TALLINN - A new Cabinet minister shocked the nation this week by suggesting that the government hold a referendum on adopting the euro.
Finance Minister Aivar Soerd, a member of the People's Union, announced plans for a nation-wide referendum on the country's transition to the euro.
"The issue is still on the agenda and the opinion of the people is important," he told the Baltic News Service. "The People's Union has not backed out of its earlier view."
The party has more than once voiced its desire to hold a referendum on adopting the euro, despite the fact that Estonia, as a new member state, has no choice in the matter. According to EU accession agreement, all 10 new member states must adopt the euro.
As part of his argument, Soerd brought up the coalition agreement, which states that the government's goal is to facilitate the transition to the euro by 2007.
The Bank of Estonia slammed the referendum idea, suggesting that such talk would damage the country's credibility.
"So far Estonia has, on the level of both the government and the Bank of Estonia, been giving a clear message about its plans concerning the transition to the euro. The existence of clear plans and visions in itself has played a significant role in achieving international reliability of Estonia," the bank wrote in a statement.
Any discussion about holding a referendum would cause economic uncertainty and, in the end, cost the country no insignificant amount of money, the bank explained.
In anticipation of the monetary switch-over, Estonia's sovereign ratings have been rising, while loan-interest rates are quickly falling. Due to the country's large account deficit, its timely accession to the eurozone has been a key argument in determining the sovereign rating, a fact that all rating agencies have pointed out, the bank said.
"We have gotten so used to the historic stability of the Estonian kroon, based on the currency basket system and a strong financial sector, as well as the government's conservative budget policy, that we tend to forget that all this need not be necessary for a small state. Besides, much depends on the international credibility of our economy," the bank said.
The People's Union, which is chaired by Villu Reiljan (see interview on Page 18), is widely perceived to be a center-left party that gains much of its support from rural and agricultural areas. The area's conservative residents are likely to be most skeptical about adopting another currency.
Otherwise, Soerd said that fulfillment of the coalition agreement between the People's Union, the Center Party and the Reform Party would require more than 3 billion kroons (192 million euros) in additional expenses, which, in his words, could be met without putting the balanced budget in deficit.
"The state budget for 2006 must not have a deficit," he said.
Soerd was head of the Tax and Customs Board until 2003 when then Finance Minister Tonis Palts, of the Res Publica party, fired him. The court later reinstated Soerd, but the present head of the board, Aivar Rehe, had already been appointed.
Soerd said that one of his term priorities at the Finance Ministry would be reining in government expenses. He praised his predecessor, Taavi Veskimagi, also from Res Publica, who he said had successfully kept expenses in check.