Estonia officially joins euro zone

11:36, January 01, 2011      

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Combination photo made from handout photos obtained by Reuters December 31, 2010 shows the new designed (from L-R) Estonian 50 Euro Cents, Two Euro, and One Euro coins. Estonia could be the last new entrant for some years when it becomes the 17th euro zone member on January 1, 2011. (Xinhua/Reuters)

After the bell rang for the New Year of 2011 on Saturday, Estonian Premier Andrus Ansip drew an euro note from an ATM surrounded by a crowd of people in central Tallinn, and announced Estonia has officially become the 17th member of the single European currency alliance.

Estonia, which has a population of just 1.4 million and is poor in natural resources, declared itself independent from the Soviet Union in 1991.

After its independence, Estonia governments have been showing their strong resolutions to join the European Union and euro zone.

In order to join the eurozone, Estonia has made tough reforms to meet a Common Monetary Standard for Europe, which include reforms of its social security system and taxation system, the pegging of the Estonian kroon in a currency board-type arrangement to the euro, and restraint of inflation and unemployment rate.

In March 2009, the Estonian government accepted a decision of changing the national currency to the euro by Jan. 1, 2011.

In July 2010, the economic and finance ministers of all 27 European Union countries approved Estonia's accession to the euro zone from Jan. 1, 2011.

The Council of the European Union agreed that Estonia has achieved a high degree of sustainable economic convergence and is ready to adopt the euro on Jan. 1, 2011.

During its transition period, while the Greek economy got into a mess with an incredible high budget deficit, Estonia successfully met the euro zone's rules on public finances, with its gross debt in 2009 accounting for only 7.2 percent of its GDP and its deficit falling to 1.7 percent.

Under such circumstances, Estonia has experienced a rapid increase of consumer prices this year, forcing many Estonians to reduce daily expenses and credit consumption. On Dec. 28, 2010, the gasoline and diesel prices at Estonian gas stations rose to 1.2 euros per liter, the highest ever in the tiny Baltic state. More and more Estonians have feared that joining the euro zone may result in further rises of price levels.

According to a recent poll conducted by an Estonian organization last month, Estonians are less optimistic about the prices' trend and the proportion of optimists has gone down to 47 percent from 50 percent in June 2010.

The Estonian government has actively advocated the benefits of joining the euro zone to Estonians over the past year, such as the advantages for improving the national economy and welfare, avoiding the devaluation of the kroon and enhancing the nation's trade with other EU countries.

Estonia has successfully realized its wish to join the euro zone after wide-ranging social and economic reforms in the past several years. However, the real benefits of being an eurozone member still need time to be seen.

Source: Xinhua
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