Eesti Pank - Bank of Estonia

The Government approved the revised convergence programme Estonia 2006 on 30 November and approved amendments to the Estonia's National Changeover Plan. According to the proposal from the Ministry of Finance, a specific date for the launch of the euro will not be established in the plan.

The Minister of Finance Aivar Sõerd said in his comment on the convergence programme that the government continues to pursue application of a reliable economic policy and prudent fiscal policy. "The convergence programme presents a sound fiscal position, reserves are on an increase and government debt is diminishing", he said.

The Ministry of Finance prepared the revised convergence programme which covers budgetary policy of Estonia following the draft state budget for 2007 and the state fiscal strategy for 2007-2013. According to the minister, Estonia's budgetary policy adheres to the Stability and Growth Pact along with general economic policy guidelines. He added that the programme reflects the government's objectives and policies as established in the coalition agreement and strategic development plans, including Estonia's economic growth and employment action plan

In conjunction with the convergence programme, the changeover to the euro was discussed again and amendments to the changeover plan were adopted. The changeover date in the previous plans was 1 January 2008 but the revised changeover plan submitted to the government does not fix a date. Sõerd maintained they considered it better not to establish a specific date of the changeover. Andres Lipstok, Governor of Eesti Pank, a participant in the cabinet meeting said it was a sound proposal not to establish a definite date.

The price rise over the last two years has kept at 4 % mainly due to various external factors, that is, it clearly exceeds the level required to be able to join the euro area. Inflation rate that exceeds the average of the euro area by a few percentage points is considered appropriate for a country with a rapid economic development. Low interest rates also indicate the absence of an inflation-related problem.

While price developments often change rapidly, it is complicated to forecast inflation for more than a couple of years. Therefore it is difficult to assess when Estonia will be able to meet the price stability criterion and become a full member of the euro zone. This is why references to definite dates in the euro changeover plan have been replaced by references to the date of making a decision on the changeover or simply a €-day.

Irrespective of adverse inflationary developments, Estonia intends to launch the euro as soon as possible. Estonia has no problems in meeting other Maastricht criteria. As soon as the price stability criterion is met, Estonia will apply to the European Commission and the ECB for the assessment of compliance to criteria

Both the revised convergence programme and the changeover plan are available on the website of the Ministry of Finance at www.fin.ee.

The Government approved a revised convergence programme