Tags: Estonia Euro

Estonia Joins Euro as Currency Expands Into Former Soviet Union

Friday, 31 Dec 2010 08:55 AM

 

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The European Union hailed Estonia's adoption of the euro in a few hours time is a symbolic boost for a currency that has just faced its worst crisis in its 12-year history.

European Commission President Jose Manuel Barroso said Friday that Estonia's changeover from the kroon to the euro at midnight would boost the small Baltic nation's economy and send a powerful message to all EU members.

"It is a strong signal of the attraction and stability that the euro brings to member states of the European Union," Barroso said in Brussels.

At the stroke of midnight, Estonia will adopt the euro — a final step in the Baltic state's dogged effort to become the 17th member of the eurozone and to integrate its economy with Europe. It is the first former Soviet republic to join the single currency club.

But the switch comes at a time of profound crisis with Europe's common currency, particularly after two members — Greece and Ireland — required emergency bailouts in 2010 to deal with their massive debt burdens.

That is why many feel that the inclusion of Estonia, whose $19 billion economy is dwarfed by the euro's total annual output of approximately $12.5 trillion, holds symbolic importance.

Many economists generally believe that Estonia, which has emerged from its worst economic crisis — the economy contracted 14 percent in 2009 — will benefit from having the euro, though the country still has painful structural reforms to implement before reaching western European living standards.

The country, which achieved independence in 1991, will be the poorest member of the eurozone.

"The euro will definitely support Estonia's trade," Prime Minister Andrus Ansip told reporters Friday, adding that 70 percent of the country's trade takes place with EU members.

The country, which achieved independence in 1991, will be the poorest member of the eurozone, and that's cause for concern for many Estonians who fear they will end up having to cough up scarce resources to help out other eurozone countries that may end up getting bailed out.

But Ansip reminded Estonians that the eurozone isn't a one-way street.

"We cannot talk about solidarity just when Estonia needs help," he said. "We have to help others too."

Celebrations will include fireworks and a gala concert featuring the music of U.S. composer George Gershwin, while Estonian Prime Minister Andrus Ansip was due to make one of the first bank-machine withdrawals in euros just after midnight.

The Finance Ministry said Estonia's banks and IT-systems were prepared to cope with the changeover as hundreds of ATM-machines were being loaded with euro notes.

Selected bank branches and post offices were scheduled to stay open over the weekend to accommodate the switch, but police urged citizens not to rush about with large amounts of cash due to robbery risks.

After Slovenia and Slovakia, Estonia will be the third East European country using the euro. Seven other countries in the region — Poland, Romania, Hungary, Czech Republic, Bulgaria, Lithuania and Latvia — are also required to phase in the euro as part of European Union membership, though there is no deadline to do so.

Estonia's Baltic neighbors Latvia and Lithuania have pledged to join the euro area in 2014.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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