Euro-skeptic Estonia
January 1, 2011
Anti Poolamets campaigned long and hard against the euro but, in the end, he failed. His native Estonia officially introduced euro bills and coins on January 1. The small country with its 1.3 million citizens became the 17th country to join the eurozone.
"My grandpa saw eight currencies come and go," Anti Poolamets said. "Three currencies during Estonia's revolution, the kroon in the 1920s, occupation money during the Nazi period. Then there were different kinds of rubel in the Soviet Union, and the Estonian kroon again since 1992. And now comes the euro."
The lawyer and historian fought to keep the Estonian kroon as the Baltic country's currency - and a symbol for its independence from the Soviet Union in 1991. He believes it is a matter of power to issue a currency, adding that this power has now been transferred to the European Union.
Confronting euro skeptics
Poolamets points to recent polls that show a majority of Estonians sharing his euro skepticism. The Estonian government, he argues, should have waited to see if and when the euro recovers before introducing the common currency.
Estonia's Finance Minister Juergen Ligi continues to confront euro sceptics like Poolamets with arguments why Estonia needs the euro.
"The Estonian kroon has never been an independent currency," Ligi said. "The kroon's value had been fixed to the German mark from the very beginning and then was fixed to the euro. We never changed the exchange rate in 18 years and we have done quite well with that policy."
Introducing the euro was an inevitable step in Estonia's financial policy, Ligi argues. And it will send an important signal to potential investors that the country is serious about pushing through reforms to meet the eurozone's strict membership criteria, he added.
Unlike many other eurozone countries, Estonia doesn't suffer from excessive debt. Its public deficit-to-GDP ratio ranks among the lowest in Europe. Its economy has rebounded after being hit hard during the economic crisis in 2008 and 2009. Its inflation rate, which prevented the euro from being adopting in 2007, is now below the required 2 percent per year.
"The euro will be the currency in Estonia for a very long time, Ligi said. "We are also willing to contribute to the safety net for struggling euro states."
Most Estonians will need time to become familiar with the new euro coins, as they are accustomed to paying mostly with bills. Their smallest bill - one kroon - was worth just 6 eurocents before the conversion.
"All these coins are very inconvenient," a taxi driver commented. "I will need a new wallet and a different kind of register."
Evelyn Tamm, a young student from Tallinn, is not excited about using the new currency, though she admits it makes traveling around Europe easier without the need to exchange money. She says she still needs to get used to thinking in euros instead of kroons.
"My mom, who had to switch from the Russian rubel to the kroon, told me I won't be calculating in my head anymore after a couple of months," Tamm said. "We'll see about that."
Euro coins don't bother Maris Hellrand, a communications manager from Tallinn, since she, like most Estonians, pay for even small amounts by card. But Hellrand wonders whether it was a mistake to adopt the euro in the middle of crisis with several states requiring bailout funding and others likely to follow.
Higher costs?
She also believes the decision to introduce the euro caused living expenses to rise in the second half of the year. Finance Minister Ligi denies a connection between higher living costs and the euro, claiming that price increases were caused by a general hike in food and energy prices.
Michael Stenner from the German-Estonian Chamber of Commerce in Tallinn agrees. He points to efforts by the government to make price developments as transparent as possible.
Stenner, who also manages an upscale hotel in the city's historic center, doubts restaurants and hotels in Estonia will hike their prices as they did in Germany when the country adopted the euro in 2002.
The euro won't affect trade volumes between Estonia and the eurozone, Stenner believes. "But everything else will become much simpler, because currency exchange and difficult bank transfers won't be necessary anymore," he said.
By introducing the euro, Estonia will show potential investors that the country is ahead of its Baltic neighbors, Lithuania and Latvia, which have been hard hit by the economic and financial crisis, according to Stenner. "Next year, we will have a double effect with the euro adoption and Tallinn being the European Capital of Culture," he said. "That could bring more tourists to Tallinn." Stenner said.
Author: Bernd Riegert (sst)
Editor: John Blau