The Financial times on Estonia's progress towards Euroland
Eugene Holman
characterize this article as "odious, nation-smashing, socialist,
Kremlin-inspired anti-Baltic propaganda", but the rest of us know that
prices in central Tallinn have been posted in both kroons and euros for
several years already.
Regards,
Eugene Holman
Source: http://news.ft.com/cms/s/c2bf4c10-f271-11d9-8e69-00000e2511c8.html
"If markets are so integrated, you can't cook a different soup in one
corner of the pot."
<quote>
Estonia heads for the euro club and all its controversy
* By Ralph Atkins
* Published: July 12 2005 03:00 | Last updated: July 12 2005 03:00
For Lydia, a product development manager at a drinks company in Estonia,
the future stability of the euro is academic. Pausing outside the Zara
store in a shopping mall on the edge of the medieval centre of the capital
Tallinn, she sighs: "I don't even earn enough to save in [Estonian]
kroons. I have a daughter."
However, for her country, the northernmost of the Baltic states that
joined the European Union last year, the issue is of more than passing
interest.
While politicians elsewhere in Europe fret about the destabilising effects
of fiscal indiscipline and worry about the impact of the French and Dutch
referendums that rejected the EU's proposed constitution, Estonia is
finalising plans to join the 12-country single currency club.
Preparations are gathering pace, even if the population is not convinced.
"It is not going to be good for us," adds Lydia. "Our salaries are so low
and prices will go up. Besides, the kroon is such a nice currency."
But to the Estonian authorities, joining the euro is a natural step for
the country, which has locked its currency using a "currency board"
arrangement to the D-Mark and then the euro since 1992.
"I can't say that people don't care . .. but at the end of the day
Estonians are pragmatic," says Andres Sutt, deputy governor of the Bank of
Estonia.
In the bank's view, the locals realise that Estonian monetary independence
is impossible. Estonia's population is just 1.4m and its economy is
equivalent to 0.1 per cent of current eurozone gross domestic product.
Before the kroon, Estonia was part of the rouble bloc; before the second
world war, its currency was linked to gold.
It is also integrated internationally: exports and imports are each
equivalent to about 80 per cent of GDP and with few exceptions local banks
are foreign owned. "If markets are so integrated, you can't cook a
different soup in one corner of the pot," says Mr Sutt.
As for worries about a eurozone break-up, he adds: "I wouldn't really see
that as a realistic scenario."
Nevertheless, Estonia insists it is determined to learn from the mistakes
of existing eurozone members.
"We are not going to promise all the things that the euro will not bring,"
says Anne Sulling, euro project manager at the finance ministry. When the
euro was introduced to EU citizens, she argues, emphasis was placed on the
supposed benefits to growth. "That is why they were disappointed."
Estonia is instead following Finland's example in stressing how life would
continue as before. "The European Central Bank had beautiful young people
dancing and the Finns had this old man going into a cafe after work and
paying in euros. The message was to live like you lived before, nothing
changes."
Learning from the experience of Germany, where consumers reckoned
retailers were deliberately rounding up prices, the Estonian government
will lead by exam ple - taxes will be rounded down; government subsidies
rounded up.
The country should comfortably fulfil the criteria for joining the
eurozone. On fiscal policy it puts existing members to shame, running
budget surpluses and a government debt-to-GDP ratio of about 5 per cent.
But will the euro bring benefits to Estonia's economy, which grew by more
than 6 per cent last year? Ms Sulling makes just two claims: that it will
reduce transaction costs and make international price comparisons easier.
The central bank adds that eurozone membership will give it a voice on
monetary policy for the first time, with one seat on the ECB's rate-
setting council, the same as Germany.
Others are more negative. Professor Ivar Raig of Audentes University,
Tallinn, one of Estonia's most prominent eurosceptics, argues euro
membership will accelerate price increases, remove even the theoretical
possibility of Estonia setting its own interest rates and only encourage
foreigners - especially the Finnish - to buy Estonian properties. "This is
soft-colonisation by the Finns," he says. "The Russians did it by force.
Other economists worry about Estonia's large current account deficit,
equivalent to 13 per cent of GDP last year, which might presage painful
adjustment at some point. Estonians are also increasing borrowing rapidly,
with credit demand growing by 30 per cent last year, suggesting a higher
interest rate than elsewhere in the eurozone might be appropriate.
But at Tallinn's shopping mall there is a sense of inevitability. Maret, a
public relations executive, twirls her green shawl cheerfully and
declares: "It is coming, and we can't do anything about it."
</quote>
lora...@cs.com
Eugene Holman wrote:
> Unu Hu[i], his alternative identities, and cohorts will find some way to
> characterize this article as "odious, nation-smashing, socialist,
> Kremlin-inspired anti-Baltic propaganda", but the rest of us know that
> prices in central Tallinn have been posted in both kroons and euros for
> several years already.
> Regards, Eugene Holman
No, none of that. It is merely stoogism.
Just as your "Progress towards Euroland" is merely a slide into total
Idiocy.