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updated 4/24/2009 10:59:53 AM ET 2009-04-24T14:59:53

Estonia plans to build a new broadband network that would provide high-speed Internet access to homes and businesses throughout the small Baltic country by 2015, the government said Friday.

The $500 million project — a joint effort by the Economy Ministry and domestic telecommunication companies — is expected to give a much-needed boost to the Baltic nation's economy, which this year is expected to shrink by more than 10 percent.

"The project enables us to boost the economy and also create new jobs," Economy Minister Juhan Parts said in a statement.

The new broadband network will cover all homes and offices in the nation of 1.3 million, with more than 4,100 miles of fiber-optic cable. It will allow users to surf the Internet at speeds of up to 100 megabits per second, the ministry said.

Parts said the new network would be particularly important to poor rural areas, which technologically have lagged behind the capital, Tallinn — known for its many wireless hotspots and as a research hub for online communications service Skype.

The government will cover 25 percent of the project's costs with money from European Union structural funds. The rest will be financed by private telecom companies, the ministry said.

Like its Baltic neighbors Latvia and Lithuania, Estonia is currently undergoing its most severe recession since independence in 1991. Unemployment is soaring, and the country's central bank predicted Wednesday that gross domestic product may plummet 12.3 percent this year — which according to some economists would qualify as a depression.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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