Estonia meets the requirements to join Eurozone at the start of 2011, while eight other countries are not fit yet, the European Commission said Wednesday. Meanwhile, the European Central Bank voiced concern over the country's inflation.
The commission pledged to recommend EU governments to let the country use euro, replacing kroon from January 1, 2011. On the same day, the ECB hinted in a report that the country may fail to maintain low inflation.
To qualify for Eurozone membership, candidates must show that their public finances are in good shape and the exchange rate and prices are stable. Their interest rates must also be low, and national legislation on monetary matters must be in line with EU law.
Estonia's general government deficit fell to 1.7% of GDP in 2009 and the gross debt level stood at 7.2% of GDP. The deficit in 2009 remained within the 3% set out in the Maastricht Treaty.
Revealing a conflict between the European Commission and the ECB, a report from the latter showed Wednesday that Estonia faces challenge of maintaining low inflation as it has limited room for manoeuvre for monetary policy. The bank noted that the country's current low inflation is due to temporary factors.
"Even though Estonia gets a green light on euro entry from the EC, the concerns of the ECB will nonetheless need to be addressed," Danske Bank chief analyst Lars Christensen said in a note. The economist noted that the May inflation data, due in the first week of June, could be an interesting data point giving support to one of the opposing views and, of course, the situation in the European financial markets will no doubt be in the minds of Eurozone leaders when the final decision is made.
Estonia's economy contracted in the first three months through March, after exiting recession in the fourth quarter of 2009, preliminary data from Statistics Estonia showed yesterday. GDP shrank a seasonally and working day adjusted 2.3% in the first three months of this year after growing a revised 2.3% in the fourth quarter.
The commission noted that Bulgaria, the Czech Republic, Latvia, Lithuania, Hungary, Poland, Romania and Sweden do not yet satisfy conditions for Eurozone entry. Meanwhile, the U.K. and Denmark have opted not to join.
The most recent country to adopt the euro was Slovakia, in 2009. According to the commission, some 329 million people now use the euro every day, nearly two-thirds of the EU population of about 500 million.
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December 19, 2025 15:10 ET U.S. inflation data and interest rate decisions by major central banks were the highlights of this busy week for economics news flow. Employment data and survey results on the housing markets also gained attention in the U.S. In Europe, the European Central Bank and Bank of England announced their policy decisions and macroeconomic projections.