TALLINN - At the meeting of European Union economic and finance ministers that took place on July 13 in Brussels, the decision and resolutions of the council were approved, thereby giving the final nod to Estonia’s adoption of the euro as of Jan. 1, 2011, and establishing the conversion rate of Estonian kroons to the euro. The Council also adopted regulations setting a permanent conversion rate for the Estonian kroon against the euro, and adapting certain technical provisions on the euro.
The European Commission together with Estonian authorities and the European Central Bank work hand in hand in common projects such as the euro exhibition, euro conference and information campaign to ensure a smooth changeover for Estonian residents. The decision seals a striking success story for one of the EU’s smallest members, a year after its economy appeared to be following those of Latvia, Hungary and Romania into meltdown under the impact of the global financial crisis.
During the transition, Estonian kroons will be exchanged for euros at a rate of 1 euro = 15.6466 kroons, which means that the current exchange rate remains unchanged.
The approval process began on May 12, when the European Commission stated that the tiny Baltic state fulfills all necessary conditions to join the eurozone. Conditions cover entry requirements on inflation, debt and deficit levels, interest rates, and currency stability.
In a ceremony in the Berlaymont building following the ECOFIN decision, EU commissioner for Economic and Monetary Affairs Olli Rehn, the Estonian Finance Minister Jurgen Ligi, the ECB represented by Frank Moss, director, and other guests assembled around a Euro map to add a euro button for Estonia.
“Today’s decision is recognition of our joint efforts and fiscal policy. We are stepping into a euro zone whose economic bases are becoming stronger. The euro is very important for our economic recovery and for increasing our well-being. Now six months of hard work stand before the state, local governments and businesses, during which we will make the practical preparations to ensure that the transition to the euro goes as smoothly as possible,” commented Ligi.
“The decision allows investors to make the difference between us and the region of Eastern Europe, whose image has been very bad for the markets,” Ligi added. “Joining the eurozone means trust in the Estonian economy is growing,” said Estonian Central Bank Governor Andres Lipstok.
To celebrate the event, Estonian diplomats gave the EU’s finance ministers chocolate versions of the new currency. Erki Peegel, director of Enterprise Estonia, which is responsible for promoting Estonian business abroad, hailed as ‘very positive’ the EU decision. “We will now be seen as part of the family among other eurozone countries and there will be clear price transparency. The euro also reduces risks for foreign investors,” said Peegel.
In addition to making the euro decision, the ministers got an overview of the priorities of Belgium’s EU presidency - at the forefront are improving the co-ordination of economic policies and the ongoing reform of the financial sector. The European Commission introduced proposals for implementing stricter budget policy monitoring than before. Work on their proposals will continue in the fall.
“Estonia has achieved a high degree of sustainable economic convergence and is ready to adopt the euro on Jan. 1, 2011. We commend Estonia for its long-standing commitment to prudent policies. To ensure that the adoption of the euro is a success, Estonia must pursue its efforts to maintain a prudent fiscal policy stance,” said Rehn.
Currently, 16 out of the 27 member states of the EU use the euro as their currency, so Estonia will become the 17th member of the single currency area.
An information campaign to accompany the run-up to the adoption of the euro has started under the slogan ‘Welcome, euro’ (Tere euro). Its objective is to ensure that all Estonians know everything they need about the euro as their new currency and the Economic and Monetary Union (EMU) before it becomes a reality for them.
The Commission provides Estonia financial and practical support for the campaign under a Partnership Agreement. The campaign will include printed information material, TV and radio clips, as well as advertisements in print media, cinemas and on the Internet.
After Jan. 1, there will be a two-month period of parallel circulation of both kroons and the euro in Estonia. During the period of parallel circulation the kroons remains legal tender, but change is as a rule given in euros in all stores and service institutions. In the estimate of the Estonian Central Bank, 80 percent of euro cash should go into circulation via ATMs. During the period of parallel circulation ATMs will release notes of 10 and 50 euros. After that it will be up to each bank to decide what denominations it keeps in its ATMs.
In accounts kroons will be converted into euros at the official rate at the moment of the changeover. Starting in December, private individuals will be able to change kroons cash for euro banknotes without a commission at the official exchange rate. The Bank of Estonia will start supplying euro coins to commercial banks in September and will start doing the same with euro banknotes in December.
Estonian shops have already begun displaying prices in both the kroons and the euro to acclimatize citizens to the change. Businesses have also created a voluntary price-checking organization to make sure that they do not abuse the system.