Tallinn  - The Estonian government survived a no confidence vote on Friday, which it had tied to plans for scathing budget cuts in a high-stakes bid to deal with the country's troubled economy.

The coalition government of Andrus Ansip won the vote in the national parliament, or Riigikogu, by 61 votes to 35.

It had tied the no confidence vote to plan for a special budget aimed at saving around 8 billion kroons (690 million dollars) from public finances.

Tying the budget proposals and the no confidence motion together, meant that failure to pass the budget would have resulted in the resignation of the government.

Even with the austerity package, which include wage reductions for public sector workers and other cuts in public spending, the budget anticipates that expenditures will be greater than revenues to the tune of 3.7 billion kroons.

The supplementary budget will permit up to 3.5 billion kroons to be used from the stabilization funds the state accrued before the Baltic boom turned to bust.

"Estonia has collected considerable reserves over the past few years, which will ensure the sense of security and solvency that we badly need at this moment of crisis," said Ansip in presenting the budget to the Riigikogu.

"But eating up our savings as fast food cannot be a rational solution to the situation. The cutting of budget expenses is indeed painful and unpleasant, but still essential," the prime minister maintained.

Estonia is also negotiating a loan with the European Investment Bank thought to be worth up to 9 billion kroons.

Neighbouring Latvia saw its coalition government under prime minister Ivars Godmanis collapse on Friday amid his country's economic crisis, which will see the economy shrink by an esimated 12 per cent in 2009. (dpa)