Euro Adoption Looking Good

Ratings agencies Fitch and S&P both raised their outlooks for Estonia's sovereign rating to 'stable' from 'negative' on the back of an increasingly favourable outlook for the country to join the eurozone by 2011. We continue to expect euro adoption to top the government's fiscal and economic policy agenda through 2010. As a result, we expect Prime Minister Andrus Ansip to continue to push through a fiscal austerity programme which should bring the deficit back to within 3.0% of GDP by end-year. Should the government succeed in entering the eurozone by 2011, this will bolster the coalition government's support, improving the likelihood of re-election in 2011.

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