Estonia pulls out all the stops for eurozone bid (News Feature)
By Mike Collier Feb 28, 2010, 2:08 GMT
Tallinn - With around three months to go until Estonia learns if it will be allowed to ditch its currency, the kroon, the Baltic state is redoubling its efforts to show it is ready, willing and able to adopt the euro on January 1, 2011.
A paper released by Deutsche Bank Research on February 26 said that Estonia is 'a long way ahead of other candidates' and 'has a good chance of becoming the seventeenth country to join the eurozone.'
But Tallinn fears that the economic crisis in Greece - which already uses the euro - will make existing eurozone members reluctant to admit a new member, particularly one that witnessed a 14-per-cent contraction in its economy in 2009.
To counter any suggestion that Estonia should wait a little longer, officials are stepping up efforts to make their case.
Finance Minister Jurgen Ligi has repeatedly insisted that Estonia has indeed met the Maastricht rules governing euro adoption. In an interview with the German Press Agency dpa on February 10, he said 'Our financial policy has been very conservative all the time, but nobody knows about it.'
A day later, Prime Minister Andrus Ansip warned the Helsinki conference of EU leaders that changing the Maastricht criteria to exclude Estonia would be grossly unfair.
Ansip's government has introduced a range of painful reforms involving big wage and public spending cuts plus tax hikes with the express purpose of qualifying to join the eurozone.
Ansip even used a speech on February 23 to mark Estonia's Independence Day as a chance to point out his country's economic credentials.
'Joining the eurozone will increase our trustworthiness. Our labour costs remain a third to a quarter of that of Finland or Sweden. Estonia's current account balance is in surplus,' he said, adding that the state's economic fundamentals were much stronger than in many other EU countries.
In its report, DB Research described Estonia as a 'borderline case,' saying 'It is less a matter of yes or no but rather of when.
'There is no doubt that Estonia will join the Economic and Monetary Union (EMU) in 2011 if it satisfies all the measurable Maastricht criteria. If one criterion - such as the deficit or the financial market analysis - should narrowly fail to be met, we can look forward to a heated debate.'
The decision on when Estonia gets the euro will depend upon the results of a visit by the European Central Bank and European Commission in May. Their recommendations will likely be rubber- stamped by EU finance ministers at a subsequent meeting in June.
Before that, the Estonian finance ministry is preparing a final report, due to be delivered in March.
It will build on a February 23 claim by its panel of experts that 'the introduction of the euro on January 1, 2011, is realistic,' and that all the technical issues involved with changing currencies, such as preventing price increases, are being taken care of.
Meanwhile the techno-savvy Estonian public is being encouraged to find out about the benefits of the EMU at a variety of officially backed websites and seminars.
With the next general election due in March 2011, the future of Prime Minister Ansip's minority coalition government is also likely to depend on whether Estonians are paying for their groceries in euros by that time.
As DB Research concluded: 'Regardless of whether the country becomes the seventeenth EMU member in 2011 or somewhat later under probably less contentious circumstances - Estonia deserves a fair assessment.'