Estonia Becomes 17th Member of The Euro Zone

Estonia has become the 17th member of the eurozone – the first ex-Soviet country to adopt the EU single currency.

Estonia is the third ex-communist country to embrace the euroPhoto: European Parliament/Flickr

The changeover from the Estonian kroon to the euro started at midnight (2200 GMT) in the small Baltic nation of 1.3m people.

‘Euro changeover in Estonia is progressing successfully. ATMs and card payments of Swedbank, SEB, Nordea and Sampo are working smoothly,’ the Estonian central bank said in a statement early on Saturday.

Despite market pressure on the eurozone and the Greek and Irish bail-outs this year, polls suggested most Estonians wanted the euro. Central bank deputy governor Rein Minka later told journalists that the changeover was continuing as planned.

Prime Minister Andrus Ansip marked the event by withdrawing euros from a cashpoint. “It is a small step for the eurozone and a big step for Estonia,” he said, holding the euro notes.

For many Estonians, 20 years after breaking away from the Soviet Union, the euro is proof that they have fully arrived in the West, the BBC’s Baltic region correspondent, Damien McGuinness, reports.

Fears that prices would rise in the wake of the currency switch appeared unfounded, with Rein Minka estimating that prices would rise by just 0.3 per cent as vendors adjusted to the new exchange rate.

In his new year speech, President Toomas Hendrik Ilves meanwhile paid tribute to Estonians’ achievements in meeting the strict conditions for joining the eurozone even in the midst of a major economic recession.

“The crisis did not evolve into a catastrophe because when things became difficult – and even before the lean times began – we mostly took the right steps,” he said.

Estonia joined the EU in 2004 – one of eight former Communist countries that did so, including its Baltic neighbours Latvia and Lithuania.

Two other ex-Communist countries – Slovenia and Slovakia – are already in the eurozone. Estonia’s government says the euro will attract foreign investors because devaluation is then ruled out.

In the past year Europe’s debt crisis has hit Estonia severely. The tough cuts in state spending, necessary to join the eurozone, have pushed unemployment to more than 16%.

To avoid a last-minute rush, Estonians were able to swap kroons for euros commission-free from 1 December. Kroons will be used in parallel with the euro for the first half of January.

Shops and restaurants will accept the kroon until January 14 – allowing those celebrating both the new year and Tallinn’s new role as European Capital of Culture for 2011 to pay their bar and restaurant bills in kroons – while banks will swap Estonians’ kroons for euros until the end of 2011 and the central bank will carry on doing so indefinitely.

The kroon has been pegged to foreign currencies from the start, first to the deutschmark and, in 2002, to the euro. The rate of 15.65 kroons to one euro has never changed. [via Wall Street Journal and BBC]

Share this article

We welcome comments that advance the story directly or with relevant tangential information. We try to block comments that use offensive language, all capital letters or appear to be spam, and we review comments frequently to ensure they meet our standards. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Coinspeaker Ltd.