The most significant EU-related development over the holidays was Estonia’s official entry into the eurozone on New Year’s Day, an event that is worth revisiting as the single currency prepares for what is likely to be another year of turmoil.
As Fredrik Erixon, director of the Brussels-based European Centre for International Political Economy, notes in a new “Obituary for the Estonian kroon”, it wasn’t too long ago that the Estonian government was being advised to drop its peg to the euro and let its currency float in order to save its economy from the ravages of the European debt crisis.
But Tallinn hung tough, and as we noted in an article last month, is now poised for gross domestic product growth that is the pride of the EU. According to forecasts by Eurostat, its 4.4 per cent 2011 real GDP growth would make it the best performer in the eurozone.
When I talked to Estonian President Toomas Hendrik Ilves last month, he recalled with hard-to-contain smugness the amount of pressure the country resisted to devalue during the early days of the euro crisis. “All three Baltic economies were in serious trouble, and all kinds of people said devalue, devalue, devalue,” he said. Read more