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December 2004

Background

According to the Treaty, and disregarding an opt-out status, a member State is either a Member State that has adopted the euro or a member state with a derogation. A member state with a derogation is, according to article 122 of the Treaty, excluded from the rights and obligations within the European System of Central Banks (ESCB). This implies, amongst other things, that the member state in question will not participate in the Single Currency since the criteria for being able to do so have not yet been fulfilled.

Candidate countries will participate in Economic and Monetary Union (EMU) from the date of their accession whilst not adopting the euro at the outset. The Candidate countries cannot adopt the euro upon accession because the Treaty requires that an assessment of the sustainability of the government's financial position be performed before accession. The other reason is that the candidate countries will not have participated in the Exchange Rate Mechanism, which is not open to the candidate countries prior to accession. Only after participation in the Exchange Rate Mechanism (for at least 2 years), could a decision be taken on the candidate countries fulfilment of the necessary conditions for the adoption of the euro as referred to in the Treaty.

The participation in EMU presupposes the adoption of the Single market acquis by the candidate countries, in particular of the acquis on free movement of capital (chapter 4), as was the case for present member states.

The opt-out status being disregarded for the candidate countries, no transitional periods or special arrangements are therefore permitted, nor have they been requested by any of the countries with which negotiations have been carried out until now.

The acquis in this area can be divided in:

  • Elements that must be implemented in legislation prior to the date of accession, including:
    1. Prohibition of direct financing of the public sector: this concerns the prohibition of overdraft or any other type of credit facilities conceded to EC institutions, and of direct acquisition of public debt instruments by the European Central Bank or the National Central Bank. The rationale for this is that it ensures fiscal discipline, and that it is a basic element of Central Bank independence.
    2. Prohibition of privileged access of the public sector to financial institutions: this concerns the prohibition of any measure not based on prudential considerations establishing privileged access of EC bodies to financial institutions. The rationale for this is that it complements the prohibition of direct financing, it reinforces freedom of capital movements and prevents distortion of market economy principles.
    3. Independence of Central Bank: absence of
      any external institution or body able to give instructions,
      approve, censor, be consulted, or participate in Central Bank
      decisions. National Central Banks should have institutional,
      personal and financial independence.
  • Elements that only have to complied with from the date of accession.
    These include exchange rate and economic policies, co-ordination of economic policies with member states through participation in Community procedures and adherence to the provisions of the Stability and Growth Pact and of the statutes of the ESCB.

State of Play

During the second half of 1999, the chapter was closed for the countries that started negotiations in 1998 (ie Cyprus, Czech Republic, Estonia, Hungary, Poland and Slovenia); the chapter was closed for Malta and Latvia and for Slovakia and Lithuania during the second half of 2000 and the first half of 2001, respectively.

Negotiations were concluded with Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia in December 2002.

It was opened with Bulgaria in March 2002 and provisionally closed in April 2002. The chapter was opened and provisionally closed for Romania in June 2002. Negotiations were concluded with Bulgaria and Romania in December 2004.

Compliance with the acquis

The latest assessment of each candidate country’s compliance with the acquis under this chapter heading, can be found in the 2004 Regular Reports and in the Comprehensive Monitoring Reports, available at:
http://ec.europa.eu/enlargement/archives/key_documents/reports_2004_en.htm.

Country by country

Bulgaria

  • Chapter opened: March 2002
  • Status: closed in December 2004 (provisionally closed in April 2002)
  • Transitional arrangements: none

Cyprus (New Member State)

  • Chapter opened: first half of 1999
  • Status: Closed December 2002 (provisionally closed at end of 1999
  • Transitional arrangements: none

Czech Republic (New Member State)

  • Chapter opened: first half of 1999
  • Status: Closed December 2002 (provisionally closed at end of 1999
  • Transitional arrangements: none

Estonia (New Member State)

  • Chapter opened: first half of 1999
  • Status: Closed December 2002 (provisionally closed at end of 1999
  • Transitional arrangements: none

Hungary (New Member State)

  • Chapter opened: first half of 1999
  • Status: Closed December 2002 (provisionally closed at end of 1999
  • Transitional arrangements: none

Latvia (New Member State)

  • Chapter opened: second half of 2000
  • Status: Closed December 2002 (provisionally closed at end of 2000
  • Transitional arrangements: none

Lithuania (New Member State)

  • Chapter opened: first half of 2001
  • Status: Closed December 2002 (provisionally closed in first half of 2001
  • Transitional arrangements: none

Malta (New Member State)

  • Chapter opened: second half of 2000
  • Status: Closed December 2002 (provisionally closed at end of 2000
  • Transitional arrangements: none

Poland (New Member State)

  • Chapter opened: first half of 1999
  • Status: Closed December 2002 (provisionally closed at end of 1999
  • Transitional arrangements: none

Romania

  • Chapter opened: June 2002
  • Status: closed in December 2004 (provisionally closed in June 2002)
  • Transitional arrangements: none

Slovakia (New Member State)

  • Chapter opened: first half of 2001
  • Status: Closed December 2002 (provisionally closed in first half of 2001
  • Transitional arrangements: none

Slovenia (New Member State)

  • Chapter opened: first half of 1999
  • Status: Closed December 2002 (provisionally closed at end of 1999
  • Transitional arrangements: none
- updated: 17/12/2004
 
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