Estonia cbank calls to limit impact of price rises

Wed Apr 27, 2011 4:20am EDT

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 TALLINN, April 27, (Reuters) - Estonia's central bank called
on the government on Wednesday to reduce its budget deficit and
for efforts to improve competitiveness by not allowing recent
high global commodity prices to pass through to broader price
and wage increases.
 Estonian joined the euro zone from Jan. 1. 2011, but has
seen prices increase by over 5 percent year-on-year in recent
months as higher global food and energy prices impact on prices.
 The country has been warned by the European Central Bank to
try to keep price increases under control.
 "Looking ahead, it is very important to avoid the pass-
through of commodity prices, since this would harm the
competitiveness of enterprises," the bank said in an economic
policy statement.
  The bank added that in order to reduce the effect of a
commodity price pass-through, it was necessary for the
government to focus on improving domestic competitiveness and on
the setting of administered prices, as well as, to prevent wage
growth from exceeding productivity growth.
 The bank also said that it was essential that the government
continue with its plans to reduce the budget deficit and
improving the efficiency of the public sector.
 "Higher tax income, which results from faster growth, should
first and foremost be used for achieving fiscal balance and
restoring reserves," the bank said.
 (Reporting by David Mardiste; editing by Patrick Graham)

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