Euro membership will follow for each of these 10 countries, as each satisfies the euro’s monetary requirements. Ironically, Estonia is now far closer to joining the euro than Sweden, since Estonia is already a de facto member of the Eurozone.
Estonia tied its currency, Estonian kroon (EEK) to the deutschmark in June 1992 at a rate of 1Dm=8 EEK. As from 1 January 1999, 15.65EEK has equalled one euro. Meanwhile, Estonia’s short interest rate is set by the markets at a rate only slightly higher than the Euroland interest rate, reflecting the market’s confidence in the continuing stability of Estonia’s currency against the euro.
During the referendum in Estonia, I noticed that many prices in Tallinn were already in euros as well as EEK. Estonia is likely to be one of the first 10 new EU entrants to formally join the euro, almost certainly before Sweden. A two-speed Europe beckons and the fast-track members will not all be current EU members.
- Maurice Fitzpatrick is head of economics at Numerica.
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