rapid increase in oil prices would be the main reason for higher price level beginning from today. “There is no reason to believe that Estonia’s accession to the Eurozone would be postponed to the indefinite future,” President of the Bank of Estonia marked.
Minister of Agriculture Ester Tuiksoo replied to three interpellations: to the interpellation (No. 154) concerning information technology solutions in the spheres of agriculture and rural life, submitted on 18 May by Members of the Riigikogu Imre Sooäär, Tiit Niilo, Sven Sester and Reet Roos; to the interpellation (No. 161) concerning preference of large scale producers in milk production, submitted on 2 June by Members of the Riigikogu Imre Sooäär, Marko Pomerants and Henn Pärn, and to the interpellation (No. 162) concerning the epidemics of infectious enteritis in AS Tallegg, submitted on 9 June by Members of the Riigikogu Tiit Niilo and Imre Sooäär.
The verbatim record of the Riigikogu sitting (in Estonian) can be found at: http://web.riigikogu.ee/ems/plsql/stenograms.form
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