Estonia’s long and determined effort to join Europe’s monetary union was rewarded this morning when the European Commission endorsed Estonia’s application to adopt the single currency.
In its 2010 Convergence Report, the EC formally declared that Estonia has satisfied all 5 criteria for membership and recommended that Estonia become the 17th country to adopt the euro as its official currency. The final decision will be made by the finance ministers of the 16 countries already in the eurozone. If, as expected, they give the green light at their meeting in July, Estonia will make the switch from kroons to euros in January 2011.
The Convergence Report asserted that eight other euro candidates (Bulgaria, Czech Republic, Hungary, Latvia, Lithuania, Poland, Romania and Sweden) are not ready and must wait awhile longer. Analysts take this to imply a waiting period of at least four more years, so Estonia is likely to be the last country to join the eurozone until at least 2014.
This moment of triumph for Estonia also contains a hint of contention, because even as the EC has endorsed Estonia’s readiness to join the eurozone on the bases of all five required criteria (budget deficits, debt, long-term interest rates and currency stability, and inflation), a report released today by the European Central Bank calls into question Estonia’s readiness on the last factor. According to a Bloomberg report,
[t]aking direct issue with the commission’s ruling, [the ECB] voiced “concerns regarding the sustainability of inflation convergence in Estonia.” Prices in April, the month after the euro test, rose 2.9 percent from a year earlier, the fastest pace in 14 months. Asked in a telephone interview how Estonia will counter the criticisms, Finance Minister Jurgen Ligi said he will work with European governments “to explain our case so that no doubts remain about our eligibility.”
Estonia is probably not too worried. The ultimate decision-makers, the finance ministers of the 16 existing eurozone countries, have always followed the recommendation of the European Commission, and they are under no obligation to heed the European Central Bank’s suggestions.
You can read the New York Times’s report here. And here’s a nice backgrounder on the history of the euro with a list of the countries that currently use it and their dates of adoption.
