Estonia bullish about swift adoption of single currency

By Peter Chapman

Date: 01/04/04

TAAVI Veskimägi, Estonia's finance minister, says his country is keen to join the single currency and will be "technically ready" to join the eurozone's ranks in mid-2006.

He told European Voice that Estonia is likely to officially start using euro notes and coins as of 1 January 2007, after a two and a half-year stint in the so-called ERM II - the exchange rate mechanism designed to stabilize currencies ahead of euro membership.

"The timetable is as soon as possible. I am preparing to write a letter to the European Central Bank on 1 May [about joining ERM II].

"But at the moment there are very clear procedures. We will prepare our convergence programme, I think, in mid-June," he said referring to a list of economic policy priorities that is drawn-up in discussion with the Commission and eurogroup members - to ensure that public finances are sustainable and would not harm the euro.

"I hope we will be joining ERM II on1 July, maybe, or else the middle of July. Our target date for joining the eurozone is 1 January 2007. We technically would be ready in mid-2006," he said.

Experts, such as Dutch Finance Minister Gerrit Zalm, have urged many of the EU's new members not to rush into taking the irreversible step towards euro membership.

But Veskimägi said Tallinn's decision to join the ERMII system would be "a very logical step", explaining that Estonia already has a fixed currency system. "We don't need to change our central currency rate - we would keep our currency's value," he added.

Under the terms of the 1993 Maastricht Treaty, countries joining the euro have to show inflation, debt and budgets are in good shape before they can be admitted.

Veskimägi said the "main problem" facing the Estonian economy is a current account deficit. But he explained this was linked to one-off transactions and is "not a danger long term".

Otherwise, he said the country's finances are in good shape, with a 2.6% of gross domestic product (GDP) budget surplus and a war chest of reserves equivalent to "a quarter of expenditure".

Growth, at 4.6% last year, has lagged behind his 7% target - although it is still way above the close-to-zero recorded by most eurozone countries in the last 12 months.

Countries such as Estonia have transformed themselves from Soviet-style command economies to market-based systems in just over a decade, while some of the current EU members have struggled to scratch the surface with reforms to make their labour markets work better.

Veskimägi said his country had completed the main part of its structural reforms process by 2001 - a year after EU leaders were pledging to push for change at the Lisbon summit.

However, the Estonian refuses to pour scorn on his future colleagues at the Ecofin Council of finance ministers for the slow pace of implementing economic reforms inside the bloc his country will join on 1 May.

"They are one cycle behind," admitted Veskimägi. "But I think this is very normal. This part of our development is in the past - but of course we do not lose our motivation."

http://ec.europa.eu/enlargement/archives/enlargement_process/past_enlargements/eu10/estonia_en.htm http://ec.europa.eu/enlargement/archives/enlargement_process/past_enlargements/eu10/estonia_en.htm

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