Estonia looks to join the Eurozone in 2011

This comes from Bloomberg News:

Estonia is set to meet its goal of adopting the euro in 2011 because of the Baltic country’s work on fulfilling fiscal requirements, European Union Economic Affairs Commissioner Joaquin Almunia said.

“It is quite possible that Estonia will be in the euro by 2011,” Almunia told the European Parliament in Strasbourg late yesterday. The data so far “seem to indicate that this would be possible. Obviously, we can’t take any decision” until an assessment next year on whether the terms are met, he said.

Estonia seeks to become the third east European nation to adopt the euro after Slovenia and Slovakia to spur investment and trade by reducing currency risk for companies.

As I indicated in my recent post on the new Gulf States currency union, the recent worries about a sovereign debt crisis will not put off smaller nations from seeking refuge inside a larger currency union.  For most, this seems a safer course than to risk an Icelandic style collapse.  The Estonian Central Bank has stated he believes Estonia will fulfill the requirements for inclusion in the Euro by this coming spring.

Aluminia’s statement is fairly non-committal. So, for Eurozone members already seeing tensions mount due to crises in Spain, Greece, Austria, and Ireland, this is a real test because Estonia has built a fairly solid case for entry.  Moreover, Estonia would be tiny as a percentage of Eurozone GDP and further positive signs of its likely inclusion would help stabilize the situation in Latvia and Lithuania where the budgetary problems are severe. Estonia does seem a perfect candidate for the Eurozone.