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Estonian kroon
Eesti kroon (Estonian)
Coins
Coins
ISO 4217 Code EEK (num. 233)
User(s)  Estonia
Inflation 0.9%
Source European Central Bank, April 2009
Method HICP
ERM
Since 28 June 2004
Fixed rate since 31 December 1998
= 15.6466 krooni
Band pegged de facto, 0% de jure according to Estonian law, 15% de jure according to ERM II rules
Subunit
1/100 sent
Nickname paper, The family names of the persons on notes: 100 krooni – Koidula, 500 krooni – Jakobson etc., eek
Plural krooni
sent senti
Coins
Freq. used 10, 20, 50 senti, 1 kroon
Rarely used 5 senti, 5 krooni
Banknotes
Freq. used 2, 5, 10, 25, 100, 500 krooni
Rarely used 1, 50 krooni
Central bank Bank of Estonia
Website www.bankofestonia.info

The kroon (sign: KR; code: EEK) is the currency of Estonia. It is subdivided into 100 senti (singular sent). The word kroon, meaning "crown", is related to that of other Nordic currencies (such as the Swedish krona and Norwegian krone) and to the Latin word corona ("crown").

Contents

History

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First kroon, 1928–1940

The kroon became the currency of Estonia on 1 January 1928. It replaced the mark at a rate of 100 marka = 1 kroon. The kroon was subdivided into 100 senti.

Sir Walter J. F. Williamson, a financial expert at the League of Nations, was hired in 1927 for the execution of the reforms. He worked as a counsellor for Eesti Pank until 1932. In 1927, Nikolai Köstner was nominated the Minister of Finance's representative at Eesti Pank. In 1928, he became the government's commissioner at the Bank.

Eesti Pank was reformed in 1927. A new version of the Statutes was approved, according to which Eesti Pank became an independent note-issuing central bank with limited functions. The main tasks of the bank remained to guarantee the value of the money through currency circulation and through the arrangement and regulation of short-term credit volume. Through the sale of government securities, the bank became a true joint-stock bank. The bank's Full Assembly (Plenary Meeting) and its board consisting of 10 members were fixed as the governing bodies of Eesti Pank in order to guarantee independence from the government. It was decided that the president was to be the executive manager of the bank, and the executive management the executive body.

A foreign loan of GBP 1.35 million (27.6 million krooni) supplemented the foreign currency reserves, of which Eesti Pank received GBP 1 million. The gold and foreign currency reserves of the State Treasury were also transferred to the central bank. The fixed capital of the bank was increased from 2.5 million krooni to 5 million krooni. The sizes of the issues in relation to the reserves backing the kroon were determined. The loan operations of the central bank were regulated and the loan portfolio was set on a sound basis. Long-term loans that had become illiquid were transferred to the Long Term Loan Bank, founded specially for the purpose of releasing Eesti Pank from this burden.[1]

Initially, the kroon was pegged to the Swedish krona at par, with a gold standard of 2480 krooni = 1 kilogram of pure gold. The gold standard, established in 1924, remained unchanged but received real coverage with the reserves backing the kroon. The issue of treasury notes and exchange notes was terminated. In order to secure the credibility of the kroon, Eesti Pank exchanged krooni for foreign currency. All these measures taken restored confidence in the domestic banking and monetary sector, contributing to the economic reinvigoration of the country and to the improvement of the reputation of the Estonian state in the international arena.

During the Great Depression in 1933, the kroon went off the gold standard. Estonian kroon circulated until the Soviet invasion of 1940. The kroon was exchanged for the Soviet ruble at a rate of 1 ruble = 0.8 kroon.

Second kroon, 1992–present

The kroon was reintroduced as Estonia's currency on 20 June 1992, replacing the Soviet ruble at a rate of 1 kroon = 10 rubles. Initially, the Estonian kroon was pegged to the Deutsche Mark at a rate of 8 krooni = 1 Deutsche Mark.[2]

Eesti Pank recommenced operations on 1 January 1990 after an interval of 50 years, though not yet as the central bank of an independent country. The fact that it was possible to restore the central bank in spite of the fact that Estonia was not yet independent was a paradox of that time. The Statutes of Eesti Pank were confirmed in March 1990, and 400 million roubles were allocated for the statutory fund. According to the Statutes, Eesti Pank was an independent public organisation, an issue centre subordinate to the highest authority of the ESSR. The main tasks of the bank included the following: developing an economic strategy for the country and its execution in the field of currency circulation, the provision of credit, financing, settlements, and foreign currency relations; management of the currency and credit system; securing the stability of currency circulation; guaranteeing the purchasing power of the national currency and determining its exchange rate in relation to other currencies. The governing body of Eesti Pank was the Board of the Bank, and its executive manager was the President of the Bank. The first board was appointed with R. Otsason at its head.

Eesti Pank took over the Tallinn branch of the Foreign Trade Bank of the Soviet Union, re-organising it into the Foreign Currency Operations Centre of Eesti Pank. The central bank also attempted to take other steps within its ability for the liberalisation of the economy and in order to make the transition to a market economy: it began organising currency auctions, publishing quotations of the number of roubles in circulation, issuing licenses for foreign payments and settlements, etc.

In April 1990 the date was set for the introduction of the national currency – December 1990. Contracts with American and British companies were concluded for printing the banknotes. A certain rival attitude and opposition between the Government and Eesti Pank appeared concerning the question of the introduction of the national currency by November 1990, although their ideas were quite similar. The sides indicated the problems and recognised the dangers involved, but both concepts still remained as overly general documents, with rather obscure tenets and no definite operation plan to be used as a possible basis for the preparation of the future monetary reform.

In November 1990, the Board of the Bank was staffed with new members. Rein Otsason remained the Chairman but was replaced by Ants Veetõusme in May 1991.

In March 1991 a monetary reform committee with extensive powers was established and its members were Edgar Savisaar, Rein Otsason and Siim Kallas. In 1992 the members of the committee were Tiit Vähi, Siim Kallas, Rudolf Jalakas and Ardo Hansson (as a substitute member). First the committee determined the general principles for the implementation of the monetary reform, and then approved the preparation plan and established temporary foreign currency rules.

In September 1991 Siim Kallas was nominated to the post of president of Eesti Pank. He proposed the implementation of the monetary reform no later than the first half of 1992. Estonia had re-established its independence, which was the most important pre-condition for the introduction of the national currency. The necessity for rapid monetary reform was also connected with the cash deficit caused by the central bank of Russia and to the continually intensifying hyperinflation. A new work group was founded at Eesti Pank to work out the schedule for and prepare the monetary reform. Due to the altered conditions, the above-mentioned work group did not have much to incorporate from the previous conceptions. Eesti Pank developed the solutions to all conceptual, strategic, tactical and technical questions and performed the calculations of the issue.

At the same time it was necessary to begin transforming Eesti Pank into an actual regulator of the Estonian banking sector. At that time, settlements were performed through Moscow, the local Clearing Centre being subordinate to Moscow. Eesti Pank was not yet able to regulate and inspect the operations of the local commercial banks. It was necessary to form a sharp-witted team at the central bank to turn the bank into a well-functioning organisation and regulatory centre. In January 1992, the Estonian Republican Bank of the State Bank of the USSR was subordinated to Eesti Pank, which ended Union-wide banking in Estonia. After that, the Estonian Clearing Centre of the State Bank of the USSR was also subordinated to Eesti Pank.

The formation of reserves backing the kroon was commenced. After the recognition of Eesti Pank as the legal successor of the central bank of the Republic of Estonia, established in 1919 during the independence period, the government of Great Britain decided to return the gold that had belonged to the pre-war Eesti Pank to Estonia. The restoration of the membership of Eesti Pank in the Bank for International Settlements was accompanied by the restoration of its rights to the gold and other assets deposited there. Reserve felling areas from the State Forest Fund worth 150 million dollars were also included in the balance sheet of Eesti Pank as an additional foreign currency reserve (this had more a moral and an emotional value for the general public than a practical one).

The first mission of the International Monetary Fund arrived in Estonia in November 1991 and marked the beginning of the co-operation between Eesti Pank and the International Monetary Fund. Estonia became a member of the International Monetary Fund and the World Bank.

The new banknotes reached Estonia in April 1992. The idea to base the future monetary reform on the currency board system became more and more concrete. That meant fixing the Estonian kroon to some foreign currency, and securing the money in circulation and the deposits of the commercial banks kept at the central bank, with freely convertible foreign currency. The relative simplicity of the currency board system and its ability to withstand speculative pressure, guaranteeing a fixed exchange rate even in complicated situations were factors which played an important role in preferring the currency board system over its rivals. Through the application of other systems, the relatively small and vulnerable Estonian money market could have easily been unbalanced. In May it was decided to select the German mark as the anchor currency. The German Bundesbank was informed of this.

A Bureau of Monetary Reform Committee was founded, with Enn Teimann, chief of the Foreign Currency Department of Eesti Pank, at its head. The task of the Bureau was to prepare the documents of the Committee and make the practical arrangements for the monetary reform.

On 20 May 1992 the Supreme Council adopted the three most important laws prepared by Eesti Pank: the Currency Act, the Act on Backing the Estonian kroon and the Foreign Currency Act. On 17 June 1992 the Monetary Reform Committee issued a decree to execute the monetary reform on 20 June 1992. Several other decrees followed to regulate the operation of the banking sector, the more important of which were decrees on exchanging deposits, on the types of deposits in the Savings Bank and on the securities of the Soviet Union. In addition to those, on June 18, 1992, ten regulations and decisions concerning monetary reform were adopted by the Board of Eesti Pank.[3]

The Estonian kroon was declared the sole legal tender in circulation and Eesti Pank the only regulator of monetary relations in Estonia. Within three days, 1500 rubles were exchanged to krooni for each resident natural person at the rate of 1 kroon = 10 rubles. Almost the entire amount of rubles in circulation in Estonia was exchanged to krooni at the same rate (deposits, money held by enterprises, etc.). The rate was considered under-priced by many opponents, but it actually corresponded to the market rate of that time. Time and the later course of events have indisputably proven the correctness of the choice made. All the laws and other legal acts planned for the beginning of the monetary reform came into effect. Eesti Pank began to publish daily exchange rates of the Estonian kroon against the most important foreign currencies.

The necessary reserves backing the kroon were composed of gold and foreign currency. In addition to the actions of the Bank of England and the Bank for International Settlements, the Bank of Sweden - Riksbanken - also compensated for the gold deposited in Sweden by the Estonian government prior to WWII. The Estonian government at the time feared a Soviet invasion and consequently an Annexation; unfortunately those fears became a reality. Once Estonia regained its independence once again the Swedish Riksbank paid out the value of the gold deposits in German marks. It is worth mentioning that after WWII Sweden was one of very few Western nations that recognized the Soviet occupation of the Baltic countries and returned the Estonian gold reserves to the "new owner" - the Soviet Union. The decision was very controversial and most Swedes were ashamed of it. The "compensation" of the Estonian gold reserves was meant to correct a past injustice to the Estonian people. Economically, the time for monetary reform was most appropriate because during that summer a new increase in prices began in the rouble zone.

The Estonian monetary reform earned only words of praise from the West. A seminar thoroughly introducing the Estonian economy and banking took place within the framework of the Annual Meeting of the International Monetary Fund and the World Bank. Co-operation with the International Monetary Fund (Siim Kallas became a member of the IMF Joint Procedures Committee) and the Bank for International Settlements became closer. The Bank of Finland began quoting the Estonian kroon. After the introduction of the euro the fixed exchange rate of 1.95583 DEM to EUR led to an exchange rate of 15.64664 krooni to the euro. On June the 27th 2004 as Estonia joined the ERM2 the central parity of the Estonian kroon was revalued to 15,6466 krooni per euro. The kroon is now officially in ERM II, the EU's exchange rate mechanism. As it remains pegged to the euro, it makes no use of its 15% fluctuation band. Estonia was party to joining the mechanism since joining the EU – actual entry was on 28 June 2004.[4]

Coins

First kroon

In 1928, the first coins of this currency were issued, nickel-bronze 25 senti pieces. These were followed by bronze 1 sent in 1929, silver 2 krooni in 1930, bronze 5 senti and nickel-bronze 10 senti in 1931, silver 1 kroon in 1933, bronze 2 senti and aluminium-bronze 1 kroon in 1934, nickel-bronze 20 senti in 1935, nickel-bronze 50 senti in 1936.

On 25 July 1940, 4 days after founding of Estonian SSR, the last Estonian pre-WW II coin, new 1 sent (date 1939) was issued.

Second kroon

50 senti 2004
Reverse Obverse

In 1992, coins were introduced (some dated 1991) in denominations of 5, 10, 20 & 50 senti, as well as 1 kroon. The 1 kroon was struck in cupronickel, the others in brass. However, in 1997, nickel-plated steel 20 senti were introduced, followed by brass 1 kroon in 1998. Coins in circulation:[5]

  • 5 senti (1991;1992;1995)
  • 10 senti (1991;1992;1994;1996;1997;1998;2002;2006;2008)
  • 20 senti (1992;1996;1997;1999;2003;2004;2006)
  • 50 senti (1992;2004;2006;2007)
  • 1 kroon (1992;1993;1995;1998;2000;2001;2003;2006;2008)
  • 5 krooni (1993;1994).

5 senti coins are no longer being issued but are still legal tender. The cupronickel 1 kroon coins from 1992, 1993 & 1995 are no longer legal tender.[6] The 5 krooni coins were commemorative pieces and are rarely seen in circulation.

Banknotes

First kroon

In 1927, before the kroon was officially introduced, 100 marka banknotes circulated with an "ÜKS KROON" (1 kroon) overprint. Eesti Pank introduced 10 krooni notes in 1928, followed by 5 and 50 krooni in 1929, 20 krooni in 1932 and 100 krooni in 1935.

Second kroon

500 krooni

In 1992, banknotes were introduced in denominations of 1, 2, 5, 10, 25, 100 and 500 krooni. Some of the 5, 10, 25, 100 and 500 krooni notes were dated 1991. In 1994, a 50 krooni note was introduced.

Notes in circulation:

  • 1 kroon (1992),
  • 2 krooni (1992;2006;2007),
  • 5 krooni (1991;1992;1994),
  • 10 krooni (1991;1992;1994;2006;2007),
  • 25 krooni (1991;1992;2002;2007),
  • 50 krooni (1994),
  • 100 krooni (1991;1992;1994;1999;2007),
  • 500 krooni (1991;1994;1996;2000;2007).

The 1 kroon notes are no longer issued. The 50 krooni notes are not very popular in Estonia and are not seen in everyday circulation very often.

Current Series
Image Value Main Colour Description
Obverse Reverse Obverse Reverse
EEK-1kroon-front.jpg EEK-1kroon-rear.jpg 1 kroon Orange/Brown Kristjan Raud Toompea Castle
EEK-2krooni-front.jpg EEK-2krooni-rear.jpg 2 krooni Grayish blue Karl Ernst von Baer University of Tartu
EEK-5krooni-front.jpg EEK-5krooni-rear.jpg 5 krooni Orange Paul Keres Narva castle & Ivangorod fortress
EEK-10krooni-front.jpg EEK-10krooni-rear.jpg 10 krooni Red Jakob Hurt Tamme-Lauri oak tree
EEK-25krooni-front.jpg EEK-25krooni-rear.jpg 25 krooni Green Anton Hansen Tammsaare Vargamäe village
EEK-50krooni-front.jpg EEK-50krooni-rear.jpg 50 krooni Light green Rudolf Tobias Estonia Theatre
EEK-100krooni-front.jpg EEK-100krooni-rear.jpg 100 krooni Light blue Lydia Koidula Baltic Klint
EEK-500krooni-front.jpg EEK-500krooni-rear.jpg 500 krooni Purple Carl Robert Jakobson Barn swallow
Current EEK exchange rates
From Google Finance: AUD CAD CHF EUR GBP HKD JPY USD RUB
From Yahoo! Finance: AUD CAD CHF EUR GBP HKD JPY USD RUB
From XE.com: AUD CAD CHF EUR GBP HKD JPY USD RUB
From OANDA.com: AUD CAD CHF EUR GBP HKD JPY USD RUB

See also

References


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