30.05.2012 - On 30 May 2012, the European Commission adopted a report assessing progress with convergence towards the requirements of the Economic and Monetary Union (EMU) in eight Member States - Bulgaria, the Czech Republic, Latvia, Lithuania, Hungary, Poland, Romania and Sweden.
The report concludes that none of the countries examined fulfils all conditions for adopting the euro at this stage, and that there should therefore be no change in their status of 'Member State with a derogation'.
Vice-President Olli Rehn, responsible for Economic and Monetary Affairs and the euro, said: “The Convergence Report issued today shows that the Member States examined are making some progress towards euro adoption, albeit at different paces. I encourage them to pursue policies that will help them to achieve a high degree of sustainable convergence. Economic convergence allows countries to benefit optimally from the advantages of the single currency and to sail more smoothly in a difficult economic environment. This is clearly in the interest of both the prospective and existing members of the euro area."
According to the Treaty, the Commission reports every two years on the subject. The criteria for euro adoption consist of four stability-oriented economic conditions regarding price stability, public finances, exchange rate stability and the convergence of long-term interest rates, which need to be fulfilled in a sustainable manner. In addition, the Treaty requires that other factors relevant to economic integration and convergence – including external balance and financial and product market integration – should be taken into account in the assessment. The national legislation on monetary affairs must also be in line with the EU Treaty.
The present convergence assessment takes place within the broader context of the reform of EMU governance undertaken over the past two years. The key innovations in this area, including the strengthened Stability and Growth Pact and the enhanced surveillance of macroeconomic imbalances, have contributed to the reinforcement of the assessment of each Member State's convergence process and its sustainability.
The convergence criteria comprise:
Two Member States, Bulgaria and Sweden, fulfil the price stability criterion, which requires a sustainable price performance and a 12-month average rate of inflation that does not exceed by more than 1.5 percentage points that of the, at most, three best performing EU Member States in terms of price stability (the inflation reference value was 3.1 percent in March 2012).
The criterion on the government budgetary position is met when a country is not the subject of an excessive deficit procedure (under Article 126 of the Treaty). Of the eight countries assessed, Sweden fulfils the fiscal criterion. Bulgaria will also fulfil the fiscal criterion if and when the Council decides to abrogate its excessive deficit procedure. All other Member States examined –the Czech Republic, Hungary, Latvia, Lithuania, Poland and Romania – do not fulfil the criterion on public finances.
The Treaty refers to the exchange rate criterion as the observance of the normal fluctuation margins of the exchange rate mechanism (ERM) of the European Monetary System, for at least two years without severe tensions and in particular without devaluing against the euro. Of the eight countries examined, Lithuania and Latvia have participated in ERM II over this period. Both Member States fulfil the exchange rate criterion.
Of the eight countries assessed, only Romania and Hungary do not meet the interest rate criterion, which requires average long-term interest rates to be not more than 2 percentage points above that of the best performers in terms of price stability in the year before the examination. Bulgaria, the Czech Republic, Latvia, Lithuania, Poland and Sweden had average long-term interest rates at or below the reference value (which was 5.8 percent in March 2012).
The legal examination includes inter alia an assessment of compatibility between a Member State’s legislation, including the statutes of its national central bank, and Article 130 and 131 of the Treaty and the Statute of the European System of Central Banks (ESCB) and of the European Central Bank. At the time of the drafting of the report, legal compatibility requirements had been met only by Lithuania, though there remains one imperfection regarding central bank independence.