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Ministers offer Estonia entry to eurozone January 1
European Union finance ministers from the 27 member states have approved Estonia's adoption of the troubled euro currency on January 1, 2011, sources said. Estonia will become the 17th country to switch to the shared currency.
AFP - Finance ministers from the 27 European Union nations on Tuesday approved Estonia's adoption of the troubled euro currency on January 1, 2011, sources said.
Estonia will become the 17th country to switch to the shared currency, diplomatic and official sources said, after ministers accepted during talks in Luxembourg a European Commission recommendation saying Tallinn had met strict entry criteria.
These include keeping national debt and deficits under control as well as inflation, with limited fluctuations on foreign exchange markets and on interest rate levels.
Although the currency's medium-term future remains uncertain in the eyes of some analysts, despite a trillion-dollar economic stabilisation programme for eurozone countries, commission chief Jose Manuel Barroso said last month that Estonia's willingness to join the euro club was a sign not only of its readiness but also of the euro's attraction.
"In all this debate, let's remember: nobody wants to leave the euro, and others are seeking to join," he said.
According to the latest EU estimates, Estonia will post a public deficit amounting to 2.4 percent of gross domestic product this year and debt of 9.6 percent of GDP -- levels which most of Europe can only dream of.
However, the European Central Bank has warned Estonia that it could struggle to keep inflation under control once it joins the eurozone.
Estonia, with its 1.3 million inhabitants, had initially hoped to join the euro club in 2007 but was prevented from doing so by high inflation rates at the time.
Adjustment efforts played their part in causing its economy to contract by a whopping 14.1 percent last year.
The country shifted rapidly from a communist command economy to the free market after breaking from the crumbling Soviet bloc in 1991 and its economy began to grow quickly, especially after joining the EU in 2004.
Hit by the global crisis in 2008, Estonia's government slashed public spending to confront the crisis and maintain its drive to switch from the national currency, the kroon, to the euro.
The Estonian kroon was created in 1992 to replace the Soviet ruble. First pegged to the German mark, it was then linked to the euro in 2002 and its rate has not changed since.