History of Estonian money
Beginnings of statehood - before Estonian money
The Republic of Estonia did not have its own currency in 1918. Currency circulation was legislatively regulated by the order of the German occupying powers of 15 September 1918 declaring that the German mark (equal to the so-called ostmark) was the only legal tender in Estonia. As World War I was ongoing, there were several banknotes of foreign states in circulation in Estonia. Relying on the regulation of the period of occupation, the Estonian Provisional Government established a value ratio for them on 28 November 1918. The German ostrouble (equal to two marks) was valued as the most expensive currency. The Commune of the Working People declared in Narva at the same time established that the rouble in circulation in the Russian SFSR was legal tender in its territory, considering that the roubles of different powers were valued as equal. The German mark was equalised at 50 kopeks. In addition to these currencies, in December 1919 Estonia issued 10 million Finnish marks borrowed from Finland that were to correspond to the ostmark in terms of their exchange rate. The exchange rate of Russian roubles slowly decreased in Estonia, but they only disappeared from circulation in 1921.
As there was a shortage of banknotes during the early years of the republic, several companies introduced local means of payment that could be used in factory shops and in paying salaries to employees. The Port-Kunda Cement Factory and Narva Broadcloth Factory were the first to introduce local means of payment in 1918. Their example was followed by the Sindi Broadcloth Factory and the Narva Flax Factory in 1919. It cannot be excluded that the treasury bills bearing a 5% interest rate of Saaremaa County Government were also used as currency, although officially they were meant only as treasury bills. The intervention by the central administrative board of the State Treasury brought an end to the introduction of the so-called tokens in August 1919.
Payment notes from the Clearing House of Tallinn
The first official legal tender during independence was the payment notes from the Clearing House of Tallinn, which were introduced as currency a couple of weeks before the short-term treasury bills of the Republic of Estonia bearing a 5% interest rate.
The cheques used in settlements between companies in the Clearing House of Tallinn (established in December 1918) were initially forms printed in German and Estonian, with the amount written on them by hand. To mitigate the lack of money, the Estonian Provisional Government declared them national “payment measures” on 4 January 1919, thereby granting the Clearing House the right to issue payment notes. Following the termination of its activities in 1923, the Clearing House deposited an amount of money with Eesti Pank for which cheques and payment notes were later exchanged
Treasury bills of the Republic of Estonia bearing a 5% interest rate
To acquire the various paper currencies held by the population, the government made a proposal to issue short-term treasury bills of the republic, i.e. to organise a domestic loan.
The treasury bills, which were initially intended as a domestic loan of the state, were printed in Finland in 1919. In a situation where ordering the domestic loan dragged and there was no money, the Provisional Government declared the treasury bills national legal tender on 16 January 1919. The treasury bills became invalid on 1 January 1922.
Bills of exchange of the Republic of Estonia
To supplement the cash reserves of the State Treasury, short-term securities were issued that were made in Tallinn in Toompea Castle in the Department of State Token Production in 1920. In the absence of bigger banknotes, the population happily began to use them as token money. As bills of exchange were not officially declared currency, they could not be legally removed from circulation. The majority of such bills were exchanged for legal tender as late as 1925.
The Estonian mark – the first Estonian currency
Public activities targeted at establishing statehood became possible after the surrender of Germany to the victorious countries of World War I on 11 November 1918. The same day the Estonian Provisional Government convened again and, in addition to other vital matters, it immediately paid a great deal of attention to the development of finance. Since at the time Estonian finance was based on the law of the German occupying powers, which established the German mark, on 30 November 1918 the sitting of the Provisional Government took a decision to establish the Estonian mark (= 100 penns) as the national currency.
Until the establishment of Eesti Pank, based on a government resolution the function of the State Treasury was to first issue currency as state treasury notes denominated in marks. The Estonian mark was equalised to the German ostmark. The production of treasury notes began almost simultaneously in Helsinki and Tallinn. Although it was initially sought to attribute reliable security to the notes, the economic situation of the state did not allow this and soon the mark become paper currency without any cover. The treasury notes denominated in marks were removed from circulation in stages in 1924 and 1927, and partially in the 1930s. In 1927, in connection with the monetary reform, the last series of 100-mark treasury notes was issued, printed over which was ÜKS KROON (one kroon).
Eesti Pank was established on 24 February 1919 and its primary function became the regulation of currency circulation. For this purpose, on 30 April 1919 the bank was granted the exclusive right to issue banknotes. The first fifty-mark notes were printed in Helsinki in 1919, but these were still introduced as treasury notes. The next banknotes were made in Helsinki, Berlin and Tallinn.
In addition to treasury and banknotes, exchange notes (in notes and coins) were also in circulation in Estonia in the 1920s. The government law of 12 August 1921 gave the Minister of Finance the right to issue exchange notes in notes of up to 25 marks. The volume of issue of exchange notes was limited to 10% of the issue of treasury notes. State authorities were obliged to accept exchange notes in unlimited quantities; individuals had the right to do so in limited quantities. From 1922-1926 the 10- and 25-mark exchange notes were made of paper; other denominations were minted as coins. The 10-mark notes were removed from circulation in 1927, but the 25-mark notes lasted until 1931.
The first Estonian kroon
Due to the rapid inflation of the mark and the disastrous decline in the gold reserves of the country, it was necessary to organise monetary reform in Estonia. A new currency – the kroon, equal to 100 marks – was established. Kroons were first introduced in 1924 in foreign trade, and on 1 January 1928 in daily transactions. As a result of an extensive foreign loan, the value of the Estonian kroon was equal to 100/248 g of pure gold, which was strictly pegged to the British pound. The exchange rate of the kroon was only unpegged in 1933 during the global financial crisis.
As kroon banknotes were not completed in time, in January 1928 the last series of 100-mark treasury notes was issued bearing a cerise overprint stating ÜKS KROON (one kroon). It was only in September of the same year that 10-kroon notes were introduced. Currencies with other denominations were added in subsequent years. The kroon series was finally completed in 1936.
The Estonian kroon was divided into 100 cents, with one cent equal to the pre-reform mark. Two kroons was established as the ceiling of the value of metal change. The first new coins were already in circulation in 1928. Based on the Currency Law, the one- and two-kroon coins had to be made of silver. This law was followed in the case of the two-kroon coins (“Toompea” and “University”) of 1930 and 1932 and the one-kroon coins (“Song Festival”) of 1933. The Law Amending the Currency Law passed in 1934 enabled the minting of coins from other metals, too. The one-kroon coins issued for circulation in the same year were made of brass.
All Estonian paper kroons were designed by Günther Reindorff and made in Tallinn in the State Printing Office. The last series of ten kroons was completed in 1940. Kroons remained in circulation for some time even after the occupation of Estonia by the Soviet Union in 1940. The currency of the independent Estonia (as per those of Latvia and Lithuania) was declared invalid on 25 March 1941.
When the Soviet Union occupied the Baltic States in 1940, the currency of the USSR was introduced: chervontsy, roubles and kopeks. At first they entered circulation alongside kroons and cents, but on 25 March 1941 they became the sole legal tender, albeit for a short time at first. In summer the same year the Wehrmacht forces reached Estonia.
Currency circulation was governed during the German occupation by the regulation of the new powers of 29 November 1941, which established that Estonia’s legal tender was the paper currency and coins of the State Credit Fund issued for Eastern territories, German change of one to ten pfennigs and token money of the USSR. In addition to the foregoing, during the war years some goods could also be obtained for so-called credits exchanged for flax, cotton et al. Credits were used throughout the Baltic States, made in Riga. All of these means of payment were valid until the end of German supremacy in Estonia in 1944.
Thereafter, only the currency of the USSR remained in circulation. In 1947 and 1961 monetary reform was organised in the Soviet Union. This increased the value of the rouble, which had depreciated, ten times. At the same time banknotes with a new design were issued. Roubles circulated in Estonia until 1992, when the kroon was reintroduced.
The second Estonian kroon
The idea of the reintroduction of an Estonian currency was published for the first time in 1987 as part of the Self-Managing Estonia or IME project, led by Siim Kallas, Tiit Made, Edgar Savisaar and Mikk Titma. An official exchange rate was assigned on 18 May 1989 when the "Fundamentals of Self-Management of the Estonian SSR" Act was signed. On 15 December 1989 the Supreme Soviet of the Estonian SSR adopted a resolution to re-establish Eesti Pank on 1 January 1990.
By a resolution of the Supreme Soviet, the Monetary Reform Committee was formed on 27 March 1991. It had the authority to decide on all matters related to monetary reform. The committee included the head of the government, the Governor of Eesti Pank and an independent expert. Under the “Implementation of Monetary Reform” decree of the Monetary Reform Committee of 17 June 1992 the Estonian kroon became the sole legal tender on 20 June the same year, starting from 4.00 a.m.
The Estonian monetary system was based on the system of the currency board, meaning that the exchange rate of the kroon was strictly pegged to a reserve currency. From then until 31 December 2001 the exchange rate of the kroon against the German mark was fixed at EEK 8 = DEM 1, and thereafter the exchange rate of the kroon against the euro was fixed at EEK 15.6466 = EUR 1 (the exchange rate effective to date).
To come up with a design for kroon banknotes and coins, the Council of Ministers of the Estonian SSR declared a public competition in December 1989. As a result of the competition, Urmas Ploomipuu designed the one- and two-kroon notes and Valdimir Taiger the other denominations. The one- and two-kroon notes were printed in the United States and the banknotes with higher denominations in England. The final, updated series was printed in Germany.
As a result of the competition for coin designs, the initial sketches of coins were designed by Mari Käbin, but the requirements for minting coins changed due to the reintroduction of the name and symbols of the Republic of Estonia. However, the sample coins – with an image of a cornflower and the year 1991 printed on them – were minted on the basis of the initial sketches. In the end, all of the coins were minted based on the example of the coins in circulation in 1936: the front had the name of the state and denomination and the back had three lions depicted as leopards and the year. The heraldic lion minted on coins was modelled by sculptor Arseni Mölder; artist Ants Raud fixed them to the coin. The coins were initially minted in Tallinn, and later in Finland, South Africa, England, France, the Netherlands and Germany.
To mark significant anniversaries and events, Eesti Pank issued 27 collector coins from 1992-2010. Collector coins are coins for circulation with the value minted on them, but as they are made of precious metals, they are usually not used in circulation. Such coins are also bigger than regular coins and their design clearly differentiates them from coins in circulation.
Europeans and their economy have gone through some difficult times in the last hundred years. We need only think of the hyperinflation in Germany in the early 1920s, when money lost its value in a matter of minutes, and people visited bakeries with wheelbarrows filled with banknotes. One of the principles of a united Europe is stability, which is guaranteed by a reliable and strong currency.
The Member States of the European Union signed the Maastricht Treaty in 1992, laying the foundations for the European Economic and Monetary Union. The EU has two primary objectives: to ensure uniform and stable economic growth; and to keep price increases under control. The single currency and interest rates are designed to ensure that the rise in the cost of living is under control in all Member States. This means that prices fluctuate a little and that changes in them are predictable.
On 1 January 2002, 12 Member States of the European Union (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) introduced the single currency – the euro – in the form of seven banknotes and eight coins. However, bank transfers could be made in euros from 1999.
Five years later the euro was introduced in Slovenia; another year later in Cyprus and Malta; and in 2009 in Slovakia. The euro reached Estonia in 2011, nine years after the introduction of the single currency.
The design of the euro notes is the same in all states. Euro coins have a common and a national side. The national side characterises the issuing country. Artist Lembit Lõhmus won the design competition held in 2004 for the national side of the Estonian euro coins, which depict the outline of Estonia and the name “Eesti”.
Eesti Pank continues to mint collector coins, now in euros. In addition, the central banks in the euro area issue commemorative coins. These are coins for circulation with a nominal value of two euros, the national side of which displays a commemorative motif. For additional information, see http://www.ecb.europa.eu/euro/coins/comm/html/index.en.html.