Estonia 'can adopt euro' in 2011 - EU Commission


The Baltic republic of Estonia, a country of 1.3 million people, is on course to adopt the euro in January 2011, the European Commission says.

The recommendation still requires the approval of all 27 EU member states, 16 of which are in the eurozone.

The Commission assessed the potential of nine EU countries to adopt the euro, and found that "Estonia stands out... fulfilling the criteria clearly".

Crucially, Estonia's public finances were found to be in a healthy state.

The other eight countries included much bigger ex-communist neighbours in Eastern Europe, such as Poland and Hungary.

The EU Commissioner for Economic and Monetary Affairs, Olli Rehn, said the assessment provided "a strong signal about the euro area".

The euro has come under huge pressure in money markets in recent months, amid fears that Greece's budget crisis could undermine other eurozone countries laden with big deficits.

The eurozone, helped by the IMF, has set up a 110bn-euro (£95bn) rescue package for Greece, along with a 750bn-euro fund to assist any eurozone countries in trouble.

The Commission said Estonia's deficit and debt were well within the acceptable limits set by the Maastricht Treaty that launched the single currency.

The deficit was 1.7% of total output (GDP) in 2009, despite a 15% drop in GDP.

Estonia's government debt stood at 7.2% of GDP in 2009 - well below the eurozone average of 60%.

The Commission's assessment covered: Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania and Sweden. Every two years the Commission judges whether their economic conditions meet the strict Maastricht criteria.

Since the EU's big eastward enlargement in 2004, two former communist bloc countries have joined the eurozone - Slovenia in 2007 and Slovakia in 2009. Cyprus and Malta adopted the euro in 2008.



I don't think there's any real danger here, as Estonia is outperforming several existing eurozone members economically, and small enough that any problems that might occur would be unlikely to become as destabilizing as the ones in Greece lately. Still, the timing of this report is kind of funny - one assumes they did it on purpose, to try and improve the euro's reputation a little, but it comes across as kind of a slap in the face of those who said, with some justification, that this whole shared currency without shared macro-economic policy thing is dangerous. I don't expect it will be very popular news in Germany, either.

Incidentally, I found the inclusion of Sweden in the list of countries assessed for suitability to join the euro hilarious, but also kind of sad. Sweden could've joined from the very beginning if it had wanted to, and this whole thing about it not meeting requirements is a farce to cover up the real issue - that making the euro theoretically compulsory for all EU members except the UK and Denmark (iirc) was foolish. Sweden should just be able to say, we don't want it, so we're not doing it, and same with all the newer members in Eastern Europe.