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Estonia weighs pros and cons of joining the eurozone

Christopher Werth Dec 27, 2010

Estonia weighs pros and cons of joining the eurozone

Christopher Werth Dec 27, 2010


Bob Moon: It’s been a tough year for the eurozone, the 16 European nations that share the euro as a common currency. A deep debt crisis meant big bailouts, first for Greece, then for Ireland. Now, many fear Portugal or Spain could be next. Despite all this, Estonia has decided to join the currency zone in a few days. As of Jan. 1, it’s dropping its old money, the kroon.

Christopher Werth traveled to the capital of this small Baltic nation to find out how Estonians are reacting to the change.

Estonian music

Christopher Werth: In Tallinn’s snow-covered central square, a dance instructor in a Santa suit puts shivering members of the public through their paces in a traditional dance.

Music and dance instructor giving instructions

It takes more than freezing temperatures to scare away this crowd. And it takes more than a European debt crisis to keep some Estonians from wanting to see their country adopt the euro.

Woman 1: I think the eurozone will survive the crisis. I’m not worried by the news of panic.

But for others, joining the euro now seems risky.

Man 1: The euro will bring difficulties. Nothing good can come of it.

Estonians are almost evenly split on whether dumping their present currency in favor of the euro will be a good thing, or bring the kind of economic turmoil they’ve seen in other parts of Europe.

Martin Poder at Estonia’s Ministry of Finance is hard at work trying to convince people of the benefits.

Martin Poder: The euro is a logical choice for Estonia.

Logical, he says, because the country has been pegging its currency to the euro for nearly a decade. It’s already made the painful adjustments needed for euro membership — slashing public spending, even as its economy plunged around 14 percent last year. Now, Poder says, it’s time to reap some of the rewards.

Poder: By joining the euro area, you will have more investment, and with more investment, you will have more jobs.

Unemployment in Estonia is over 10 percent, so the government hopes the euro will bring more high-tech jobs like the ones at this Elcoteq factory, that makes satellite phones.

Sound of factory tools whirring

Arno Kolk: So here we have the final assembly station where the board comes from the assembly line…

Arno Kolk is a business development manager with Elcoteq. The company is from Finland, but since opening operations here, it’s become one of Estonia’s largest exporters.

Kolk: Being part of eurozone, I think it’s a good sign for business. It does increase the confidence in a country.

And it increases the responsibilities that will fall upon Estonia. The country may be small with just 1.3 million people, but it will now take a seat at the European Central Bank. It will also be expected to contribute to a fund to bail out eurozone nations that get into economic trouble.

Ivar Raig of Tallinn University doesn’t think it’s a good time for Estonia to join.

Ivar Raig: Estonia will be the poorest country in the eurozone, and we are not ready to pay the debt of countries with weak financial discipline.

And given that the debt crisis in Europe isn’t over, Raig is urging the country’s central bank to hold on to those old Estonian kroons, just in case.

In Tallinn, I’m Christopher Werth for Marketplace.

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