Lithuania, Slovenia and Estonia move towards euro

Euobserver.com ^ | 28.06.2004 - 09:51 CET | Marit Ruuda

[ScaniaBoy]

Estonia, Lithuania and Slovenia yesterday (27 June) became the first EU newcomers to join the "exchange-rate mechanism" (ERM-2), paving the way for them to join the euro as early as 2007.

The decision was taken at a highly secretive meeting in Brussels on Sunday, involving officials from the 12 eurozone countries, the European Central Bank, Denmark, and the three countries that had applied for ERM-2 entry, according to the Baltic News Service.

ERM-2 is often referred to as the "holding bay" for the euro. Countries wishing to join the euro must participate in ERM-2 for a minimum of two years.

During these two years, the mechanism aims to ensure a stable exchange rate between the euro and the currency of the prospective euro member since currencies in ERM-2 are not allowed to fluctuate by more than 15 percent against the euro.

But before joining the euro, the applicant country must fulfil other criteria, such as maintaining low inflation and a low budget deficit.

Alluding to these additional hurdles, Estonian commissioner Siim Kallas said, "my reaction is very positive, but this is just one part of a big process".

Mr Kallas declined to speculate on which of the three countries would be first to actually join the currency club, telling Reuters that "every country will be evaluated separately".

[ScaniaBoy]

Of course on a day with almost soley good news reality has to creep in somewhere, and where better than the EU.

A few years ago Estonia was ranked as the most free economy in the world. Now they have joined the EU, and are busy implementing 97000 pages (!!) of statutes and EU-laws - finis liberty.

For the sake of Estonians, Lithuanians and Slovenians one must hope that they don't suffer any major increase in price level - in which case they will have to look forward to high rates and massive unemployment - as happened in UK, Sweden and Denmark during the unfortunate intermeszzo with ERM.