Sat, Jan 01, 2011 - Page 10 News List

Estonia braces for switch to euros

SINK OR SWIM?While many have likened joining the eurozone to boarding the Titanic, the government says that it will make things simpler for businesses


A map of Estonia is shown on its new one-euro coin.


Estonia braced yesterday to adopt the euro, a move pitched by the government as economic good sense despite the eurozone’s turmoil, but which has won a muted welcome from the Baltic state’s public.

At the stroke of midnight, along with ringing in the new year, the nation of 1.3 million bid farewell to its kroon, adopted in 1992 to replace the Soviet ruble, and became the eurozone’s 17th member.

Most surveys put support at around 50 percent, with almost 40 percent opposed.

Pollsters flag concerns about price rises, worries about the currency’s difficulties — and nostalgia for the kroon.

The kroon was born on June 20, 1992, the year after Estonia won freedom from the crumbling Soviet Union, which had taken it over during World War II.

At her market stall in the picturesque capital of Tallinn, Anna Baljuk said she remembered the emotions.

“I understood what the switch to its own money meant for Estonia,” she said.

Baljuk, selling woolen hats in the bone-chilling winter, said she has mixed feelings about the euro.

“Most of our customers are tourists who always ask the prices in euros, so the kroon-to-euro calculator’s in my head,” she said. “But I don’t see what good the euro will bring and I’m concerned that the problems in the eurozone might harm Estonia’s economy.”

The kroon has been pegged to foreign currencies from the start, first to the deutschmark and then, in 2002, to the newborn euro.

The rate of 15.6466 kroons to 1 euro has never changed.

Estonia’s small eurosceptic movement says joining a currency bloc where members like Greece flouted the rules is foolish, likening it to boarding the Titanic.

However, Estonia’s center-right government says the switch is an important signal to investors and will make life easier for businesses as 80 percent of Estonia’s trade is within the 27-nation EU.

Estonian President Toomas Hendrik Ilves highlighted the symbolism of becoming the eurozone’s third ex-communist member, after Slovenia in 2007 and Slovakia in 2009.

Post-Soviet Estonia’s policy has always been to anchor itself in the West, he said.

Estonia entered the EU and NATO in 2004, Europe’s passport-free Schengen zone in 2007 and last year the OECD grouping of leading industrialized nations.

To avoid a frenzy, customers have been able to swap kroons for euros commission-free since Dec. 1 and will be able to use them alongside the euro for the first two weeks of this month.

About 1.1 billion kroons (US$94 million) had been exchanged by Tuesday, Estonia’s banking association said, and a similar amount deposited in accounts where they will be switched automatically. That represents around half the kroon cash in private hands, it said.

Estonia’s euro coins — displaying a map of the country, after a public Internet vote — were minted by eurozone neighbor Finland and shipped over recent months. Notes are identical across the eurozone.

Bank cash machines were closed from Thursday evening to be filled with euros and were to reopen at midnight yesterday.

Kroons from the bottom drawer can be swapped at selected bank branches until the end of the year and at Estonia’s central bank for an unlimited period.

Despite an intense campaign to inform people about how the currency switch would work, long queues formed outside some Tallinn banks on Thursday, with many people wrongly worried they will no longer be able to use their kroons today.

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