Troubled euro zone welcomes Estonia to the club
THE BALTIC state of Estonia is preparing to adopt the euro on January 1st, ignoring the single currency’s travails to extend its use into the former Soviet Union for the first time.
The country of 1.3 million people is hoping the euro will help it accelerate its recovery from a recession that plunged the economy into a 14 per cent decline in 2009. This followed several years of rapid growth which earned Estonia a reputation as a “Baltic tiger”.
Recent polls suggest that 52 per cent of Estonians back the euro, with business leaders insisting it will make life easier for the nation’s businesses, 80 per cent of whose trade occurs within the EU.
Opposition to the single currency tends to come from low-earning Estonians. They fear that their wages will be eroded and prices will increase in the months ahead as bosses round pay packets down and shops round prices up after the kroon currency is replaced.
Other anti-euro voices complain that Estonia is giving away a big slice of its sovereignty barely 20 years after it escaped Soviet control, placing it at the economic mercy of Brussels and the big EU members.
Sceptics have also watched askance as Ireland and Greece have flirted with financial collapse and other states have come under considerable pressure from the markets. This has fuelled discussion about whether weaker euro-zone members should withdraw from it and revive their domestic currencies, potentially boosting competitiveness and helping their economies.
Estonia’s leaders insist they have no qualms about the euro, however, and look forward to January 1st as the fulfilment of an ambition that the Tallinn government had hoped to achieve in 2007, only for hopes to be dashed by high inflation fuelled by the booming economy.
However, a tough austerity programme to help the country recover from the financial crisis has put it back on course. The economy is expected to grow by 2.5 per cent this year, and 3.9 per cent in 2011.
“The fact that Estonia is joining a common currency at a difficult time is a pure coincidence,” said president Toomas Hendrik Ilves. “Estonia embodies the monetary values that the euro should stand on.”