Euro convergence criteria

Euro convergence criteria


Euro adoption by EU member states v · d · e
Currency Code Central rate Official
target date
Expected
entry date
United Kingdom British pound

Gibraltar Gibraltar pound

GBP

GIP

Opt-out [nb 1] Opt-out [nb 1]
Bulgaria Bulgarian lev BGN 1.95583[nb 2] [nb 3][1] 2015 [2]
Czech Republic Czech koruna CZK [nb 3][1] 2017 [3]
Denmark
Greenland Danish krone
Faroe Islands
DKK 7.46038 Opt-out[nb 4] Opt-out [nb 4]
Hungary Hungarian forint HUF [nb 3][1] 2014 [3]
Latvia Latvian lats LVL 0.702804 1 January 2014 [4] 2014 [5]
Lithuania Lithuanian litas LTL 3.45280 [nb 3][1] 2014 [6]
Poland Polish złoty PLN [nb 3][1] 2015 [7][8]
Romania Romanian leu RON 2015[9] 2015 [9]
Sweden Swedish krona SEK [nb 5] [nb 3]

The euro convergence criteria (also known as the Maastricht criteria) are the criteria for European Union member states to enter the third stage of European Economic and Monetary Union (EMU) and adopt the euro as their currency. The four main criteria are based on Article 121(1) of the European Community Treaty.

In 2009 the International Monetary Fund floated a suggestion that countries should be allowed to "partially adopt" the euro - adopting the currency but not qualifying for a seat on the European Central Bank (ECB).[10] Monaco, San Marino and the Vatican City State are in a similar situation: they have adopted the euro and mint their own coins, but they do not have ECB seats.

For eurozone members, there is the Stability and Growth Pact which has similar requirements for budget deficit and debt. However some eurozone countries have without action from the EU severely violated these criteria (e.g. Greece 10.5 % deficit in 2010[11]), which has resulted in european sovereign debt crisis.

Contents

Criteria

The Maastricht Treaty established the Maastricht criteria and the EU single market which ensures the free movement of goods, capital, people and services. (2003 German stamp commemorating the tenth anniversary of the enforcement of the Maastricht Treaty in 1993)

1. Inflation rates: No more than 1.5 percentage points higher than the average of the three best performing member states of the EU.

2. Government finance:

Annual government deficit:
The ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding fiscal year. If not it is at least required to reach a level close to 3%. Only exceptional and temporary excesses would be granted for exceptional cases.
Government debt:
The ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year. Even if the target cannot be achieved due to the specific conditions, the ratio must have sufficiently diminished and must be approaching the reference value at a satisfactory pace.

3. Exchange rate: Applicant countries should have joined the exchange-rate mechanism (ERM II) under the European Monetary System (EMS) for two consecutive years and should not have devalued its currency during the period.

4. Long-term interest rates: The nominal long-term interest rate must not be more than 2 percentage points higher than in the three lowest inflation member states.

The purpose of setting the criteria is to maintain the price stability within the Eurozone even with the inclusion of new member states.

Fulfillment of criteria

Country[nb 6] Inflation rate[nb 7] (HICP)[12] annual government deficit to GDP gross government debt to GDP ERM II membership Long-term interest rate [nb 8]
Reference value[13] max. 1% max. 3% max. 60% min. 2 years max. 6%
EU Member States
 Bulgaria 1.7% 2.8% 17.4% 6.9%
 Czech Republic 0.3% 5.7% 39.8% 4.7%
 Denmark 2.1% −3.9%[nb 9] 41.6% since 1 January 1999 3.4%
 Hungary 4.8% 4.1% 78.9% 8.4%
 Latvia 0.1% 8.6% 48.5% since 2 May 2005 12.7%
 Lithuania 2.0% 8.4% 38.6% since 28 June 2004 12.1%
 Poland 3.9% 7.3% 53.9% 6.1%
 Romania 5.0% 8.0% 30.5% 9.4%
 Sweden 2.1% 2.1% 42.6% 3.3%
 United Kingdom 3.0% 7.1% 68.1% 3.98%
non-EU Member States
 Albania 3.3%[14] 0.04% 55.9%
 Bosnia and Herzegovina 1.5% 0.35% 34%
 Croatia 1.8%[15] 2.2% 40.8%
 Iceland 1.8%[16] −5.19%[nb 9] 103%
 Macedonia 3.2% 0.6% 39.5%
 Montenegro 0.7%[17] 38%
 Norway[18] 2%[19] −17.27%[nb 9] 53%
 Serbia 10.3%[20] 0.48% 37%
 Switzerland[18] 0.9% −1.0%[nb 9][21] 41.3%[22] 1.46%[23]
 Turkey 5.08% −1.3%[nb 9] 38.8%
  criterion fulfilled

See also

Notes

  1. ^ a b The UK negotiated an opt-out from the Maastricht Treaty and is not obliged to join the euro.
  2. ^ As of January 2009, Bulgaria is not officially part of ERM II. But as the lev was originally pegged to the German mark, it is currently pegged to the euro at the rate shown.
  3. ^ a b c d e f There is no official adoption date for this country yet.
  4. ^ a b Denmark negotiated an opt-out from the Maastricht Treaty and is not obliged to join the euro. However, Denmark will hold a referendum on the opt-outs by 2011 and a target date will be announced if the referendum passes.
  5. ^ Sweden, while obliged to join the euro under its Treaty of Accession, has chosen not to join ERM II, meaning that Sweden fails the convergence criteria. Swedish political parties have pledged not to join without a referendum.
  6. ^ Current EU member states that have not yet adopted the Euro, candidates, official potential candidates and selected countries with substantial links to the EU.
  7. ^ No more than 1.5% higher than the three best-performing EU member states.
  8. ^ Ten-year government bonds. No more than 2% higher than the 3 best-performing EU member states.
  9. ^ a b c d e Negative deficit value means surplus.

References

  1. ^ a b c d e "Eighth Report on the practical preparations for the future enlargement of the euro area". European Commission. http://ec.europa.eu/economy_finance/publications/publication13582_en.pdf. Retrieved 2009-01-07. 
  2. ^ http://bnr.bg/sites/en/Lifestyle/BGEU/Pages/2607BulgariaputsoffEurozonemembershipfor2015.aspx
  3. ^ a b "Euros in the wallets of the Slovaks, but who will be next?" (Press release). Sparkasse.at. 5 August 2008. https://www.sparkasse.at/sPortal/sportal.portal;jsessionid=qhHSJ0FRvFSBNdNpZkKJVhvhHLJD4v1T2d1BG3Gcyj82vJYTDKm3!76983841?_nfpb=true&_windowLabel=LABEL_MAIN&_urlType=action&LABEL_MAIN_sh=181fe8bb390eeff395532e7956f3e368&LABEL_MAIN_action=content.main&LABEL_MAIN_OVERRULEREFRESHBACK=true&LABEL_MAIN_event=changeMain&LABEL_MAIN_chronicleId=%2Febgroup_en_0196%2FChannels%2FPress%2F2008%2F2.QU%2Feb_pi_en_20080508_next_main_Images.akp&LABEL_MAIN_zz=41235.36447435065&LABEL_MAIN_pc=1&_pageLabel=GRID02&cci=09002ee2805dab70&desk=ebgroup_en_0196&navigationId=012130649753268001119092&. Retrieved 10 January 2009. 
  4. ^ http://www.baltic-course.com/eng/baltic_states/?doc=24771
  5. ^ FEATURE - Crisis, not Greece, makes euro hopefuls cautious, Reuters, 2010-01-18
  6. ^ FEATURE - Crisis, not Greece, makes euro hopefuls cautious, Reuters, 2010-01-18
  7. ^ "Polish PM says 2015 realistic date for euro entry". ForexYard. http://www.forexyard.com/en/reuters_inner.tpl?action=2009-12-11T133216Z_01_GEE5BA1EK_RTRIDST_0_POLAND-EURO-UPDATE-1. Retrieved 2009-12-22. 
  8. ^ "Poland delays adoption of the Euro until 2015". MercoPress. http://en.mercopress.com/2009/12/15/poland-delays-adoption-of-the-euro-until-2015. Retrieved 2009-12-22. 
  9. ^ a b "Raport privind situația macroeconomică" (PDF). Government of Romania. http://www.cdep.ro/proiecte/2009/700/20/1/raport2010.pdf. Retrieved 31 December 2009. 
  10. ^ Lithuanian PM keen on fast-track euro idea, The Guardian, 2009-04-07.
  11. ^ Economy of Greece
  12. ^ European Central Bank Convergence Report May 2010
  13. ^ Values from May 2010 report for Bulgaria, the Czech Republic, Latvia, Lithuania, Hungary, Poland, Romania, and Sweden.. To be updated every 2 years.
  14. ^ http://www.bankofalbania.org/web/Welcome_to_Bank_of_Albania_webpage_5186_2.php?kc=0,0,0,0,0
  15. ^ http://www.hnb.hr/eindex.htm
  16. ^ http://www.sedlabanki.is/?pageid=194
  17. ^ http://www.cb-mn.org/
  18. ^ a b Norway & Switzerland have active political debates about joining the EU & adopting the euro & are thus included.
  19. ^ http://www.ssb.no/english/subjects/08/02/10/kpi_en/
  20. ^ http://www.nbs.rs/export/internet/english/
  21. ^ http://www.bfs.admin.ch/bfs/portal/fr/index/themen/18/01/key/02.html (2008)
  22. ^ http://www.bfs.admin.ch/bfs/portal/fr/index/themen/18/03/blank/key/schulden.html (2008)
  23. ^ http://www.snb.ch/en/iabout/stat/statpub/zidea/id/current_interest_exchange_rates/2

External links


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