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Passing the Euro Test

Jan 2, 2011 • Developing Economies, Economic History, Government, International Trade and Finance, Macroeconomic Measurement, Money and Monetary Policy • 97 Views    No Comments

Having just entered the euro zone, the Estonian kroon will be replaced by 194 million euro coins and 45 million bank notes. The process will take 2 weeks as the new currency replaces the old. Here are some pictures of Estonian euro coins and a picture and history of euro banknotes.

 

To be accepted, Estonia had to pass the “euro” test. Composed of five categories, the test focuses on euro zone targets for 1) inflation, 2) the deficit, 3) debt, 4) long-term interest rates and 5) exchange rate stability requirements. Estonia gets high marks for her debt (8% of GDP) and deficit (1% of GDP) but a lower grade for inflation (10.8% during 2008).

 

Fully aware of euro zone problems, Estonia says it wants to join as nation #17 because alone, it is too small to have its own monetary policy. As its finance minister said, “It is a small step for the euro zone and a big step for Estonia.” (A slightly familiar quote)

 

The Economic Lesson

This interactive map of the euro zone illustrates its history.

 

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