EU consultant: kroon to be devalued

  • 2006-06-07
  • From wire reports
TALLINN - A Finnish consultant to the European Commission has caused a stir after publishing an opinion piece in a local newspaper in which he claims that the commission may ask Estonia to devalue its currency. Esko Passila argued that the Estonian kroon, at its present exchange rate of 15.65 kroons to the euro, was highly overvalued. Thus, he argued, the European Union may significantly change the kroon's conversion rate upon Estonia's entry into the eurozone, or even unpeg the kroon from the euro, letting the exchange rate be established by money markets.

Passila suggested that this might bring down the kroon as low as 30 to 60 kroons to the euro, two- to fourfold below its present level, and claimed that this was the actual reason why the Estonian government had postponed adoption of the euro.
Passila claimed the government was hiding the actual mechanism behind the switch to the euro to prevent panic.
Commission spokespeople were quick to deny that Esko Passila's opinion reflected that of the EU's executive branch.

"With all due respect to him, I must say that what he [Passila] is reported to have said is pure speculation, which I cannot comment on or I would be speculating myself," Amelia Torres, spokesperson for the EU Economic and Monetary Affairs Commissioner Joaquin Almunia, told the Baltic News Service. Torres stressed that Passila, whose article appeared in the Aripaev business daily, was not expressing commission policy or opinion on the subject of Estonia's adopting the euro.
"What I can say is that, as everybody knows, the only reason why Estonia postponed its target date for euro adoption is that it doesn't meet the inflation criterion in 2006," said Torres.

Under the EU Treaty, a country's conversion rate upon euro area entry is decided unanimously by euro area members and the country concerned. This decision can only be taken months before the euro adoption date, she added.