Finance ministers from the 27 European Union nations have approved Estonia's adoption of the euro currency on January 1, 2011, according to official sources.
Estonia will become the 17th country to switch to the shared currency, diplomatic and official sources said, after ministers accepted during talks in Luxembourg a European Commission recommendation saying Tallinn had met strict entry criteria.
These include keeping national debt and deficits under control as well as inflation, with limited fluctuations on foreign exchange markets and on interest rate levels.
According to the latest EU estimates, Estonia will post a public deficit amounting to 2.4% of gross domestic product this year and debt of 9.6% of GDP - levels which most of Europe can only dream of.
However, the European Central Bank has warned Estonia that it could struggle to keep inflation under control once it joins the euro zone.
Estonia, with its 1.3 million inhabitants, had initially hoped to join the euro club in 2007 but was prevented from doing so by high inflation rates at the time.
Adjustment efforts played their part in causing its economy to contract by a whopping 14.1% last year.
The country shifted rapidly from a communist command economy to the free market after breaking from the crumbling Soviet bloc in 1991 and its economy began to grow quickly, especially after joining the EU in 2004.
Hit by the global crisis in 2008, Estonia's government slashed public spending to confront the crisis and maintain its drive to switch from the national currency, the kroon, to the euro.
The Estonian kroon was created in 1992 to replace the Soviet ruble. First pegged to the German mark, it was then linked to the euro in 2002 and its rate has not changed since.
The euro is currently trading at €1.1932 and 82.6 pence sterling.
