If we rely on strong macroeconomic policy, the principles of an open economy and future-looking investment, Estonia will continue to have all the possibilities for defeating the crisis. But what are the national economy level measures the government should take and how should they support the financial system? Here I start with a firm standpoint that the fixed exchange rate of the kroon to the euro is the pillar of Estonia's economic policy and the accession to the euro area as soon as possible is its logical continuation. The experience of the past half a year show that monetary policy that is based on the fixed exchange rate and the currency board supports economic stability also in more difficult times. But how does the fixed exchange rate help us overcome the crisis? First of all, it helps stabilise inflation expectations and stop price rises. Price corrections after the accession to the EU were sharper then we expected. The opening of the labour market and price rises of many goods in the global market had a strong impact on Estonia. This stage, which was, in a sense, unavoidable and paradoxically also the result of successful reforms at the start of the century, is now over. The price level is expected to decline somewhat both this and next year. Second of all, the currency board arrangement brought about a relatively fast correction in several sectors of the economy, which displayed clear signs of overheating after the accession to the EU.
The sustainability of fiscal policy is very important for restoring confidence in Estonia and adopting the euro. When looking at the changes made in the budget this year and at the new fiscal strategy, it has to be pointed out that the support of fiscal policy to the economy was remarkable in 2008. The state budget swung from a 2.7% surplus to a deficit in the course of one year. This year, the share of state expenditures in GDP may rise to 43%. Thus, it is important to ensure fiscal sustainability this year and also in the next years. Thereafter reserves must be restored. In Eesti Pank's estimate this means an extra 7 billion kroon cut in addition to the curtailments already made. Actions related to fiscal policy must be decisive, but thoroughly considered. I am not so pessimistic as to absolutely agree with the opinion that the government has reached the stage where it faces just "bad and very bad solutions". But it is also clear that there is no simple or simplified way to rekindle growth. Measures need to be taken on both the revenue and the expenditure side. But I think it should be kept in mind that it is state expenditure that has soared over the past years. On the other hand, the tax burden that has been relatively stable so far is one of the main strengths of the Estonian economy, leaving sufficient room for private initiative. To conclude, I will repeat the main message of Eesti Pank's spring forecast.