The Estonian government has approved a plan to switch to the euro from January 1 2007. The euro will be used for bank transactions, in accounting and in contracts.
Estonian kroons will remain legal tender for two weeks after the euro is introduced, after which the local currency will be excluded from bank transactions, ATM machines and retail trade. Banks will exchange kroons for euros for six months following the switchover, and Estonia’s central bank will continue to do so after the expiration of this six month period.

The Estonian government said prices would be shown in both currencies six months before and after the changeover.

In related developments, the Czech Republic decided to postpone the introduction of the common European currency until 2010, citing necessity to bring the country’s financial performance in line with standards of euro zone countries. Analysts say the Czech Republic was unlikely to reform its fiscal policy and bring its budget deficit to less than 3 percent of the national GDP before 2010.