Estonians prepare to join the euro and ditch the kroon

Tallinn traders hope the euro will bring a boost in trade

The euro may be in crisis, dragged down by some of the weaker economies of the 16-member eurozone. But that has not deterred the Baltic republic of Estonia from adopting the European single currency on 1 January 2011.

Estonia met the eurozone's budget criteria with flying colours.

But other European countries that do not use the euro are not rushing to follow its example and not everyone here is convinced that changing currency is a positive step. According to government polls, just over half of the population are in favour of the single currency.

In Tallinn's medieval Old Town square, the snow-covered Christmas market looks like something out of a fairy tale.

But market traders here are hoping that the euro will offer benefits that are more true to life.

"It will boost trade because more businesses will come to Estonia," says one woman, whose mulled wine stall already shows prices in euros.

Symbol of freedom

Another stall-holder says "I am pretty sad because (the kroon) was a sign of independence for Estonia."

That point - that the Estonian kroon is a symbol of freedom from the Soviet Union - is something you hear a lot.

Many say they will miss their brightly-coloured bank notes, which they find more attractive than the more mundane-looking euro.

But poorer families have more urgent concerns about the new currency. Kaja Kruusamagi has come with her 15-month-old baby and her husband, an unemployed carpenter, to collect a food parcel from the charity Foodbank.

Some families fear Estonia's relatively low cost of living will rise

Without this weekly box of bread, fruit and vegetables, Mrs Kruusamagi says it would be impossible to feed her four children properly. Their benefits are about to be cut, meaning that after Christmas the entire family will have to live on less than 4000 kroons (256 euros, $339) a month.

"Things will cost more with the euro," she explains. "The cost of living in Estonia is lower than in other EU countries. But when we all have the same currency, our prices will soon rise to the level of the rest of Europe."

The tough cuts in state spending, necessary to join the eurozone, have pushed unemployment up to over 16%. So the chances of her husband Meelis finding a job soon are slim. And even those still in work have seen their wages slashed.

'European Rouble'

One of those campaigning against the euro is Anti Poolamets. He is wearing a T-shirt which has the words "long live the Estonian Kroon, down the European Rouble" printed on the back.

He compares the euro to the Russian currency, which was forced on Estonia during the Soviet occupation of the 20th century.

The government has handed out free currency conversion calculators

Mr Poolamets believes that after years of fiscal prudence, Estonia, one of the EU's poorest countries, will now have to bail out richer, more profligate eurozone members.

"Our government debt is the lowest in Europe," he says. "We have never lived beyond our means. And now we are in the same boat as the Greeks and the Irish. We have to pay bills for bad banks and bail out Irish bankers."

But Estonia's Minister of the Economy Juhan Parts says helping neighbours is what European unity is all about. And he argues that Estonia's success in meeting the euro's entry criteria proves that the eurozone's budget aims can work.

"The euro is very important. It makes Europe more competitive and helps the single market function better. It's just not possible to go back to 27 currencies."

Back at the Christmas market, as daylight fades and temperatures drop even further, traders hack away at the ice in front of their stalls.

For some of them, joining a single currency in crisis seems an equally chilling prospect.

But for many, such as an elderly man who excitedly shows me the currency conversion calculator handed free by the government, the euro is a sign, that 20 years after independence from the Soviet Union, they have not only arrived in the West.

With the lowest levels of debt in the EU, in some ways they have even outperformed it.