Estonia sets to adopt euro amid debt crisis

11:19, January 01, 2011      

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Estonia was set to adopt the euro on Saturday and become the 17th member of the euro zone when the single currency club was mired in a sovereign debt crisis.

"I congratulate Estonia and warmly welcome all its citizens to the euro area," European Commission President Jose Manuel Barroso said in a statement Friday.

Barroso said the euro would improve the daily life of the country's 1.34 million people by making travel elsewhere in the euro zone easier and cheaper, with no need to change currencies and pay commissions.

Estonia's adoption of the euro means that over 330 million Europeans now carry euro notes and coins in their pockets, which marks the fifth enlargement of the alliance.

After Estonia's adoption, the euro, introduced in 1999, would be the official currency of 17 European Union nations, instead of 11 members at the very beginning. The members would account for nearly three quarters of the EU's GDP, totaling over 12 trillion U.S. dollars in 2010 at current prices.

Estonia is the first Baltic country that uses the euro.

Olli Rehn, European Commissioner for Economic and Monetary Affairs, said the adoption of the euro is a great achievement and a fair reward for Estonia, which has been firmly committed to maintaining sound fiscal policies.

"The single currency will provide a stable framework for the Estonian economy, which together with sound fiscal and macroeconomic polices will create the basis for economic prosperity," he said.

Hours before the introduction of the euro in Estonia, the commission said all the preparations had been completed.

Commercial banks had received euro banknotes and coins in advance from the Estonian Central Bank and had in turn supplied euros to shops and other businesses under a specific contract, so that they can handle payments and return change in euros from Saturday.

There would be a dual circulation period of two weeks, during which the two currencies would circulate alongside each other in order to allow for a gradual withdrawal of Estonian kroons. Shops were expected to give change in euros only in order to speed up the changeover and reduce the cost of handling two currencies simultaneously.

To promote the changeover, the commercial banks would extend opening hours during the changeover and add additional staff. Most bank branches would be open on Saturday and Sunday to offer cash services. All ATMs would be able to dispense euro banknotes from midnight on Jan. 1.

A recent survey showed more than half of Estonians were concerned that entry into the euro zone would push up prices in the poorest country of the euro family.

In order to address concerns about possible price increases and abusive price practices in the changeover period, a Fair Pricing Agreement was launched in August.

More than 500 companies joined the agreement and pledged not to increase their prices without justification during the changeover to the euro and to respect the changeover rules.

However, Estonia's adoption of the euro was shadowed by the sovereign debt crisis, which has forced Greece and Ireland into bailout and is posing the biggest challenge to the euro.

Barroso said Estonia's entry would be a vote of confidence for the euro.

"It is a strong signal of the attraction and stability that the euro brings to member states of the European Union," he said.

Analysts warned the enlargement would not dispel concerns over the future of the euro, which was expected to face particular threat in 2011 as the sovereign debt crisis may spread further to Portugal and Spain.

Source: Xinhua
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