One More at the Party – Estonia
The Eurozone welcomed a new comrade on the first day of 2011: Estonia. The press reported somewhat muted celebrations around the country and in the capital, Tallinn. This Soviet breakaway had a poster campaign in anticipation of the event – a modern shot of a handsome, well-scrubbed smiling family comprised of early thirties parents and a cherubic baby; somewhat at odds with the current death-pallor of the European Union, but a picture of Irish government ministers handing out cheese isn’t exactly a positive PR spin, now is it? Nonetheless, some celebrated and others berated. The loss of the Estonian currency, the Kroon, was actually lamented by many. And of course the question of ‘what will this mean for us now?’ was on everyone’s lips. Estonia is now the 17th country to adopt the Euro, and the new question on many economists lips is, ‘will the single currency even survive?’
A good question, indeed. Portugal and Spain are currently fighting for dear life as the IMF is perhaps preparing to hand out yet another dubious flotation device, and old Germany sits there shaking her head wondering what the hell will happen next. Tony Blair’s former Economic Advisor, Derek Scott, was quoted in The Guardian saying that the problem is that higher inflation for the struggling countries in the Euro, means that their goods and services will never be able to compete with those of the relatively healthy Germany. And they can’t devalue because of the shared currency – the only option being austerity and deflation. And Germany isn’t prepared to ‘recycle the current-account surpluses it has accumulated,’ as that would ultimately destroy their own economy.
The economic experts don’t reckon the single currency will die, but perhaps there will be a breakaway of the northern European states (essentially those not in ‘better’ shape). But, as one blogger pithily pointed out at the end of a recent piece on Estonia’s acceptance to the collective: ‘I’m still waiting for someone to explain to me how you have one currency and 17 finance ministries.’ But, for now, we can toast a new partner in the messy battle to keep Europe’s single currency alive.…