Ralph Atkins

A welcome piece of good news for Jean-Claude Trichet, European Central Bank president: Estonia is about to join the eurozone as its 17th member. The entry of the tiny Baltic state has significance beyond its shores. It shows that despite all the woes of the past year, Europe’s monetary union is still on an expansion course. Mr Trichet has just been speaking in Tallinn, the country’s capital, at an event kicking off the final preparations before January 1, 2011 when the euro becomes legal tender.

His comments covered the usual themes about Europe’s common destiny and the euro’s importance in the continent’s economic integration. But Mr Trichet did not speak as if Greece had never happened. There was a stern warning that future members had to do more that just meet the technical requirements for joining (although with hindsight, it is not even clear that Greece managed that).

Mr Trichet said: Read more

Ralph Atkins

Jean-Claude Trichet claims the European Central Bank foresaw the financial market crisis that erupted in August 2007. In January that year he warned markets to prepare for a significant “re-pricing” of some assets.

He could also argue that Greece’s downfall could have been predicted by anyone listening to the ECB. Read more

The European Commission has given the green light to Estonia’s euro accession on January , 2011. Final approval is required from EU finance ministers. The timing is ironic given the current eurozone crisis—apparently not one eurozone member would currently meet the strict conditions for entry to the single currency.

From Reuters: Read more

I was once refused a mortgage because I had never had a credit card. Prudence apparently made me a dubious debtor. Might Estonia’s prudence imperil its bid to join the euro? With government debt below 10 per cent of GDP, Estonia has not needed to issue a benchmark bond. Such a bond would give evidence of low and stable interest rates, a pre-requisite for entry into the euro, slated for 2011, argues Sakari Suoninen of Macroscope blog, adding that other indicators can probably substitute.

As Sakari points out, it will be very impressive if Estonia meets the eurozone’s entry requirement: no country already using the common currency would qualify to join the bloc this year.

Standard and Poors has revised its outlook for Estonia from negative to stable because of improved public finances.

“We believe Estonia has stabilized its public finances, which significantly increases its prospects for Eurozone accession in 2011. We are affirming our ‘A-/A-2′ long- and short-term sovereign credit ratings on Estonia,” said the ratings agency. Read more