05.01.2011
Boarding Titanic, landing on the Moon
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| Editor, news2biz ESTONIA |
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Politicians and journalists tend to think that people like strong images. Clichés, even. The adoption of euro in Estonia on 1 January was no exception to that rule. The Prime Minister Andrus Ansip paraphrased the American astronaut Neil Armstrong by saying that the euro adoption is a small step for the eurozone and a big step for Estonia, while withdrawing the first 20-euro note from the ATM installed for this occasion next to the central opera house in Tallinn. At the same time, near the ATM, the euro-opponents had installed posters saying "welcome aboard Titanic".
What is wrong with the clichés is that they tend to be, and almost always also are, inaccurate. Or, saying it in a milder manner, using them generalises the actual occasion to the level of misinterpretation. The adoption of the euro is equally far from the man landing on the Moon and Titanic crashing into an iceberg. Estonians did not land on an unhabited planet; also, Titanic was sunk by the humane overconfidence and misjudgement, there was nothing wrong boarding this engineering masterpiece at the time. Nevertheless, both verbal images along with a half a dozen another clichés were used by the media around the world when describing Estonia's euro introduction.
I cannot resist using verbal images as well, though. But I would rather describe the euro adoption for Estonia as yet another step on the road the country had chosen twenty years ago. In 1991, there was a time to make a decision, which route to follow when developing the country after the collapse of the Soviet Union. This was a dramatic moment for Estonia, and a comparison with Titanic would have made more sense then – thinking of Soviet Union as a steamer that ran aground due to inaptitude of its leadership and improbability of its chosen route.
The adoption of euro just came along with the route chosen by Estonia twenty years ago. Then, we boarded the steamer designed by a Frenchman and steered by the German captain, now we changed our money to the currency used on board. We have already adopted to the life on board, being in some areas "deutscher als die Deutschen" or more German than the Germans as Die Zeit noted. So, the actual currency change is not that big of a thing to boast or rant about, at least by using hackneyed clichés.
The contra-euro camp claims that Estonia's independence is now completely lost, a comment similar to those they made when Estonia joined the EU and NATO. What they seem to forget is the level of integration of the modern world. It is not the 15th century anymore, when minting own coins and embroidering own colours to pendants were the symbols of one's sovereignty.
In the complex world of the 21st century, a country as insignificant as Estonia has to line up with one or several major players. Now, the ultimate sign of sovereignty is that one has a freedom to choose who of the major players we follow.
In order to have a Titanic or a smaller ship of our own, one has to be big, big in terms of money, resources or populace. One has to have the riches of Switzerland, the oil of the Saudis or the market of the size of Argentina to choose its own route. Argentina can make several financial or political miscalculations, start a war with the major NATO member country or declare all its foreign debts null and void. The foreign investors eventually return to the country, even if they burned their fingers several years before. That would not be the case for Estonia: one error in laying the route, and our steamer, or more precisely, a rowboat, will run aground or sink, i.e. default, as Iceland almost did, despite the fact that the Icelanders had a couple of decades more to accumulate wealth and gather credibility than Estonians.
Not only the domestic euro-deniers are those who forget the size of Estonia and the very thin layer of credibility it managed to accumulate with two decades of currency peg and strict fiscal policy. Several Scandinavian bloggers have commented the news of Estonia's euro accession by saying that it would have been better for Estonia if we had abandoned the peg and let our currency float freely when the recent crisis started.
Well, correct me if I am wrong, but those were also the Scandinavians who sold off the shares of the two Swedish banks with a heavy Baltic exposure, SEB and Swedbank, when the Baltic economies turned to recession. If the investors lost confidence in their banks operating in the Baltic region so easily, if the credibility of the Baltics is so small, what would they have done in case the Baltic three had devalued their currencies? For starters, the loan losses would have multiplied in case we had picked up this idea.
Estonia possesses only a fraction of that credibility its western overseas neighbour Sweden has, and that tiny bit is easy to lose by making harsh moves. The medicine that only shakes Sweden, for instance, eventually curing the disease in its economy, can fatally wound Estonia. A small and insignificant country has to be consistent in its economic policy. That is also why Estonia had no other serious choices but to adopt the euro.
The determinacy of the euro adoption was also one of the reasons, why the actual move went quite smoothly. In the first few days of using the euro, only few incidents were reported, and those incidents gave also more reason to laugh than cry. For instance, one customer in a rural shop paid in kroons and resisted taking the change back in euros, claiming that the cashier made everything up just to tease him.
One cannot also undermine people's experience in changing the currencies. The Estonians have seen eight monetary reforms within the last hundred years, one reform in every twelve years in average – thus, it was about a time to change the currency, as the kroon stood firm for almost 18 years. Of the currencies used in the Estonian territory, three were introduced by the Estonian government – the mark and the kroon of the pre-war time and the recent kroon. Besides their own money Estonians have used the czarist roubles, the German marks, the Soviet roubles, Ostmarks, Soviet roubles again, and then the devalued Soviet roubles as well as almost every hard currency available now and then.
Considering that, I am confident that Estonia is more than able to run a smooth currency change once more, should the eurozone's steamer run aground against all the odds. While it floats, though, Estonia stays on board, and is also able to give advice to its fellow passengers. Estonians are a seafaring nation, after all. Borrowing Neil Armstrong again, perhaps Estonia's entrance to the eurozone will be rather a small step for Estonia but a big leap for the monetary union. Who knows.