Estonia to strengthen the euro area

[Äike]

Estonia to strengthen the euro area (http://blogs.euobserver.com/mujagic/2010/12/28/estonia-to-strengthen-the-euro-area/)

I know it seems odd, but while the future of the euro (will / should some euro countries leave the euro area?) is one of the most hotly debated subjects amongst economists, in just a few days time the euro area will actually expand.

When the clock strikes 23:00 in Frankfurt, Brussels and Amsterdam, Estonia will become the 17th member of the euro area (23:00 because in Estonia it is an hour later, so it will be 00:00 local time there). Is that good or bad for the euro area?

Although Estonia is a small country, there are only 1.3 million people living there (in a country that is somewhat larger than the Netherlands, where more over 16 million people live), it becoming a member of the euro area is a good thing.

Not in terms of economy however. Its economy is tiny, with the gross domestic product (GDP) just north of some 20 billion euro. Still though, Estonia has much to offer.

In terms of public finances, there will be some serious reshuffling in the euro area. Estonia will immediately advance to the first place when it comes to the size of public debt in the euro area. Estonia carries a ‘burden’ of some 7 percent of its GDP. For comparison purposes, the strong euro area countries such as Germany and the Netherlands have public debts of some 70 percent of GDP or more. Greece and Italy score well above 100 percent with a country like Belgium not very far behind.

Remarkable

Estonia is also a living proof that economic disasters do not have to lead to enormous budget deficits. Disaster is the correct word, as the economy of this tiny Baltic nation has contracted by some 15 percent in 2009 with 2010 not being much better either. But still its government managed to keep the budget deficit at just a tad over 1 percent of its GDP. A remarkable achievement indeed if there ever was one.

Moreover, it will be something new to the people of Estonia, as their governments have actually achieved budget surpluses in every year since 2002. Again, compare that with Greece, that not only has had budget deficits since 2002 (and before that as well), but has not even been able to keep the deficits below 3 percent of its GDP in any of those years.

But the most important change is the fact that the head of the Estonian central bank will become one of the voting members of the Governing Council of the European Central Bank. Given the fact that Estonia values fighting inflation more than trying to artificially prop up the economy and does not like to fund the government deficits by printing new money, this new board member will be an ally of the German, Dutch and Finish central bankers on the board at the ECB.

Dark side

There is one dark side as well though. In the not too distant past, a large majority of Estonian people actually supported the euro. Now, that support has declined to just some 50 percent.

That reflects the general trend that the popularity of the European currency is declining (fast) in Central and East Europe. If the take the eagerness to join the euro area as a yard stick to measure the value and appeal of the euro area, then there is no other conclusion possible, other that that the value and appeal are falling.

What is not declining is the intensity of the debate on the future of the euro. If anything, that debate is further gaining in strength. In that light: the Estonian krona, that will thus disappear in a few days time, was introduced in the summer of 1992, meaning that it has become 18 a couple of months ago. The euro coins and notes have been around since the beginning of 2002, so 9 years. It will be interesting to see whether the euro will be able to outlive the Estonian (new) krona.

P.S. If you wonder why any country would want to join the euro area in the first place: according to the Treaty on the European Union, ALL member states of the European Union (bar United Kingdom and Denmark) MUST join the euro area as soon as they fulfill the criteria that have been set (on inflation rate, long term interest rates, economic convergence, debt and budget balance).

[Loki]

Of course it would strengthen the euro area, and weaken Estonian finances in the long run. Just as it was the case with Ireland. People never learn, eh?? Expect prices to skyrocket once Estonia has joined the euro, and a property bubble to be created. And a few years after, massive debt, austerity measures and a collapse of the Estonian economy. Great stuff to look forward to!!

[Äike]

Expect prices to skyrocket once Estonia has joined the euro, and a property bubble to be created. And a few years after, massive debt, austerity measures and a collapse of the Estonian economy. Great stuff to look forward to!!

Collapse of the Estonian economy? That won't happen in the next 15 years. You can be certain in that.

Estonia isn't like Latvia, Ireland or Greece. Our economic policies are very conservative, the government does not take massive loans. Even almighty Germany has 10 times more debt than Estonia.

[Inese]

Collapse of the Estonian economy? That won't happen in the next 15 years. You can be certain in that.

Estonia isn't like Latvia, Ireland or Greece.

Hello?? Why you always use Latvia to show a bad and negative thing?? Fuck Karl my country is your neighbour, we have a common history to a point and you talk about us like a third world country on the neger african continent! :mad: That is shit Karl, really! What do you think?? Tiny Estonia can save the Euro?? Estonia is smaller than Latvia!

Yes i have read your flames with Eriks and Namejs and i dont like it what they say to you and Estonians but i dont like what you say about Latvians too :rolleyes2: Estonia is good and Latvia is hell, blahg blah!! I tell you, you would be in the same situation without help of your big brother Finland, you know?? Finland helps the finno ugric brothers in Estonia with money and economy. But we Latvians have no big brother and we have it more difficult but we are no shit country --- dont give others the wrong impression. THANKS!!

[Loki]

Collapse of the Estonian economy? That won't happen in the next 15 years. You can be certain in that.

Estonia isn't like Latvia, Ireland or Greece. Our economic policies are very conservative, the government does not take massive loans. Even almighty Germany has 10 times more debt than Estonia.

You sure of that? Ireland had the highest GDP per capita in the EU. It was, in short, the richest EU country. ANY economy can go to shreds when a housing bubble bursts. I am absolutely certain that massive price increases/inflation will ensue in Estonia when/if it joins the euro, and that house prices will keep on increasing ... you will see. You can make a note of my post here, and check back in 5 years or so. It won't be a pretty sight.

[Äike]

Hello?? Why you always use Latvia to show a bad and negative thing?? Fuck Karl my country is your neighbour, we have a common history to a point and you talk about us like a third world country on the neger african continent! :mad: That is shit Karl, really! What do you think?? Tiny Estonia can save the Euro?? Estonia is smaller than Latvia!

Yes i have read your flames with Eriks and Namejs and i dont like it what they say to you and Estonians but i dont like what you say about Latvians too :rolleyes2: Estonia is good and Latvia is hell, blahg blah!! I tell you, you would be in the same situation without help of your big brother Finland, you know?? Finland helps the finno ugric brothers in Estonia with money and economy. But we Latvians have no big brother and we have it more difficult but we are no shit country --- dont give others the wrong impression. THANKS!!

I was just saying that Estonia didn't take big loans, like Latvia did. The Estonian government did put some funds aside, during the economic boom years. While Latvia did invest/spend it all.

Reading the last part of your post, I get an impression that Estonia is like a Finnish colony in your eyes... Which is very false.


You sure of that? Ireland had the highest GDP per capita in the EU. It was, in short, the richest EU country. ANY economy can go to shreds when a housing bubble bursts. I am absolutely certain that massive price increases/inflation will ensue in Estonia when/if it joins the euro, and that house prices will keep on increasing ... you will see. You can make a note of my post here, and check back in 5 years or so. It won't be a pretty sight.

Even if there is an economic crisis, then the damage cannot be massive if the government hasn't got massive debt and has funds put aside for the bad days. This is where Estonia prevails with its conservative policy.

[Loki]

Even if there is an economic crisis, then the damage cannot be massive if the government hasn't got massive debt and has funds put aside for the bad days. This is where Estonia prevails with its conservative policy.

Let me explain: property price increase > property bubble > mortgage increases > property prices crash > banks run out of liquidity > government underwrites bank debt created by bubble/crash > Estonian taxpayer saddled for billions of euros in order to save collapsing banks

[Treffie]

Good luck Estonia, I think you're gonna need it

[Groenewolf]

In all essence the Euro is only as strong as the weakest components, so the addiction of Estonia would help it on the short term. But I hope that Estonia does not get a bad hang-over from it in the long run.

[Äike]

Let me explain: property price increase > property bubble > mortgage increases > property prices crash > banks run out of liquidity > government underwrites bank debt created by bubble/crash > Estonian taxpayer saddled for billions of euros in order to save collapsing banks

There's one problem all "Estonian banks" are owned by Swedes or Danes. Thus any bubble/crash resulting in "collapsing banks" will mean that Swedish and Danish taxpayers would bail out their banks.

[esaima]

There's one problem all "Estonian banks" are owned by Swedes or Danes.
Mostly by Swedes but indeed, indeed.
I think this is a real thing what makes some Estonians to think that we aren´t really a sovereign state.

[Fortis in Arduis]

Euro area to weaken Estonia.

[antonio]

Estonia isn't like Latvia, Ireland or Greece. Our economic policies are very conservative, the government does not take massive loans.

Speculative and capitalistic forces (or even people's greediness) beyond Estonian government power are not conservative at all, and Euro is like paving their road to fuck your country maybe in just 10 years. Anycase is a great merit to accomplish Euro conditions, I'll suppose there exists just to time-decouple crumbling countries and Euro implantation: for not making too much evident the obvious relation. :cool:

[Fortis in Arduis]

^ Put the last sentence into plain English if you can please!

Karl is basically 'new' with respect to economics. The 'conservative' free-market trick can only be performed until it inevitably ends when the national assets are in the hands of foreigners or multinationals. It does not even work in America.

The Swedish bank thing should set the alarm bells ringing.

[antonio]

^ Put the last sentence into plain English if you can please!


I write the better English I can, my friend !



Karl is basically 'new' with respect to economics. The 'conservative' free-market trick can only be performed until it inevitably ends when the national assets are in the hands of foreigners or multinationals. It does not even work in America.


Obviously they had already experienced the inherent evilness of Communist system. They're just to experience the other side of the XXth coin, doubled nowadays. Unfortunatelly capitalistic system is not absolute goodness...for not to talk about its specially despisable variant called socialdemocracy aka pseudosocialism, the one prefered for Spaniard millions of morons constituted in electoral majorities in order to screw up decent people.

[Fortis in Arduis]

Oh sure, and pretending that social democratic trends will not emerge in Estonia after the WTO Reaganisation has run its course will not be enough to stop it. Estonia needs economic nationalism.

[Äike]

Mostly by Swedes but indeed, indeed.

Sampo pank is Danish, I have my bank account there.




Karl is basically 'new' with respect to economics. The 'conservative' free-market trick can only be performed until it inevitably ends when the national assets are in the hands of foreigners or multinationals. It does not even work in America.

I am new to economics? Most of the people on this forum are "new" to economics, some posts about economics are so funny and full of paranoia that they make me laugh.

[Fortis in Arduis]

I am new to economics? Most of the people on this forum are "new" to economics, some posts about economics are so funny and full of paranoia that they make me laugh.

So, presumably what you like to do, being the munificent chap that you are, is initiate an edifying discussion with these silly fellows, after having a little chuckle to yourself in your cosy garret (http://www.thefreedictionary.com/garret), of course. :angel

[Äike]

So, presumably what you like to do, being the munificent chap that you are, is initiate an edifying discussion with these silly fellows,

I have no itnerest in having any economical discussions. You might think that the Estonian economy is "utterly fucked", because we now have the euro. That isn't true, I know that and I do not care much if some people think otherwise. Estonia is out of the economic crisis, with a growing economy, while countries like the UK are finally starting to cut expenses...


after having a little chuckle to yourself in your cosy garret (http://www.thefreedictionary.com/garret), of course. :angel

I do not live in a garret.

[Fortis in Arduis]

I have no itnerest in having any economical discussions. You might think that the Estonian economy is "utterly fucked", because we now have the euro. That isn't true, I know that and I do not care much if some people think otherwise. Estonia is out of the economic crisis, with a growing economy, while countries like the UK are finally starting to cut expenses...

I do not live in a garret.

That is a dreadful shame as it appears that you are having one, right now.

I do not think that the Estonian economy is utterly fucked, but the thin end of the wedge has just come into view, and accepting the Euro constitutes an appalling loss of sovereignty.

Estonia is a rose growing in a turd bucket. What an achievement.

The Thatcherite model only achieves results until it fails.

With what cock-and-bull story was the Euro sold to the Estonian people, and were you for it or against it?

[Äike]

That is a dreadful shame as it appears that you are having one, right now.

I do not think that the Estonian economy is utterly fucked, but the thin end of the wedge has just come into view, and accepting the Euro constitutes an appalling loss of sovereignty.

Estonia is a rose growing in a turd bucket. What an achievement.

What do you mean by that?


With what cock-and-bull story was the Euro sold to the Estonian people, and were you for it or against it?

I am a supporter of everything Estonian, thus I like the kroon more than any other currency. But I am also a realist, thus I know that the euro will not "destroy" the Estonian economy.

About 2 years ago I posted a thread in this section. It was an EU research which said that Estonia will have the fastest growing economy in the European Union, in 2011. I'm quite certain that it will be true, because Estonia is out of the crisis already. There was considerable economic growth already in 2010.

[The Ripper]

Now if only the Estonian economy would pull the rest of Europe out of the recession. ;)

[Äike]

Now if only the Estonian economy would pull the rest of Europe out of the recession. ;)

That could be possible, if there would be 133 million people in Estonia, not 1.3 million. If all European countries would follow the same (conservative) policies as Estonia, then there would be no recession.

[Fortis in Arduis]

What do you mean by that?

Estonia is the 'rose', without the debt burden of other EU states, but accepting the Euro has now firmly planted Estonia into the turd bucket which is the EU.

Estonia is now a rose, growing in a turd bucket.

This is not good for Estonia, and if Estonia strengthens the EU, that is not good either. The EU must die. :coffee:


I am a supporter of everything Estonian, thus I like the kroon more than any other currency. But I am also a realist, thus I know that the euro will not "destroy" the Estonian economy.

You like the kroon because it is Estonian. How about liking it because it allows Estonia to set her own interest rates, strengthens the home markets and encourages local economy, which in turn facilitates autarky?

The Euro helps foreign finance capitalists, and hinders local economies and producers and will destroy national sovereignty.

Sure enough, the Euro will not destroy the Estonian economy, but Estonia's economy will become less Estonian as a result.


About 2 years ago I posted a thread in this section. It was an EU research which said that Estonia will have the fastest growing economy in the European Union, in 2011. I'm quite certain that it will be true, because Estonia is out of the crisis already. There was considerable economic growth already in 2010.

That might be a positive indicator, but progress is not always to be measured by economic growth, and you are also comparing Estonia to a turd bucket anyway, you see.

Seriously, people just do not know what they have until it is gone. :(

Foreign investment and rationalisation/liberalisation of the economy will help to sweep away socialist cobwebs, if there are any, but it leads to a loss of sovereignty.

Using the UK as an example, most of the wealth is concentrated in the South-East, because our main industry is finance and that is based mainly in London. The rest of the country lags behind and there are huge wealth disparities.

Yes, it is exciting and it is possible to be a little patriotic about the finance industry and our role in the global economy, but long gone are our once incredible manufacturing industries, our traditional way of life has been slowly diminishing.

I support that industry because it keeps us afloat, but it is basically money-lending backed up by our military. It is total rubbish and the people who run this scam do not care about the British people, but they make very convincing noises. Politicians are very good at that.

Estonia adopting the Euro is depressing because it adds to the economic capitalist and social Marxist menace that is the EU, and ultimately it will be damaging to the Estonian people and their economic and fiscal sovereignty.