BRUSSELS (MNI) – Estonia clearly fulfills the criteria to join the
euro and is ready to adopt the single currency on January 1 2011, the
European Commission said on Wednesday.

The Commission’s endorsement comes despite concerns voiced by the
European Central Bank that the Estonia’s inflation rate might not be
sustainable.

The eight other European Union member states under consideration
for euro membership – Bulgaria, the Czech Republic, Latvia, Lithuania,
Hungary, Poland, Romania and Sweden – do not yet meet all the conditions
for adoption, the Commission said in its convergence report, published
Wednesday.

Estonia’s euro bid will now be discussed by the European Parliament
and the EU heads of state and government before a final decision is
taken by the Council of European Union finance ministers at their July
meeting.

“Estonia has achieved a high degree of sustainable economic
convergence and is ready to adopt the euro on January 1 2011,” European
Commissioner for Economic and Monetary Affairs, Olli Rehn said in a
statement.

“Estonia must pursue its efforts to maintain a prudent fiscal
policy stance. Estonia needs also to remain vigilant and react early and
decisively in case signs of a build-up of macroeconomic imbalances
and/or losses of competitiveness were to appear,” Rehn added.

In a statement released simultaneously, the European Central Bank
voiced concerns about the sustainability of Estonia’s inflation
convergence.

Current low inflation levels in Estonia mainly reflect temporary
factors, the central bank said. Over the medium term, maintaining low
inflation rates will be “very challenging given the limited room for
manoeuvre for monetary policy,” it said.

But the Commission’s report noted that the average inflation rate
in Estonia during the 12 months through March 2010 was -0.7%, well below
the reference value of 1.0% for the same month.

The Commission said Estonia’s inflation rate was “likely to remain
below the reference value in the period ahead.”

“Estonia’s price performance is assessed as sustainable,” the
Commission said. “However, Estonia will need to remain vigilant to keep
inflation at a low level, notably by maintaining an ambitious fiscal
policy stance and by keeping domestic demand in line with fundamentals,”
it said.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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