I have been to Tallinn, the lovely capital of Estonia. What's more, my favourite choral ensemble is the Estonian Philharmonic Chamber Choir (EPCC) whose music I enjoy as a man of taste if not necessarily wealth [!--my first pun of the year].Bang on schedule despite a torrid 2009, the tiny former Soviet bloc republic of Estonia has just acceded to the Eurozone at the start of 2011. For obvious reasons, Euroskeptics are more upbeat nowadays than they have been in years given the collective woes of Portugal, Ireland, Greece, and Spain or the now-infamous PIGS economies. However, what these perma-critics fail to appreciate is that their woes are not really problems germane to sharing a single currency but to poor economic management, period. Among other things, out-of-control public spending (Greece) and overcommitment to failed financial institutions (Ireland) have helped cause troubles in these 'peripheral' economies. In recent years, all have to an extent abused their status as Eurozone members to run very substantial external deficits.
Thankfully, most of these ills do not automatically apply to Estonia. Although there will indeed be temptations to go down the PIGS route as a newly-minted euro user, I think our Estonian friends been given ample warning not to do so. Besides, is it really an advantage to run reckless policies like the United States to ensure that you've screwed over future generations? I'll leave you to ponder that question as I've banged on that drum enough already; meanwhile, here's Reuters on the changeover:
The small Baltic state of 1.3 million became the 17th euro zone country at midnight, beginning a switch from the kroon, and was the first former Soviet state to adopt the euro. Prime Minister Andrus Ansip was the first to take euros out of a specially installed cash machine outside a theater where a ball had been held to celebrate the switchover and the new year. "It is a small step for the euro zone and a big step for Estonia," he said, holding the notes. "We are proud to be a euro zone member state."Estonian Euroskeptics win a prize for their analogy if not necessarily their penetrating powers of economic analysis, but it's still the start of 2011 I guess:
Estonia sees changing to the euro as marking the end of its struggles since a 2009 recession lopped 14 percent off its output. It hopes to entice investors by removing any fears of devaluation and make borrowing more secure for its people, many of whose mortgages are already in euros.
It also caps a drive for integration with the West, away from the influence of Russia, that began with the collapse of the Soviet Union in 1991. With a similar history, neighbors Latvia and Lithuania hope to adopt the euro in 2014 and have also had their currencies pegged to the euro for years. The kroon will be converted at the rate of 15.6466 at which the currency was pegged to the euro. They will circulate together as legal tender for two weeks.
An anti-euro campaign kept up its rhetoric, saying in a statement Estonia was "getting the last ticket for the Titanic..."The Eurozone rolls on, baby, and Estonia's plight will help demonstrate whether it's still a viable proposition for the likes of Latvia and Lithuania.
Ansip's center-right government has slashed spending and hiked some taxes to ensure the budget deficit stayed low. Estonia will be the currency club's poorest member but its debt and deficit levels -- the cause of the crisis for some current euro zone members -- are among the lowest in the bloc.
