In order to enter the currency the other sixteen government members, the European Commission, the Euro Parliament, the Assembly’s’ economic and monetary affairs committee and the finance ministers all have to approve the country (Becerra). Eight other countries requested to join the currency were denied because they did not meet the requirements. “To join the Euro zone, candidates must show that their public finances are in good shape and the exchange rate and prices are stable. Their interest rates must also be low and national legislation on monetary matters must be in line with EU law” (Becerra). Estonia was able to meet all of the requirements, but will become the second smallest economy that holds the euro as its currency.
The New York Times acknowledges the debt crisis that has been spreading across the European Union to countries such as Greece, Spain, and Ireland. Even with the euro being the strongest currency in the world many people and governments are wondering if the countries will desert the euro. “Joining the euro is a status issue for countries seeking to cement their positions at Europe’s top table . . . But you also could call it sheer bloody-mindedness of Estonia to join now with the outlook for the currency so uncertain” (Kanter). Amadeu Altafaj, who is involved in EU’s commissioner for economic and monetary affairs believes adding Estonia to the currency shows other countries that the EU is going to bounce back its economy by the euro.
Joining the currency is a sign that the country is achieving Western Europe’s standards of living; Estonia, being the first former satellite of the USSR acquiring the euro, and being the third post communist state to obtain the euro, has proved they have met that goal. Estonia’s small public debt of 7.2 percent of GDP, and small gap between revenue and spending shows the country is capable of being one of the 17 members using the currency (Kanter). Andrus Ansip, the prime minister of Estonia explained that the country “prefer[s] to be inside, to join the club, to be among the decision makers” (Kanter).
Joining the currency has some advantages and disadvantages. “[T]he most immediate advantages are likely to include greater interest from foreign investors and lower borrowing costs for both the public and private sector” (kanter). But the measures to joining the euro has proven to create disadvantages; there may in time be financial problems associated with Estonia’s export-driven economy—especially if the EU currency remains unsound. “Investors will only be willing to lend to Estonia on favorable terms if Estonia can continue to compete. . . . That is where the biggest risks for Estonia now lie” (Kanter).
