The European Union grows as candidate countries meet the conditions for entry and accede to the Union – this process is known as enlargement. Similarly, the euro area is enlarging as non-euro-area EU Member States meet the conditions for entry and adopt the euro.
The euro area includes those EU Member States that have adopted the single currency. But the euro area is not static – under the Treaty, all EU Member States have to join the euro area once the necessary conditions are fulfilled, except Denmark and the United Kingdom which have negotiated an 'opt-out' clause that allows them to remain outside the euro area.
Sweden is also expected to join the euro area in the future, but has not yet qualified.
An accession country that plans to join the Union must align many aspects of its society – social, economic and political – with those of EU Member States. Much of this alignment is aimed at ensuring that an accession country can operate successfully within the Union’s single market for goods, services, capital and labour – accession is a process of integration.
Adopting the euro and joining the euro area takes integration a step further – it is a process of much closer economic integration with the other euro-area Member States. Adopting the euro also demands extensive preparations; in particular it requires economic and legal convergence.
Before a Member State can adopt the euro, it must fulfil certain economic and legal criteria. The economic ‘convergence criteria’ are designed to ensure that a Member State's economy is sufficiently prepared for adoption of the single currency and can integrate smoothly into the monetary regime of the euro area. Legal convergence requires that national legislation, in particular the national central bank and monetary issues, is compatible with the Treaty.
Replacing a national currency with the euro is a major operation that demands many practical preparations, for instance ensuring that the national currency is withdrawn quickly, that prices of goods are properly converted and displayed, and that people are kept well informed. All these preparations rely on the particular ‘changeover scenario’ that a euro-area candidate country adopts. Significant experience was gained when the euro was first launched, which benefits euro-area candidate countries today. The European Commission, in particular, offers much help and advice to euro-area candidate countries.
Some non-euro-area countries are already members of the Exchange Rate Mechanism (ERM II). ERM II is a system designed to avoid excessive exchange-rate fluctuations between the participating currencies and the euro that might disrupt economic stability within the single market. Participation is voluntary, but it is also one of the 'convergence criteria' – euro-area candidate countries must participate, without severe tensions, for at least two years before they can qualify to adopt the euro.