Weak euro has indirect positive impact on Estonia, says expert

(Reuters/Scanpix)
1/6/2015 3:13 PM
Category: Economy

The euro hit a nine-year low against the US dollar on Monday, which could be good news for Europe's biggest exporters, says economics professor Raul Eamets.

The weak euro will boost Eurozone's export sector, but will have little direct impact on Estonia, as the majority of the nation's exports head to other EU countries.

Eamets said Germany will greatly benefit and the trickle down effect will reach Estonia.

Bank of Estonia economist Natalja Viilmann is less optimistic, saying increased export revenues will eventually lead to an increase in salaries and the strengthening of the Eurozone, meaning benefits will be short-term.

Eamets said the general economic outlook is not great and Estonia will grow if it manages to find new markets in growing economies, such as in Asia or South America.

Bond market expected to grow

Economics professor Rainer Kattel said it is likely the European Central Bank will begin to buy government bonds of member states in a quantitive easing drive. This would inject cash into the banking system, stimulate the economy and push prices higher.

He said the move will alleviate, but not solve the problem as unemployment is still very high in Europe.

SEB's Peeter Koppel said a second point of worry is Greece as polls show the left-wing Syriza party could win elections at the end of January. Syriza has said it wants to restructure the nation's huge debts which according to Kattel means it wants to write some debts off. A win for the party would also mean an end to the austerity drive in the nation.

Koppel said Greece has never before been so close to leaving the Eurozone, especially as it would no longer trigger a larger exodus of Portugal, Spain and Italy. Greek financial woes have become an isolated problem, and if it left the Eurozone, it would not bring down the whole currency.

L. Viirand, L Velsker, J.M. Laats

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