Functions and Assets of Eesti Pank after the Transition to the Euro
The article aims to analyze the change in the role of Eesti Pank that will occur after the transition from the kroon to the euro.
The article is based on a discussion the author developed with representatives of Eesti Pank on the occasion of the amendment of the Eesti Pank Act in the Riigikogu. No monetary system can effectively function if decision-making is decentralized. This being the case, we can no longer speak of an independent state central bank (one that is empowered to make decisions) in the euro zone, as the former central banks will become regional units of the European Central Banking System and will fulfil the decisions of the European Central Bank. Undoubtedly the preparation of reports and forecasts about Estonia and the presentation of these to the European Central Bank – as well as ensuring fulfilment of the decisions of the European Central Bank – will be an important and labour-intensive job. But calling what is essentially a regional branch of the European Union´s central institution, with no actual decision-making power of its own, a “state central bank” would be misleading and create the wrong impression of the possibilities and problems of Estonian monetary policy in the euro zone. After the introduction of the common currency, the argument of Eesti Pank that the goal of the bank is “ensuring the stability of the banking and finance system” would have questionable value, as this function is supposedly not in the purview of the European Union. Eesti Pank has no special mechanisms for influencing the banking or finance system. On the contrary, Eesti Pank itself must abandon the established special requirements in order to ensure equal competition conditions throughout the euro zone.