Estonia, which joined the euro area this year as its members fought to end a sovereign-debt crisis, is benefitting from the currency amid turmoil in the monetary union, Prime Minister Andrus Ansip said.
“It was really an important thing for Estonia to join the euro zone, and even knowing now what happened during the last year, I can say that, yes, this was a really good decision for Estonia,” Ansip said in an interview yesterday in Washington. “We had expectations, and now I can say reality was even better than we expected.”
The package euro-area leaders crafted to end the 21-month sovereign bond crisis was “remarkable,” with “impressive” involvement from the private sector, Ansip said. The leaders, after eight hours of talks yesterday in Brussels, announced 159 billion euros ($229 billion) of new aid for Greece, with bondholders picking up part of the bill.
After enduring one of the deepest recessions in the European Union in 2008-09, Estonia had the bloc’s fastest growing economy in the first quarter and was the only member to post a budget surplus last year. Ansip said becoming the 17th euro member helped reassure investors, attracting capital, boosting exports and creating jobs.
The prime minister, who met with the International Monetary Fund’s No. 2 official, John Lipsky, in Washington, said second-quarter growth was strong and the economy should expand more than 5 percent this year. Inflation, which is “a challenge,” should slow in the second half, he said. The inflation rate dropped to 4.9 percent in June, the lowest in eight months.
Ansip, who oversaw austerity measures equal to 9 percent of Estonia’s economy in 2009 to prevent the budget deficit from ballooning, said the Greeks are making efforts to reduce their budget shortfall and “know what they have to do.”
Greece must sustain its efforts to meet conditions attached to the aid package, and close cooperation between the EU and the IMF on bailouts in the region should continue, he said.
“The IMF has really good expertise,” Ansip said. “They are experienced.”
Estonia’s credit rating was raised one step to A+ this month by Fitch Ratings, which cited its improved public finances and adoption of the euro.
The country doesn’t see itself as an economic model for the rest of the world, said Ansip, who also met with Vice President Joe Biden and House Speaker John Boehner while in the U.S. One policy that served Estonia well was accumulating reserves before the global recession, when growth was strong, he said.
As a euro-area member, Estonia will need to contribute to the new bailout package for Greece.
“That’s life,” Ansip said. “When somebody has big difficulties, their friends have to help.”