Transformations  in
Business & Economics

Estonia’s Adoption of the Euro in 2007 – a Premature Step with Adverse Effects
Robert Mikecz

ABSTRACT. Estonia has undergone a complete transformation from a centrally planned to a liberal, market oriented economy. Its economy has been successfully restructured. The country’s economic indicators show a healthy, fast growing economy with high GDP growth rates, a balanced budget, low levels of foreign debt and relatively low inflation rates. Estonia became a European Union (EU) member in 2004. The Estonian authorities plan to adopt the Euro as the country’s currency in 2007.

This paper will show that despite the seemingly healthy economic indicators the adoption of the Euro in 2007 will be premature. It will first examine the theory behind monetary integration and analyse the advantages and disadvantages of a common currency system. It will then look at the current state of the Estonian economy. Finally, the article will show that a premature accession to the Euro-Zone will have negative consequences for the economy and social welfare in Estonia.

KEYWORDS: euro-zone, regional development, convergence criteria, monetary integration, Estonia.

JEL classification: R11, E42, E52, P2.