Vare credits Kallas currency reform with Estonia’s economic success

Siim Kallas’s currency reform gave Estonia’s economy a major boost and helped lay the foundations for the country’s later success, economic expert and former government minister Raivo Vare told ERR.

Kallas, then president of the Bank of Estonia, led the reform in 1992, when Estonia replaced the Soviet ruble with the kroon. Vare said the reform provided a strong anchor during a period of uncertainty and continued to support the economy through much of the 1990s.

Preparations for introducing the kroon began before Kallas became central bank president. However, he was in office during the most decisive phase and served on the monetary committee alongside Prime Minister Tiit Vähi and financial expert Hardo Hansson.

According to Vare, Kallas was one of the three people responsible for the reform and played a major role in drafting the monetary laws that helped maintain the kroon. Some of those laws remain in force even in the euro era, he said.

Vare also credited Kallas with helping choose the kroon’s exchange rate. Estonia introduced the currency at a rate of one kroon to eight Deutsche marks, which Vare described as an important decision because the mark was then considered the strongest and most stable currency.

Estonia adopted the kroon despite recommendations from international financial organisations to remain in the ruble zone. Those organisations hoped the zone would gradually strengthen and create a larger economic area, Vare said.

“Estonia, led by Siim Kallas, stood its ground, acted in its own way and made the right choice, as history has since confirmed,” Vare said.

Vare added that Kallas’s later work in politics and at the European Commission gave him a significant place in Estonian history.

Siim Kallas, who was born in 1948, died on Saturday at the age of 78.