Stenbock House — Today, the Government discussed the current progress towards achieving the Maastricht criteria required for accession to the euro zone. At the moment, Estonia excellently meets all the Maastricht criteria except for the inflation criterion.
During the cabinet discussion, it was concluded that as a result of the previous inflation developments, 1 January 2007 had become unlikely as a date for accession to the euro area. According to the spring economic forecast of the Ministry of Finance for 2006 and the recent economic forecast of the Bank of Estonia, the earliest opportunity to achieve the Maastricht price stability, given the present interpretation of the criterion, would be the second quarter of 2007. Adhering to the goal pursued by the Government and the central bank to adopt the euro at the earliest opportunity, it was decided to continue the necessary technical preparations in order to be ready for the adoption of the euro on 1 January 2008.
The cabinet members concluded that the price increase exceeding the inflation criterion was largely caused by the oil price increase on the world market and Estonia’s rapid economic growth, and did not constitute a problem from the economic standpoint. Both the European institutions and the International Monetary Fund have considered Estonia’s economic policy exemplary.
The cabinet agreed that the Government had to make every effort to keep the inflation as low as possible : the Government would continue conservative fiscal policy and maintain the state budget surplus; the Government has decided to postpone the increase in tobacco and alcohol excise duties for reducing the inflation level until 1 January 2008.
According to analysts, a short-term postponement in the adoption of the euro will not cause any setbacks in the economy. At the same time, it was stressed in the cabinet meeting today that the postponement would not mean suspension of preparations. Estonia will have to make all preparations for accessing the euro area at the earliest opportunity.