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EU commission backs Estonia’s 2011 eurozone entry

12 May 2010 14:16 (UTC +04:00)

Baku. Vahab Rzayev - APA-Economics. The European Commission on Wednesday backed Estonia’s plan to adopt the euro in 2011, the Baltic state’s foreign ministry said, AFP reported.

"On May 12, 2010, the European Commission evaluated Estonia’s readiness to adopt the euro and proposed that Estonia join the eurozone in 2011," the ministry said in a statement on its website.

By switching from its national currency, the kroon, on January 1 next year, Estonia would become the 17th member of the EU to adopt the euro, which has been in circulation since 2002.

In order to qualify, candidate nations must respect several criteria -- keeping national debt and budget deficits under control, as well dampening down inflation.

They are also required to limit fluctuations in interest rates and on foreign exchange markets -- the kroon is pegged to the euro.

Estonia, a nation of 1.3 million people, shifted rapidly from a communist command economy to the free market after breaking from the crumbling Soviet bloc in 1991.

The economy grew sharply, notably it joined the European Union in 2004, but the country tumbled into recession in 2008 as domestic demand withered amid high inflation and the global crisis battered exports.

Estonia had hoped to adopt the euro in 2007 but failed to meet the inflation-control criteria. In the face of the slump, Estonia’s centre-right government has slashed public spending to confront the crisis and maintain its drive to meet the eurozone criteria.

The decision by the European Commission -- the executive body of the 27-nation EU -- had been eagerly awaited in Estonia given concerns that massive debt problems in the eurzone could make Brussels wary of taking on a new member.

The European Commission’s decision is not the final green light, however. It must still be endorsed by Estonia’s fellow EU nations, which is expected in July.

The Estonian government has said the move would boost investor confidence as the country emerges from the economic crisis.

Estonia would be the third ex-communist nation to adopt the euro, after Slovenia in 2007 and Slovakia in 2009.

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EU commission backs Estonia’s 2011 eurozone entry

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