* Estonia becomes 17th euro zone member
* Brushes off euro crisis, sees benefits from entry
* Bigger eastern European states more cautious
(Adds central bank quotes)
By David Mardiste
TALLINN, Jan 1 (Reuters) - Estonia switched smoothly to the
euro on Saturday, brushing off worries about a crisis in the
currency club which is likely to put off bigger eastern European
nations from joining for up to a decade.
The Baltic state of 1.3 million became the 17th euro zone
country at midnight and was the first former Soviet state to
adopt the euro, capping 20 years of integration with the West.
Estonia sees the change as marking the end of its struggles
since a 2009 recession lopped 14 percent off its output. It
hopes to entice investors by removing fears of devaluation and
make borrowing more secure for its people, many of whose
mortgages are already in euros from top Nordic banks.
"It is a small step for the euro zone and a big step for
Estonia," said Prime Minister Andrus Ansip, who was the first to
take euros out of a specially installed cash machine.
"We are proud to be a euro zone member state."
The central bank, whose governor will now help decide euro
zone interest rates, said the changeover was smooth.
"The money reached ATMs and retail stores in time at the end
of the year," said deputy central bank head Rein Minka.
Estonia will be the currency club's poorest member but its
debt and deficit levels -- the cause of the crisis for some euro
zone members -- are among the lowest in the bloc.
In economic terms, the single currency bloc will barely
notice the addition -- Estonia's GDP is 0.2 percent of the euro
zone's 8.9 trillion euros.
EASTERN SCEPTICS
Poland, Hungary and other eastern European EU states are
sceptical about joining the euro. They have all promised to join
one day but want to see how the debt problems of Ireland,
Greece, Spain and Portugal are solved.
They also fear that losing flexible exchange rates will make
them less competitive and less able to fight financial crisis.
Polish central bank governor Marek Belka told newspaper
Super Express Poland would join when there was "order" in the
euro zone. "In the euro zone there are dramatic things
happening, so why rush?" he said.
Czech Prime Minister Petr Necas has said the euro would not
be to the country's advantage for a long time. Economists say
the larger eastern EU nations may now not join before 2019-2020.
German Chancellor Angela Merkel and French President Nicolas
Sarkozy used New Year addresses to show support for the euro.
"The euro is the foundation of our prosperity," said Merkel.
"Germany needs Europe and our common currency ... We Germans
assume our responsibility, even when it is sometimes very hard."
With a similar history of Nazi and Soviet occupation, all
three Baltic states made joining Western structures their goals
and joined NATO and the European Union in 2004.
Latvia and Lithuania hope to adopt the euro in 2014 and have
had their currencies pegged to the euro for years.
The kroon will be converted at the rate of 15.6466 at which
the currency was pegged to the euro. They will circulate
together as legal tender for two weeks.
(Additional reporting by Patrick Lannin in Stockholm; Editing
by Patrick Graham, Lin Noueihed and Padraic Cassidy)
