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Euro for Estonia: ready or not, here it comes
Published: 13 July, 2010, 08:13
Edited: 27 July, 2010, 16:00
TAGS: EU, Currencies, Economy
Estonia is less than six months away from joining the Euro, but instead of seeing gold, many in the country are expressing concerns.
After years of preparation through painful economic belt-tightening, January 2011 has been set as the date for the arrival of the Euro.
But it’s not a single currency many in Europe would exactly call healthy.
Oleg Bessedin, a local businessman, already works in both currencies and says he has no problem with the Euro. But he’s worried that now is not the right time to join, and that doing so will hurt many Estonian businesses and consumers.
“The average salary is now 7,000-8,000 krones. If we convert that it comes out at 400 euros. That wouldn’t be considered a solid salary in other parts of Europe. An Estonian citizen compared to others becomes a tramp,” Bessedin says. “First of all our government is trying to convince us there will be no price rises. I think that for such goods as real estate and cars there prices won’t go up but goods like potatoes and bread are now five or seven krones. If we convert them into euros there are no such coins. That’s why shops will round the prices up.”
And there has already been a lot of economic hurt to get here. Estonia, Latvia and Lithuania, once called the ‘Baltic tigers’ for their aggressive investments, were mauled by the economic crisis.
Latvia and Lithuania are still viewed as too risky to be allowed to join. To meet the EU’s tough rules on joining Estonia has had to massively slash state spending, including wages, jobs and benefits, and raise taxes. So will it be worth it?
“I think the most important part of the Euro introduction is the confidence we are getting from it, belonging to a bigger currency area. So we are a very small, very open economy. It’s very hard to have your own currency and remain trustworthy during the crisis,” says Ulo Kaasik, Head of the Economics Department at the Estonian Central Bank.
Economics aside, Estonians are also very proud of their currency. To many it is a symbol of independence. When RT spoke to people in the shops, their reaction was mixed.
Meanwhile outside Estonia there is widespread incredulity the country would want to join. The potential financial disasters facing countries like Greece, Spain and Portugal have sent shockwaves through the Eurozone. And Estonia’s money problems won’t end with its accession.
“In a country like Estonia, which is already seeing a deeply recessed economy, inflation, high unemployment and shortages of skilled workers, the potential for price pressures and for being a less attractive venue for foreign investment could really create a lot of problems,” research associate at the Fund For Peace Mark Loucas says.
Estonians have been through hard times in recent years. They now hope the promised benefits of Euro membership will come sooner rather than later.
The euro's recent turbulence and Estonia's shaky economy raise more questions than answers over the timing of the currency change. Ivar Raig, who's a Dean of Economics at Tallinn University, says the country needs to recover to EU standards before eliminating the Krone.
“If Estonia wants to become a real Baltic tiger or even a Nordic star country, we have to maintain our current monetary policy and have one more growth wave to catch up to EU average levels and then join in the top of the next economic growth cycle.”
Economist and currency expert Professor Wilhelm Hankel doesn’t see Estonia’s becoming a part of the Eurozone as win-win situation.
“It’s not only investment. By losing your own currency, you lose your instruments for economic policy. And especially joining the Eurozone, you get into the temptation to become over-indebted, which is the tragedy of some countries in the South. So this union is not a win-win situation, you have the losers and the winners. And paradoxically, as the result of the Euro, the stronger countries are the losers and the weaker countries are the winners,” Hankel told RT.
13.07.2010, 08:09
3 comments
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1.Marzipan..."developing" Skype is not "inventing" Your exact words were, "Skype is an Estonian invention" Are you that sloppy with the language that you don't know the difference? No...I think that was a deliberately untrue statement on your part to make your Estonians seem a whole lot smarter than they really are...I think one day you'll make a very slick (Estonian) politician. 2."Russians as a whole have not had the same passion for education as native Estonians..... (Estonians have a) readily available lower class: there is a significant pool of manual labour available, drawn mostly from parts of its Russian population...."Obviously there isn't much difference there...still very facist...although you throw a bone to younger Russians....I find this amusing on two levels; First, Estonians have gone through great pains to erase their Nazi past but, then, expose their true feelings with these outrageous remarks......Second, what makes you think Russians want to work for arrogant masters like the NATO Estonians? Maybe these Russians feel the same way about NATO Estonians as you do about Soviets... 3. "This means that despite its size, it is doing better than approximately three quarters of the rest of the world" Again you just don't get it ...deliberately... like any slick politician...Statistics in tiny countries like Estonia are skewered because one big outfit like NATO can move into Estonia & employ everyone , the same way Boeing & Microsoft support Seattle in the US. How much NATO butt is Estonia kissing? Here's an indicator: "Estonia already provides invaluable economic and political advice to Georgia, as well as others in Europe’s East. It is a strong advocate of the EU’s Eastern Partnership initiative. And as one of the countries within NATO most worried about the “protection” side of the equation – At one point in 2009, Estonia had more troops per capita in Afghanistan than any other NATO Ally "
Svetlana, indeed I have not lived in Soviet Estonia, and I am eternally grateful for that. However, my parents, uncles, aunts, cousins, brothers, grandmother and in-laws have, and they have not always been silent about what they experienced there. I know very many people, both within and outside of Estonia, who also have. I have read widely on the subject. And I first visited Estonia within just a few months of the end of Soviet occupation there, and saw with my own eyes the shockingly depressing condition to which Soviet rule had reduced it. Through subsequent visits I have also noticed the many differences between the immediate post-Soviet Estonia then, and EU- and NATO- member Estonia now. So while neither you or I have had the personal experience of life in Soviet Estonia, my perceptions of it are formed by realities and are consistent with these, while yours seem to be formed by something else. But agreeing to disagree is a very sensible and civilized approach, Svetlana. I would like to hope that should I ever meet in person those with whom I disagree on these web pages, we can still respect and appreciate each other as people, and talk about things on which we do agree.
Larry, your doctrinaire thinking, whose aim seems to be to demonize Estonia at all costs, leads you into some remarkable logical absurdities. You say “developing” is not “inventing”. It all depends from what point the development starts. As far as I am aware, the named individuals developed the relevant software systems from scratch. But ultimately that is not relevant to the wider topic discussion in any case. Enke suggested Estonia was technologically inadequate. I pointed out otherwise. As well as taking note of what I said in my response to Stole in regarding her “lower class” theories which you have not done, you may want to do a bit of research about the meaning of the word, “fascist.” I could say that you misuse that word as if you were a language fascist – but if I said that, I would be emptying that word of its meaning just as surely as you already do. Apart from being occupied by Germany for about 3 years in between its two Soviet occupations, Estonia has no connection to anything Nazi and unlike your allegation, goes to no pains at all to erase a Nazi past which was not there to begin with. Russians can work for whoever they want to, as can Estonians. But if they choose not to acquire necessary educational qualifications, they need not blame anyone apart from themselves if they end up holding jobs that are less than brilliant. Big corporations indeed can move in and provide mass employment. But what relevance does this have to Estonia, where unemployment still currently stands at around 13%? You’ve got some really odd ideas about Estonia, Larry, that are laced with the negativism of Soviet/Russian propaganda. To you, anything positive about the country, its past, present or future is untrue, and anything negative is worse by far than it appears. I wonder what has driven you to that kind of miserable mindset? Has Estonia actually harmed you in some way?