In Brief
Estonia gets ready for euro, sees economy boost TALLINN (AFP) – As Estonia braces to adopt the euro it is brushing off the currency’s woes, seeing the switch as a chance to boost its economy after a deep slump and set an example for current eurozone members. On January 1, the Baltic state will say farewell to its national currency, the kroon, becoming the eurozone’s 17th member and the third from behind the former Iron Curtain. Its center-right government insists that for a small, open economy like Estonia, which joined the European Union in 2004, the euro makes perfect sense. «The euro emphasizes Estonia’s economic credibility. It is an important signal to investors everywhere,» Prime Minister Andrus Ansip told AFP. Economy Minister Juhan Parts noted that research by the International Monetary Fund showed eurozone membership could boost Estonia’s economic growth by 0.15-1.0 percentage points a year over the next two decades. The euro would benefit local firms, he added, noting that 80 percent of Estonia’s trade takes place within the 27-nation EU. «A working EU common market is beneficial to us all. It allows Estonian entrepreneurs to sell their products more easily, which creates work and puts food on the table,» he told AFP. Estonia had aimed to switch in 2007, but high inflation sparked by an economic boom dashed hopes of clearing eurozone entry hurdles carved in the EU’s 1992 Maastricht Treaty. Estonia earned a reputation as a «tiger» thanks to its rapid leap from the communist command economy to a high-tech-driven free market after independence in 1991. But it was battered by the global crisis. Its economy shrank by 14.1 percent in 2009, one of the world’s deepest slumps. Amid a recovery, growth is expected to hit 2.5 percent this year, and 3.9 percent in 2011. Deposits at Cypriot banks increase 18 percent Deposits at banks in Cyprus rose 18 percent to 68.7 billion euros ($90.3 billion) in the first 11 months of the year, the country’s central bank said. Deposits advanced 2.6 percent in November from the prior month, according to a statement on the central bank’s website. The main reason for the increase was Russians transferring funds to the eastern Mediterranean island, which benefited both Greek and Cypriot banks, according to Constantinos Loizides, managing director of Piraeus Bank Cyprus, a unit of Greece’s fourth-largest lender. Deposits at units of Greek banks in Cyprus have risen 27 percent since December 31 to 7.4 billion euros through November, compared with 7 billion euros in June. Deposits at Greek banks on the island peaked in May at 7.5 billion euros as clients in the country transferred money to Cyprus on concerns Greece would default, restructure its borrowings or abandon the euro and impose restrictions on capital flow. (Bloomberg) ECB purchases Data from the European Central Bank show it bought government bonds worth 1.121 billion euros ($1.468 billion) in the week ended December 24, as the ECB stepped up bond purchases in its fight against Europe’s debt crisis. The previous week the Central Bank only invested 603 million euros in bonds from governments with shaky finances such as Ireland, Greece and Portugal, disappointing traders who had hoped the ECB would play a more active role as the region tries to keep the debt crisis from pushing more states into international bailouts. Buying bonds supports their prices and keeps countries’ borrowing costs in check. Despite the increase, yesterday’s data are still far below ECB bond purchases seen earlier this year. (AP) Bond trading Greek bond trading on the electronic secondary securities market known as HDAT fell 52 percent in November to 926 million euros ($1.2 billion) from 1.94 billion the previous month, the country’s central bank said. The most actively traded security was the 10-year bond, with 211 million euros of transactions, the Bank of Greece said yesterday in an e-mailed statement. Of the 800 orders executed on the system, 63.6 percent were sell orders, the bank said. (Bloomberg)
