ABSTRACT
The European Union Single Market, with removal of capital controls, created pressure for the establishment of a common currency in Europe—the euro—and the formation of the euro area. Estonia was the first of the Baltic States to join the euro area in 2011; Latvia subsequently joined in 2014 and Lithuania in 2015. The only Nordic country to adopt the euro was Finland. Sweden and Denmark rejected euro area membership in referendums. The Baltic’s are all North Atlantic Treaty Organization (NATO) member states as indeed are Denmark, Iceland and Norway, while Finland and Sweden remain outside NATO. The governments of the Baltic States joined the euro area without consulting their citizens via referendums. The fixed exchange rate policy has arguably slowed their economic recovery in the aftermath of the economic crisis, but security concerns and the wish to create irreversible links with Western Europe presumably also weighted high in the minds of their governments.
