The Baltics and the euro

The European Union will finally celebrate a milestone in its tortuous meandering on the issue of individual country's sovereignty. The euro has now arrived and is as of Jan. 1, 2002, in the pockets of 300 million people who live in the 12 countries that have adopted the new currency.

But the euro will also become familiar in other European countries that have not joined the new monetary system.

Since its introduction three years ago, the euro has been a commercial tender used by banks and corporations. But now the euro is taking on a life of its own, and might encourage all Europeans to think in terms of being citizens of Europe, rather that just citizens of their individual countries. It's a very difficult step, but with other steps such as voting for a European Parliament in 2004, Europeans are gradually and slowly moving in the direction of feeling part of a country called Europe, rather than looking at the EU as a large bureaucracy that spends a lot of resources in drafting legislation on environment, trade and other issues.

European tourists and business people who come to the Baltics will bring euros to spend in the three countries. Finns who come from the only country in Scandinavia that has adopted the euro, will be among the first ones to bring their new currency to Estonia. But many other Europeans will do the same from now on.

One of the most welcomed signs of hospitality is to accept someone else's currency, as it has been the case for the dollar for the last half a century. While the euro has still to prove its own stability as a viable currency, it represents the strong economies of very productive countries, and as such it should become a strong currency.

Posting prices in local currency and in euros in the Baltic countries is an expensive process, as registers and computer systems would have to be harmonized. But this process has to be started in preparation for the entry to the EU as early as 2004. This entry does not imply that the three Baltic countries will be able to join the euro at that time, as there are macroeconomic matters involved, but familiarizing the Baltic population with a currency that eventually will be their own would be a positive step.

Although Estonia, Latvia and Lithuania have reasonably stable currencies of their own, the euro could become popular enough that it becomes used by people living and traveling in the Baltics. If trade among the three countries is done in euros, it would make things simpler. Furthermore, it would create an environment where people would be inclined to vote yes in a referendum to join the EU.