In an interview with Eesti Päevaleht (Estonian Daily, one of the largest papers in Estonia) on Monday, 28 February, Joaquin Almunia, the European commissioner for economics and finance, dashed the hopes of the Estonian government for quick accession to the eurozone, the group of countries using the euro as their currency. Mr Almunia said that there are two obstacles to Estonia joining the eurozone on 1 January 2007 – Estonia’s inflation is too high and its Constitution does not allow it. Some experts, however, think that Brussels and Moscow agreed that Estonia is not allowed to join the eurozone.

According to Mr Almunia Estonia has to choose between maintaining fast economic growth with real growth of income on the one hand and suppressing inflation, which would harm economic growth, on the other hand. He ruled out any “political arrangement” for Estonia to join if all criteria should not be met. The commissioner stressed that this is about equal treatment of all the countries and that everyone has to follow the rules. Of course, “everyone,” as we all know, means everyone except France and Germany – two countries with larger budget deficits than the EU criteria allow.

Mr Almunia consoled Estonia that it will not be outside the eurozone forever and that it might be possible to join within a few years, if inflation goes down and Estonia resolves its constitutional conflict. The Estonian government has announced that it will not suppress economic growth in order to join the euro, but accession to the eurozone is still very much the government’s priority.

The Bank of Estonia, which under the constitution is obliged to defend the national currency, the kroon, announced, that it envisages joining the eurozone perhaps no later than in the middle of 2007. It is odd that the Bank of Estonia and the Ministry of Finance seem to be two of the institutions most eager to abandon the kroon.

Some experts in Estonia believe that Brussels’ refusal to invite Estonia (and Latvia) to the eurozone, despite the fact that the Estonian accession treaty obliges the country to join “as soon as possible,” is due to pressure from Moscow. Russia has considerable interests in the Baltic States and the Kremlin is pursuing them mainly via Russian businessmen, who still like to do business in dollars. Estonia’s former ambassador to Moscow, H.E. Mart Helme, [the author’s father] believes that Russia has struck a deal with the EU that ensures that the Baltic States remain in the Kremlin’s sphere of influence, while Brussels has administrative power over them.