Governor of Eesti Pank: Estonia is prepared for living in the euro area

According to Andres Lipstok, Governor of Eesti Pank, Estonia is prepared for living in the monetary union, as Estonia has, like the euro area, resorted to other measures of economic adjustment than the changing the exchange rate.

"The Estonian kroon has been a cornerstone of our economy and has been supporting the stability of the Estonian monetary system for over 18 years. Conservative fiscal policy and open-economy driven decisions have further contributed to the currency board arrangement. Estonia has well preserved the Estonian kroon, and also vice versa," said Mr Lipstok.

"Estonia has adjusted to changes through a conservative fiscal policy, open economy and flexible labour and product markets. There has been no need to make adjustments by changing the exchange rate. In that sense, euro area membership will not entail any changes for us," noted the Governor.

"Accession to the euro area has opened up new prospects for development for Estonia. The euro as such does not make us smarter or raise our productivity overnight. However, joining the euro area will definitely increase confidence in Estonia's economy. It is clear to everybody that being part of the euro area means following certain rules. By becoming a member of the euro area, we assume the obligation to follow the common fiscal rules, which is only beneficial for Estonia in the long run," said Mr Lipstok.

The Governor added that the enlargement of the euro area and functioning of the European monetary union is of utmost importance, with Estonia's accession making a small additional contribution to that.

On Tuesday, EU finance ministers adopted the final decision on Estonia's accession to the euro area on 1 January 2011. The exchange rate was fixed at 1 EUR = 15.6466 EEK by the unanimous vote of the euro area finance ministers and Estonia's finance minister.

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Viljar Rääsk
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