TALLINN - Former Prime Minister Mart Laar said he believes that Estonia would not be able to adopt the European Union's common currency the euro on Jan. 1, 2007 as planned due to high inflation.
"The sad truth at this moment is that Estonia will not be switching to the euro on Jan. 1, 2007. The inflation rate in Estonia is below only Latvia's in the EU, clearly exceeding the required 3 percent ceiling," he told the business daily Aripaev.
Prime Minister Andrus Ansip has also admitted that the transition to the euro may be delayed, but the government is continuing to gear up for the transition, which, in Laar's words, will only anger people.
"What makes the situation even worse is that the government appears to lack any will to decide what to do," he said.
As Laar sees it, explanations that the country's inability to meet the inflation criteria is due to temporary circumstances, or a rise in fuel prices, cannot be taken as a serious argument. "Other new member states moving toward the introduction of the euro on Jan. 1, 2007 's Slovenia and Lithuania 's have, despite a similar rise in gas prices, managed to keep inflation under control," he said.
A situation where two other countries planning to switch to the euro on Jan. 1, 2007 are set to manage it but Estonia won't is especially painful. "For the first time since the restoration of independence Estonia is clearly letting another Baltic state overtake it in economic reforms," Laar says.
"Because of this, Estonia may be threatened with the worst economic setback of the last few years," he said.
Laar said the situation would be better if the government had openly and unambiguously dropped plans to switch to the euro on Jan. 1, 2007 and admitted the country wouldn't be able to get ready by that date but would intend to do so on Jan. 1, 2008.