TALLINN, May 19 (Reuters) - Estonia's coalition government, brought to the brink of collapse by budget cut needs, said on Tuesday it had found about two thirds of the savings needed, including some tax rises, to keep the deficit within EU limits.
The three-party coalition said in a statement it had found savings worth 3.4 billion kroons ($296.2 million).
This was still short of the 5.5 billion kroons needed to keep the deficit within 3 percent of gross domestic product and stay on course for euro adoption. It was not clear how the further savings would be made.
"All ministries have their reduced total costs by 1.8 billion kroons," the government said.
The government will meet on Thursday to approve the cuts and send the bill to parliament.
The budget cuts are needed after Estonia plunged into recession following several years of strong growth.
Excise duties on fuel and tobacco would rise by 5 percentage points, on fuel from July and on tobacco from January, it added.
Estonia has so far cut the budget by 10 billion kroons this year, but the strains of finding such fiscal adjustments have brought the government virtually to its knees.
The two largest parties, the Reform Party of Prime Minister Andrus Ansip, and second-largest party, Pro Patria/Res Publica, are now seeking to dump smallest party, the Social Democrats.
The main point of disagreement is how to make the budget cuts and at the same time to finance the unemployment fund, with the Social Democrats insisting on higher contributions.
Ansip is to talk further on Wednesday with a small opposition group, the People's Union.
Estonia still hopes to join the euro zone from January 1, 2011, but the budget deficit must be below three percent of GDP.
Analysts polled by Reuters last month forecast the country would not join the euro until 2013.
The EU commission forecasts the budget deficit at three percent of GDP this year, but says it will breach the limit in 2010. The International Monetary Fund said on Monday that aiming for a 3 percent budget gap this year was ambitious. (Reporting by David Mardiste; Editing by Ron Askew)