Estonia will miss govt.'s euro-zone target - PM

TALLINN. April 13 (RIA Novosti) - Economic reasons will likely prevent Estonia from adopting the euro as its currency from January of next year as the government had previously announced, the country's prime minister said Thursday.

Andrus Ansip said his country would not join the euro zone at any cost, and that Estonia's current high inflation rate was natural given the country's high economic growth rate - projected at 8.5% in 2006 - while in euro-zone countries inflation stands at 1.5-2%.

The Maastricht inflation criteria state that a candidate country's inflation rate should be no more than 1.5 percentage points above the medium aggregated level of the three European Union countries with lowest inflation. This currently stands at about 2.8-3%.

Ansip said artificial methods to restrict inflation in the country, which saw inflation of 4.1% in 2005, were unlikely to bring positive results.

"Artificial methods to lower inflation may result in a loss of trust in the Estonian economy and a state budget shortage, and would be an extremely high price for switching to euro by the previously announced date," he said.

He said the government was continuing to work on adopting the euro, and had earlier set a provisional date of January 1, 2008. He added that the switch would also depend on external factors, particularly oil prices.

"We are preparing to switch to the euro, but are not ready to do it at any cost," Ansip said.

The international credit ratings agency Fitch forecast last year that Estonia, Slovenia and Lithuania would join the euro zone as early as January 2007.