jean - claude trichet : the entry of estonia into the euro area speech by mr jean - claude trichet, president of the european central bank, at the euro conference at the bank of estonia, tallinn, 20 september 2010. * * * distinguished guests, ladies and gentlemen, it is a great pleasure for me to be here today, in tallinn, to participate in the euro conference. on 1 january 2011 the euro will become legal tender in estonia, and estonia will become the 17th country to join the euro area. let me first congratulate all parties involved in this outstanding achievement on their efforts and determination to prepare estonia for the adoption of the euro. the creation of the single currency has been a very important step forward in the achievement of the historical endeavour of creating a single market for the europeans, which was what the founding fathers had in mind more than fifty years ago. its inception has been, at the same time, a powerful symbol of the will of the european countries to pursue actively their strategic road towards unification. we were eleven countries when we started the euro on 1 january 1999. we will be seventeen on 1 january 2011. there is no better way to demonstrate that the euro area is not a “ closed shop ” but is open to those countries and economies that are fully compliant with the entry criteria in a convincing and sustainable manner. 1 january 2011 will become a landmark in the history of estonia, reflecting the long and challenging process of economic and monetary integration that has enabled estonia to join the euro area. after regaining independence in 1991, estonia embarked on a rapid and farreaching programme of social and economic reform. in addition to being a determined reformer, it became a model for stable multi - party democracy. estonia transformed itself into a dynamic economy, gaining recognition for its sound fiscal record, economic freedom and capacity to develop new technologies. for several years, estonia was also one the world ’ s fastest growing economies, but its growth was far from balanced. notwithstanding some very difficult years following its regaining of independence, estonia ’ s real gdp grew at an average rate of 7. 2 % per annum over the period from 1995 to 2007. however, this growth rate came to a halt in 2008. real output declined sharply in 2008 and 2009, and, after latvia, estonia became the second most severely affected eu member state in terms of output decline. the severity of the adjustment revealed that the period of rapid output growth was, to some extent, also a period of imbalanced growth and economic

, this should help stabilise euro area economic activity and lead to a gradual recovery in the second part of the year. at the same time, necessary balance sheet adjustments in the public and private sectors, and the associated tight credit conditions, will continue to weigh on economic activity. this economic outlook for the euro area remains subject to downside risks. the risks include the possibility of even weaker than expected domestic demand and slow or insufficient implementation of structural reforms in the euro area. these factors have the potential to dampen the improvement in confidence and thereby delay the recovery. according to eurostat ’ s flash estimate, euro area annual hicp inflation was 1. 7 % in march 2013, down from 1. 8 % in february. the ongoing decline in annual inflation rates mainly reflects the energy component of the price index. looking ahead, price developments over the medium term should remain contained in an environment of weak economic activity in the euro area. inflation expectations are firmly anchored and in line with price stability over the medium to long term. risks to the outlook for price developments continue to be broadly balanced over the medium term, with upside risks relating to stronger than expected increases in administered bis central bankers ’ speeches prices and indirect taxes, as well as higher oil prices, and downside risks stemming from weaker economic activity. turning to the monetary analysis, the underlying pace of monetary expansion continues to be subdued. the annual growth rate of m3 moderated to 3. 1 % in february, down from 3. 5 % in january. the annual growth rate of the narrow monetary aggregate, m1, increased to 7. 0 % in february, from 6. 6 % in january. at the same time, mfi deposits in a number of stressed countries strengthened further in february. the annual growth rate of loans ( adjusted for loan sales and securitisation ) to non - financial corporations and households remained broadly unchanged in february, at – 1. 4 % and 0. 4 % respectively. to a large extent, subdued loan dynamics reflect the current stage of the business cycle, heightened credit risk and the ongoing adjustment of financial and non - financial sector balance sheets. at the same time, available information on non - financial corporates ’ access to financing indicates tight credit conditions, particularly for small and medium - sized enterprises in several euro area countries. in order to ensure adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential that the fragmentation of euro area credit markets is reduced further and the resilience