Modernisation and Liberalisation
Since reestablishing independence, Estonia has styled itself as the gateway between East and West and aggressively pursued economic reform and integration with the West. Estonia's market reforms put it among the economic leaders in the former COMECON area. A balanced budget, almost non-existent public debt, flat-rate income tax, free trade regime, fully convertible currency backed by currency board and a strong peg to the euro, competitive commercial banking sector, hospitable environment for foreign investment, innovative e-Services and even mobile-based services are all hallmarks of Estonia's free-market-based economy. Estonia also has made excellent progress in regard to structural adjustment.
In June 1992, Estonia replaced the ruble with its own freely convertible currency, the kroon (EEK). A currency board was created and the new currency was pegged to the German Mark at the rate of 8 Estonian kroons for 1 Deutsche Mark. When Germany introduced the euro the peg was changed to 15.6466 kroons for 1 euro. Estonia was set to adopt the euro in 2008 but due to high inflation rates the adoption date was delayed to 2011. On 1 January 2011, Estonia adopted the euro and became the 17th eurozone member state.
The privatisation of state-owned firms is virtually complete, with only the port and the main power plants remaining in government hands. The constitution requires a balanced budget, and the protection afforded by Estonia's intellectual property laws is on a par of that of Europe's. In early 1992 both liquidity problems and structural weakness stemming from the communist era precipitated a banking crisis. As a result, effective bankruptcy legislation was enacted and privately owned, well-managed banks emerged as market leaders. Today, near-ideal conditions for the banking sector exist. Foreigners are not restricted from buying bank shares or acquiring majority holdings.
Tallinn's fully electronic stock exchange opened in early 1996 and was bought out by Finland's Helsinki Stock Exchange in 2001. It is estimated that the unregistered economy provides almost 12% of annual GDP.
Read more about this topic: Economy Of Estonia