TALLINN - The European Commission evaluated Estonia’s readiness for accession to the euro zone and made a proposal for the country to be admitted to the euro zone in 2011. In the Commission’s opinion, Estonia will enter the euro area from a considerably better position than many previous entrants. According to an EU executive, Estonia has clearly done its homework and has achieved one of the strongest fiscal positions in the European Union.
Estonia clearly meets the criteria for euro membership set out in the Maastricht Treaty “as a result of determined and efficient efforts by the Estonian government and Estonian people,” the EU commission said.
Despite the European Central Bank’s doubts about how long Estonia can hold down inflation, the European Union’s executive arm said that Estonia was ready to adopt the euro, unlike other, bigger hopefuls such as the Czech Republic, Hungary and Poland. Estonia will become the fifth state that joined the Union in 2004 to adopt the currency.
“To ensure that the adoption of the euro is a success, Estonia must maintain a prudent fiscal policy stance,” said Olli Rehn, EU economic and monetary affairs commissioner. Rehn also said that Estonia needs to “remain vigilant and react early and decisively” if signs of macroeconomic imbalance or deterioration of competitiveness emerged.
The Commission judged that Estonia also meets the long-term interest rate stability requirement even though the country has no government bonds on which to base an evaluation. Massimo Suardi, the official dealing with euro changeover matters at the European Commission’s Directorate General for Economic and Financial Affairs, said they analyzed other indicators related to interest rate stability, such as the low level of public debt, credit ratings, and short-term interest rates.
According to some experts, the Commission’s positive assessment came in the wake of an enormous European bailout for Greece, which shed new light on the importance of countries taking inflation-control measures. Countries are concerned that massive debt problems in the eurozone made Brussels wary of taking on a new member.
In connection with the adoption of the euro, 236 out of 418 laws currently in effect in Estonia will have to be changed, noted Prime Minister Andrus Ansip at the government press conference. “This means that 56.6 percent of our laws would need to be changed in connection with the adoption of the euro,” he said. According to the prime minister, the process of changing the laws is not difficult in technical terms; each law does not need to be separately voted on.
The Commission’s proposal, however, is only a recommendation. In order for Estonia to be officially welcomed into the eurozone, the approval which took place on May 12 will have to be confirmed by the EU’s finance ministers in July.