The euro came into effect as currency in Estonia on 1 January 2011. During 2010 Estonia successfully fulfilled all the Maastricht criteria, which are required to join the euro zone. Estonia is the 17th country and the first Baltic state to join the monetary union.
Why did Estonia change over to the euro?
Estonia's accession to the euro zone is in the country’s own interest despite the current crisis gripping the monetary union. The changeover to the euro, a world currency, boosts business confidence, investor confidence, and also the well-being and confidence of the Estonian people. The euro will support our economic stability, facilitate trade relations with EU member states, and establish Estonia as a part of one of the most influential economic regions in the world. In addition, adopting the euro will prevent the risk that the value of our money would decline and savings would be reduced. Transition to the euro makes travelling more convenient and cuts the costs of currency exchange for both private individuals and businesses.
The Estonian kroon was pegged first to the Deutsche Mark and later to the euro during the entire circulation period (since 1992). Due to the fixed exchange rate and the peg to the euro, Estonia was almost already a member of the euro area, except that the banknotes were different. Therefore the changeover from the kroon to the euro did not bring along any major economic changes, although transaction costs did decrease and the possible risks that endangered the kroon as a small currency with a fixed exchange rate disappeared.
It is quite clear that accession to the euro area is more beneficial for countries whose economies are closely integrated with the euro area. The close integration of Estonia's and the EU’s economies is reflected in the fact that Member States account for 80% of Estonia's external trade and more than 80% of foreign investment in Estonia. The adoption of the euro resulted in smaller transaction costs since the need for currency exchange decreased. Based on the experience of other countries, this will allow the country to save up to 0.2% of GDP. Most of Estonia's trade was euro-based, which means it is easier for companies to conduct business now that the country has joined the euro area: there is no need to settle in two currencies or exchange currencies, and prices are comprehensible and more easily comparable without extra calculations.
Joining the euro area and transitioning to the single currency hedges the risk of adverse exchange rate movements. A stable monetary environment, in turn, promotes fast economic growth. At the same time, accession to the euro area entails the obligation for Estonia to follow a balanced economic policy in the future as well.
Estonia's accession to the Economic and Monetary Union was the best and most reliable way to ensure the stability and low inflation level of the currency in circulation.
How did Estonia change over to the euro?
- From 1 July 2010, all traders were obliged to show prices both in Estonian kroons and euros. Prices will be presented in two currencies until 30 June 2011 in order to give people more time to get used to the new currency.
- On 13 July 2010, the European Union's Ministers of Finance approved the official rate for the changeover from kroon to euro, which is 15.6466 EEK for 1 euro.
- From 15 September 2010, the Bank of Estonia started the preliminary distribution of euro coins to the commercial banks that in turn started preliminary distribution to their corporate customers.
- From 15 November 2010, preliminary distribution of euro banknotes to the commercial banks by the Bank of Estonia started.
- From 1 December 2010, all individuals had the possibility to exchange kroon banknotes for euros without any service fee, according to the official exchange rate of 1 EUR = 15.6466 EEK in all the bank offices working with cash (until 30 June 2011). The banks also started a preliminary distribution of euro banknotes to corporate customers.
- From 1 January 2011, ATMs issue 5-, 10- and 50-euro banknotes. All deposits in Estonian kroons change over to euro deposits (only the payment unit will change).
- Until 14 January 2011, it was possible to use both euros and kroons in making cash payments.
- From 15 January 2011, the only official means of payment in Estonia is the euro.
- Until 30 June 2011, companies must show their prices both in kroons and euros.
- Until 31 December 2011, kroon banknotes and cents will be exchanged for euros in bank offices.
- The Bank of Estonia will exchange kroons and cents for euros indefinitely, without a service fee and according to the official exchange rate.