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Euro convergence criteria
The euro convergence criteria (also known as the Maastricht criteria) are the criteria European Union member states are required to meet to enter the third stage of the Economic and Monetary Union (EMU) and adopt the euro as their currency. The four main criteria, which actually comprise five criteria as the "fiscal criterion" consists of both a "debt criterion" and a "deficit criterion", are based on Article 140 (ex article 121.1) of the Treaty on the Functioning of the European Union.
Full EMU membership is only open to EU member states. However, the European microstates of Andorra, Monaco, San Marino and the Vatican City, which are not members of the EU, have signed monetary agreements with the EU which allow them officially to adopt the euro and issue their own variant of euro coins. These states had all previously used one of the eurozone currencies replaced by the euro, or a currency pegged to one of them. These states are not members of the eurozone and do not get a seat in the European Central Bank (ECB) or the Eurogroup.
As part of the EU treaty, all of the EU Member States are obliged to adhere to the Stability and Growth Pact (SGP), which serves as a framework to ensure price stability and fiscal responsibility, has adopted identical limits for governments budget deficit and debt as the convergence criteria. As several countries did not exercise a sufficient level of fiscal responsibility during the first 10 years of the euro's lifetime, two major SGP reforms were subsequently introduced. The first reform was the Sixpack which entered into force in December 2011, and it was followed in January 2013 by the even more ambitious Fiscal Compact, which was signed by 25 out of the then-27 EU member states.
Countries are expected to participate in the second version of the European Exchange Rate Mechanism (ERM-II) for two years before joining the Euro.
The Maastricht Treaty, which was signed in February 1992 and entered into force on 1 November 1993, outlined the five convergence criteria EU member states are required to comply with to adopt the new currency, the euro. The purpose of setting the criteria was to achieve price stability within the eurozone and ensure it wasn't negatively impacted when new member states accede. The framework of the five criteria was outlined by article 109j.1 of the Maastricht Treaty, and the attached Protocol on the Convergence Criteria and Protocol on the Excessive Deficit Procedure. The original treaty article was later renumbered to become article 121.1 of the Amsterdam Treaty, and later renumbered again to Article 140 of the Treaty on the Functioning of the European Union. Aside from the renumbering, no significant change have happened to the content of the "convergence criteria article" and its referred to Protocol on the Convergence Criteria and Protocol on the Excessive Deficit Procedure. The precise definition and method of measuring compliance was subsequently further developed by the EMI (later known as ECB) in their first three reports published in April 1995, November 1995 and November 1996. The full definition of the five criteria are summarised below.
The ECB publishes a Convergence Report at least every two years to check how well the EU members aspiring for euro adoption comply with the criteria. The first full convergence report was published in November 1996, and concluded only 3 out of 15 EU member states (Denmark, Luxembourg and Ireland) were completely compliant with the criteria at that point in time. As a majority of states were not in compliance, the Council decided to delay the introduction of the euro by two years to 1 January 1999. In March 1998 a more positive second convergence report concluded that 11 out of 12 applying countries were prepared for the electronic introduction of the euro on 1 January 1999, with only Greece failing to qualify by the deadline. Subsequent convergence reports have so far resulted in an additional 9 EU member states complying with all criteria and adopting the euro (Greece, Slovenia, Cyprus, Malta, Slovakia, Estonia, Latvia, Lithuania and Croatia). The latest convergence report was published in June 2014, and checked for compliance in the reference year from May 2012 – April 2014, where Lithuania managed to fully comply – thus becoming the next 19th eurozone member. As the reference values for HICP inflation and long-term interest rates change on a monthly basis, any member state with a euro derogation has the right to ask the ECB for an updated compliance check, whenever they believe they have met all both economic and legal convergence criteria. For example, Latvia asked for such an extraordinary compliance check in March 2013 (outside the regular 2-year interval for automatic assessments).
In 2009, the authors of a confidential International Monetary Fund (IMF) report suggested that due to the Great Recession, the EU Council should consider granting new EU member states which are having difficulty complying with all five convergence criteria the option to "partially adopt" the euro, along the lines of the monetary agreements signed with the European microstates outside the EU. These states would gain the right to adopt the euro and issue a national variant of euro coins, but would not get a seat in ECB or the Eurogroup until they met all the convergence criteria. However, the EU has not made use of this alternative accession process.
The compliance check above was conducted in June 2014, with the HICP and interest rate reference values specifically applying for the last assessment month with available data (April 2014). As reference values for HICP and interest rates are subject for monthly changes, any EU member state with a euro derogation, has the right to ask for a renewed compliance check at any time during the year. For this potential extra assessment, the table below feature Eurostat's monthly recalculation of criteria values being used in the calculation process to determine the upper limit for HICP inflation and long-term interest rates, where a certain fixed buffer value is added to the moving yearly average for the three EU Member States with the lowest HICP figures (ignoring states classified as "outliers").
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Euro convergence criteria
The euro convergence criteria (also known as the Maastricht criteria) are the criteria European Union member states are required to meet to enter the third stage of the Economic and Monetary Union (EMU) and adopt the euro as their currency. The four main criteria, which actually comprise five criteria as the "fiscal criterion" consists of both a "debt criterion" and a "deficit criterion", are based on Article 140 (ex article 121.1) of the Treaty on the Functioning of the European Union.
Full EMU membership is only open to EU member states. However, the European microstates of Andorra, Monaco, San Marino and the Vatican City, which are not members of the EU, have signed monetary agreements with the EU which allow them officially to adopt the euro and issue their own variant of euro coins. These states had all previously used one of the eurozone currencies replaced by the euro, or a currency pegged to one of them. These states are not members of the eurozone and do not get a seat in the European Central Bank (ECB) or the Eurogroup.
As part of the EU treaty, all of the EU Member States are obliged to adhere to the Stability and Growth Pact (SGP), which serves as a framework to ensure price stability and fiscal responsibility, has adopted identical limits for governments budget deficit and debt as the convergence criteria. As several countries did not exercise a sufficient level of fiscal responsibility during the first 10 years of the euro's lifetime, two major SGP reforms were subsequently introduced. The first reform was the Sixpack which entered into force in December 2011, and it was followed in January 2013 by the even more ambitious Fiscal Compact, which was signed by 25 out of the then-27 EU member states.
Countries are expected to participate in the second version of the European Exchange Rate Mechanism (ERM-II) for two years before joining the Euro.
The Maastricht Treaty, which was signed in February 1992 and entered into force on 1 November 1993, outlined the five convergence criteria EU member states are required to comply with to adopt the new currency, the euro. The purpose of setting the criteria was to achieve price stability within the eurozone and ensure it wasn't negatively impacted when new member states accede. The framework of the five criteria was outlined by article 109j.1 of the Maastricht Treaty, and the attached Protocol on the Convergence Criteria and Protocol on the Excessive Deficit Procedure. The original treaty article was later renumbered to become article 121.1 of the Amsterdam Treaty, and later renumbered again to Article 140 of the Treaty on the Functioning of the European Union. Aside from the renumbering, no significant change have happened to the content of the "convergence criteria article" and its referred to Protocol on the Convergence Criteria and Protocol on the Excessive Deficit Procedure. The precise definition and method of measuring compliance was subsequently further developed by the EMI (later known as ECB) in their first three reports published in April 1995, November 1995 and November 1996. The full definition of the five criteria are summarised below.
The ECB publishes a Convergence Report at least every two years to check how well the EU members aspiring for euro adoption comply with the criteria. The first full convergence report was published in November 1996, and concluded only 3 out of 15 EU member states (Denmark, Luxembourg and Ireland) were completely compliant with the criteria at that point in time. As a majority of states were not in compliance, the Council decided to delay the introduction of the euro by two years to 1 January 1999. In March 1998 a more positive second convergence report concluded that 11 out of 12 applying countries were prepared for the electronic introduction of the euro on 1 January 1999, with only Greece failing to qualify by the deadline. Subsequent convergence reports have so far resulted in an additional 9 EU member states complying with all criteria and adopting the euro (Greece, Slovenia, Cyprus, Malta, Slovakia, Estonia, Latvia, Lithuania and Croatia). The latest convergence report was published in June 2014, and checked for compliance in the reference year from May 2012 – April 2014, where Lithuania managed to fully comply – thus becoming the next 19th eurozone member. As the reference values for HICP inflation and long-term interest rates change on a monthly basis, any member state with a euro derogation has the right to ask the ECB for an updated compliance check, whenever they believe they have met all both economic and legal convergence criteria. For example, Latvia asked for such an extraordinary compliance check in March 2013 (outside the regular 2-year interval for automatic assessments).
In 2009, the authors of a confidential International Monetary Fund (IMF) report suggested that due to the Great Recession, the EU Council should consider granting new EU member states which are having difficulty complying with all five convergence criteria the option to "partially adopt" the euro, along the lines of the monetary agreements signed with the European microstates outside the EU. These states would gain the right to adopt the euro and issue a national variant of euro coins, but would not get a seat in ECB or the Eurogroup until they met all the convergence criteria. However, the EU has not made use of this alternative accession process.
The compliance check above was conducted in June 2014, with the HICP and interest rate reference values specifically applying for the last assessment month with available data (April 2014). As reference values for HICP and interest rates are subject for monthly changes, any EU member state with a euro derogation, has the right to ask for a renewed compliance check at any time during the year. For this potential extra assessment, the table below feature Eurostat's monthly recalculation of criteria values being used in the calculation process to determine the upper limit for HICP inflation and long-term interest rates, where a certain fixed buffer value is added to the moving yearly average for the three EU Member States with the lowest HICP figures (ignoring states classified as "outliers").