A vibrant recovery has marked Estonia’s first year in the euro area, albeit amid nascent tensions. The economy’s strong rebound has been grounded in a proven track record of prudent macroeconomic policies, which also underpinned a successful euro adoption and a recent credit rating upgrade. Moreover, Estonia earned the distinction of being the only EU country with a fiscal surplus in 2010, a feat likely to be repeated in 2011. But coming on the heels of one of the EU’s deepest economic contractions, the recovery has exposed underlying difficulties. Price pressures have emerged (still mainly imported) and unemployment, while declining, remains high with long-term joblessness on the rise.