Euro convergence criteria

The euro convergence criteria (also known as the Maastricht criteria) are the criteria which 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 due to their small size are not members of the EU, have signed monetary agreements with 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. Due to the fact that 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 recently 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.

Criteria

The Maastricht Treaty, which was signed in February 1992 and entered into force on 1 November 1993, outlined the 5 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,[1] 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.[2][3][4] The full definition of the five criteria are summarised below.

  1. HICP inflation (12-months average of yearly rates): Shall not exceed the HICP reference value, which is calculated by the end of the last month with available data as the unweighted arithmetic average of the similar HICP inflation rates in the 3 EU member states with the lowest HICP inflation plus 1.5 percentage points. However, EU member states with a HICP rate significantly below the eurozone average (and pre 1999 below "comparable rates in other Member States"), do not qualify as a benchmark country for the reference value and will be ignored, if it can be established its price developments have been strongly affected by exceptional factors (i.e. severe enforced wage cuts, exceptional developments in energy/food/currency markets, or a strong recession).[5] In example, at the April 2014 assessment: Greece, Bulgaria and Cyprus with HICP values respectively 2.2, 1.8 and 1.4 percentage points below the eurozone average, were all found to have suffered from exceptional factors, and hence concluded to be outliers, causing the reference limit instead to be calculated based on the HICP values from the three states with the 4th to 6th lowest HICP values in EU.[6]
  2. Government budget deficit: The ratio of the annual general government deficit relative to gross domestic product (GDP) at market prices, must not exceed 3% at the end of the preceding fiscal year (based on notified measured data) and neither for any of the two subsequent years (based on the European Commission's published forecast data). Deficits being "slightly above the limit" (previously outlined by the evaluation practice to mean deficits in the range from 3.0–3.5%[7]), will as a standard rule not be accepted, unless it can be established that either: "1) The deficit ratio has declined substantially and continuously before reaching the level close to the 3% limit" or "2) The small deficit ratio excess above the 3% limit has been caused by exceptional circumstances and has a temporary nature (i.e. expenditure one-offs triggered by a significant economic downturn, or expenditure one-offs triggered by the implementation of economic reforms with a positive mid/long-term effect)".[2][3][8] If a state is found by the Commission to have breached the deficit criteria, they will recommend the Council of the European Union to open up a deficit-breached EDP against the state in accordance with Article 126(6), which only will be abrogated again when the state simultaneously comply with both the deficit and debt criteria.
  3. Government debt-to-GDP ratio: The ratio of gross government debt (measured at its nominal value outstanding at the end of the year, and consolidated between and within the sectors of general government) relative to GDP at market prices, must not exceed 60% at the end of the preceding fiscal year. Or if the debt-to-GDP ratio exceeds the 60% limit, the ratio shall at least be found to have "sufficiently diminished and must be approaching the reference value at a satisfactory pace".[3] This "satisfactory pace" was defined and operationalized by a specific calculation formula, with the entry into force of the new debt reduction benchmark rule in December 2011, requiring the states in breach of the 60% limit to deliver – either for the backward- or forward-looking 3-year period – an annual debt-to-GDP ratio reduction of at least 5% of the part of the benchmark value being in excess of the 60% limit. If both the 60% limit and "debt reduction benchmark rule" is breached, the Commission will finally check if the breach has been caused only by certain special exempted causes (i.e. capital payments to establishment of common financial stability mechanisms, like the ESM) – because if this is the case they will then rule an "exempted compliance". If a state is found by the Commission to have breached the debt criteria (without this breach solely being due to "exempted causes"), they will recommend the Council of the European Union to open up a debt-breached EDP against the state in accordance with Article 126(6), which only will be abrogated again when the state simultaneously comply with both the deficit and debt criteria.[8]
  4. Exchange rate stability: Applicant countries should not have devalued the central rate of their euro pegged currency during the previous two years, and for the same period the currency stability shall be deemed to have been stable without "severe tensions". As a third requirement, participation in the exchange-rate mechanism (ERM / ERM II) under the European Monetary System (EMS) for two consecutive years is expected,[9] though according to the Commission "exchange rate stability during a period of non-participation before entering ERM II can be taken into account."[10] For example, Italy was deemed to have converged with only 15 months as an ERM-member, as measured on the last day in the review period of the convergence report.[11] Meanwhile, the European Commission concluded that for Cyprus, Malta and Latvia, their 18 months of membership in the review period ending on 31 October 2006 was insufficient.[12] As of 2014, all 29 times the subcriteria for ERM-membership length was found complied with by the Commission, these cases had the particular observation in common, that the state had surpassed minimum two full years of ERM-membership either ahead of the "final approval date (following approximately 1.5 month after the publication of the convergence report) where their currency exchange rate would be irrevocably fixed by the Council of the European Union" or by the "first possible euro adoption date following the publication of the convergence report".
  5. Long-term interest rates (average yields for 10yr government bonds in the past year): Shall be no more than 2.0 percentage points higher, than the unweighted arithmetic average of the similar 10-year government bond yields in the 3 EU member states with the lowest HICP inflation (having qualified as benchmark countries for the calculation of the HICP reference value). If any of the 3 EU member states in concern are suffering from interest rates significantly higher than the "GDP-weighted eurozone average interest rate", and at the same time by the end of the assessment period have no complete funding access to the financial lending markets (which will be the case for as long as a country is unable to issue new government bonds with 10-year maturity – instead being dependent on disbursements from a sovereign state bailout programme), then such a country will not qualify as a benchmark country for the reference value; which then only will be calculated upon data from fewer than 3 EU member states.[13] In example, Ireland was found to be an interest rate outlier not qualifying for the reference value calculation in the assessment month March 2012, when it was measured to have a long-term interest rate average being 4.71 percentage points above the eurozone average – while at the same time having no complete access to the financial lending markets.[14] When Ireland was assessed again in April 2013, it was, however, deemed no longer to be an outlier, due to posting a long-term interest rate average only 1.59 percentage points above the eurozone average – while also having regained complete access to the financial lending markets for the last 1.5 month of the assessment period.[15] A final relevant example appeared in April 2014, when Portugal likewise was found not to be an interest rate outlier, due to posting a long-term interest rate average being 2.89 percentage points above the eurozone average – while having regained complete access to the financial lending markets for the last 12 months of the assessment period.[6]

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 that only 3 out of 15 EU member states (Denmark, Luxembourg and Ireland) were completely compliant with the criteria at that point in time.[16] 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.[17] 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.[18] Subsequent convergence reports have so far resulted in an additional 8 EU member states complying with all criteria and adopting the euro (Greece, Slovenia, Cyprus, Malta, Slovakia, Estonia, Latvia and Lithuania). 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.[6] 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).[19]

EU members which have not adopted the euro
Non-Eurozone
EU member
Currency EU join
date
ERM II
join[20]
Central rate
per €1[20]
Government
Policy
Public
Opinion
Convergence
Criteria
Notes
Name Code
Bulgaria Bulgaria Lev BGN 2007-01-01 None 1.95583[nb 1] ERM-II application
by July 2019[21]
39% in favour
(2017)[22]
All except ERM-II
and legislation
Coins design approved
Croatia Croatia Kuna HRK 2013-07-01 None Free floating ERM-II by 2020,
Euro by 2025[23]
43% in favour
(2017)[22]
Not compliant
Czech Republic Czech Republic Koruna CZK 2004-05-01 None Free floating Not on governing
party's agenda[24]
22% in favour
(2017)[22]
Not compliant
Denmark Denmark Krone DKK 1973-01-01 1999-01-01 7.46038 Not on governing
party's agenda[25]
31% in favour
(2017)[22]
Fully compliant Treaty opt-out from euro membership,
rejected membership via referendum
Hungary Hungary Forint HUF 2004-05-01 None Free floating Not on governing
party's agenda[26]
57% in favour
(2017)[22]
Not compliant
Poland Poland Złoty PLN 2004-05-01 None Free floating Not on governing
party's agenda[27]
36% in favour
(2017)[22]
Not compliant
Romania Romania Leu RON 2007-01-01 None Free floating Membership by 2022[28] 57% in favour
(2017)[22]
Not compliant
Sweden Sweden Krona SEK 1995-01-01 None Free floating Not on governing
party's agenda[29]
25% in favour
(2017)[22]
All except ERM-II
and legislation
Rejected membership
via referendum[nb 2]
United Kingdom United Kingdom Pound
sterling
GBP 1973-01-01 None Free floating Withdrawing from
the EU in 2019
30% in favour
(2017)[22]
Not compliant Treaty opt-out
from euro membership

In 2009 the authors of a confidential International Monetary Fund (IMF) report suggested that in light of the ongoing global financial crisis, 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.[30] However, the EU has not made use of this alternative accession process.

Fulfillment of criteria

Convergence criteria (valid for the compliance check conducted by ECB in their May 2018 Report)
Country HICP inflation rate[31][nb 3] Excessive deficit procedure[32] Exchange rate Long-term interest rate[33][nb 4] Compatibility of legislation
Budget deficit to GDP[34] Debt-to-GDP ratio[35] ERM II member[36] Change in rate[37][38][nb 5]
Reference values[nb 6] Max. 1.9%[nb 7]
(as of 31 Mar 2018)
None open (as of 3 May 2018) Min. 2 years
(as of 3 May 2018)
Max. ±15%[nb 8]
(for 2017)
Max. 3.2%[nb 9]
(as of 31 Mar 2018)
Yes[39][40]
(as of 20 March 2018)
Max. 3.0%
(Fiscal year 2017)[41]
Max. 60%
(Fiscal year 2017)[41]
EU members (outside the eurozone)
 Bulgaria 1.4% None No 0.0% 1.4% No
-0.9% (surplus) 25.4%
 Croatia 1.3% None No 0.9% 2.6% No
-0.8% (surplus) 78.0%
 Czech Republic 2.2% None No 2.6% 1.3% No
-1.6% (surplus) 34.6%
 Denmark 1.0% None 19 years, 2 months 0.1% 0.6% Unknown
-1.0% (surplus) 36.4%
 Hungary 2.2% None No 0.7% 2.7% No
2.0% 73.6%
 Poland 1.4% None No 2.4% 3.3% No
1.7% 50.6%
 Romania 1.9% None No -1.7% 4.1% No
2.9% 35.0%
 Sweden 1.9% None No -1.8% 0.7% No
-1.3% (surplus) 40.6%
 United Kingdom 2.8% None No -7.0% 1.2% Unknown
1.9% 87.7%
Notes
  1. ^ As of January 2015, Bulgaria is not officially part of ERM II.[20] The Bulgarian National Bank pursues its primary objective of price stability through an exchange rate anchor in the context of a Currency Board Arrangement (CBA), obliging them to exchange monetary liabilities and euro at the official exchange rate 1.95583 BGN/EUR without any limit. The CBA was introduced on 1 July 1997 as a 1:1 peg against German mark, and the peg subsequently changed to euro on 1 January 1999.[6]
  2. ^ Sweden, while obliged to adopt the euro under its Treaty of Accession, has chosen to deliberately fail to meet the convergence criteria for euro adoption by not joining ERM II without prior approval by a referendum.
  3. ^ The rate of increase of the 12-month average HICP over the prior 12-month average must be no more than 1.5% larger than the unweighted arithmetic average of the similar HICP inflation rates in the 3 EU member states with the lowest HICP inflation. If any of these 3 states have a HICP rate significantly below the similarly averaged HICP rate for the eurozone (which according to ECB practice means more than 2% below), and if this low HICP rate has been primarily caused by exceptional circumstances (i.e. severe wage cuts or a strong recession), then such a state is not included in the calculation of the reference value and is replaced by the EU state with the fourth lowest HICP rate.
  4. ^ The arithmetic average of the annual yield of 10-year government bonds as of the end of the past 12 months must be no more than 2.0% larger than the unweighted arithmetic average of the bond yields in the 3 EU member states with the lowest HICP inflation. If any of these states have bond yields which are significantly larger than the similarly averaged yield for the eurozone (which according to previous ECB reports means more than 2% above) and at the same time does not have complete funding access to financial markets (which is the case for as long as a government receives bailout funds), then such a state is not be included in the calculation of the reference value.
  5. ^ The change in the annual average exchange rate against the euro.
  6. ^ Reference values from the ECB convergence report of May 2018.[39]
  7. ^ Cyprus, Ireland and Finland were the reference states.[39]
  8. ^ The maximum allowed change in rate is ± 2.25% for Denmark.
  9. ^ Cyprus, Ireland and Finland were the reference states.[39]

Reference values

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").

The black values in the table are sourced by the officially published convergence reports, while the lime-green values are only qualified estimates – not confirmed by any official convergence report – but sourced by monthly estimation reports published by the Polish Ministry of Finance. The reason why the lime-green values are only estimates, is because the "outlier" selection – ignoring certain states from the reference value calculation – beside of depending on a quantitative assessment also depends on a more complicated overall qualitative assessment, and hence it can not be predicted with absolute certainty who of the states the Commission will deem to be outliers. So any selection of outliers by the lime-green data lines – shall only be regarded as qualified estimates – which potentially could be different from those outliers which the Commission would have selected if they had published a specific report at the concerned point of time.[nb 1]

The national fiscal accounts for the previous full calendar year are released each year in April (next time 23 April 2015).[45] As the compliance check for both the debt and deficit criteria always awaits this release in a new calendar year, the first possible month to request a compliance check will be April, which would result in a data check for the HICP and Interest rates during the reference year from 1 April to 31 March. Any EU Member State may also ask the European Commission to conduct a compliance check, at any point of time during the remainder of the year, with HICP and interest rates always checked for the past 12 months – while debt and deficit compliance always will be checked for the 3-year period encompassing the last completed full calendar year and the two subsequent forecast years.[6][13] As of 12 September 2014, all of the remaining euro derogation states without an opt-out, had not yet entered ERM-II,[20] which mean its highly unlikely any of them will ask the European Commission to conduct an extraordinary compliance check ahead of the publication of the next regular convergence report (scheduled for release in May/June 2016).

See also

Notes

  1. ^ A particular high uncertainty exists for the Polish selection of HICP outliers, as it is only based upon evaluation of the first part of the official outlier criteria. The official outlier criteria require both (1) The HICP rate to be significantly below the eurozone average and (2) This "significant below" HICP to stem from adverse price developments from exceptional factors (i.e. severe enforced wage cuts, exceptional developments in energy/food/currency markets, or a strong recession). Precedent assessment cases proof the second part of the outlier criteria also needs to be met, i.e. Finland had a HICP criteria value being 1.7% below eurozone average in August 2004 without being classified to be "HICP outlier" by the European Commission,[43] and Sweden likewise had a HICP criteria value being 1.4% below eurozone average in April 2013 without being classified to be "HICP outlier" by the European Commission.[15]
    In addition to the uncertainty related to the fact that the Polish source only evaluate the first requirement, there is also uncertainty related to the Polish quantification of what "significant below" means. For all assessment months until March 2014, the Polish source had adopted the assumption (based on precedent assessment cases) that "all states with HICP criteria values minimum 1.8% below eurozone average" should be classified to be "HICP outliers". Based on the 2014 EC Convergence report's classification of Cyprus with a HICP criteria value only 1.4% below eurozone average as a "HICP outlier", the Polish source accordingly also adjusted their "HICP outlier selection criteria" from April 2014 onwards, so that it now automatically classify "all states with HICP criteria values minimum 1.4% below eurozone average" as "HICP outliers".[44] The European Commission never quantified what "significant below" means, which is why the Polish source attempts to quantify it based on precedent assessment cases, but this also mean it is uncertain whether or not the currently assumed 1.4% limit is correct – because it could perhaps just as well be 1.0%.

References

  1. ^ "Full text of the Treaty of Amsterdam". Eur-Lex. 2 October 1997. Retrieved 9 March 2013.
  2. ^ a b c "EMI Annual Report 1994" (PDF). European Monetary Institute (EMI). April 1995. Retrieved 22 November 2012.
  3. ^ a b c d e "Progress towards convergence - November 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 22 November 2012.
  4. ^ "Progress towards convergence (Nov 1996)" (PDF). EMI. Nov 1996. Retrieved 18 November 2012.
  5. ^ "Convergence Report (May 2010)" (PDF). ECB. May 2010. Retrieved 18 November 2012.
  6. ^ a b c d e "EUROPEAN ECONOMY 4/2014: Convergence Report 2014" (PDF). European Commission. 4 June 2014.
  7. ^ "Luxembourg Report prepared in accordance with Article 126(3) of the Treaty" (PDF). European Commission. 12 May 2010. Retrieved 18 November 2012.
  8. ^ a b "Specifications on the implementation of the Stability and Growth Pact, and Guidelines on the format and content of Stability and Convergence Programmes" (PDF). European Commission. 24 January 2012. Retrieved 13 August 2014.
  9. ^ "POLICY POSITION OF THE GOVERNING COUNCIL OF THE EUROPEAN CENTRAL BANK ON EXCHANGE RATE ISSUES RELATING TO THE ACCEDING COUNTRIES" (PDF). European Central Bank. 2003-12-18. Retrieved 2014-08-19.
  10. ^ "REPORT FROM THE COMMISSION – CONVERGENCE REPORT 2002 SWEDEN". European Commission. 2002-05-22. Retrieved 2014-08-19.
  11. ^ "European Economy no.65 1998: CONVERGENCE REPORT 1998" (PDF). European Commission. March 1998.
  12. ^ "European Economy no 1/2006: Convergence Report December 2006" (PDF). European Commission. December 2006.
  13. ^ a b "Convergence Report (May 2012)" (PDF). ECB. May 2012. Retrieved 18 November 2012.
  14. ^ "Convergence Report 2012" (PDF). European Commission. 30 May 2012.
  15. ^ a b "Convergence Report 2013" (PDF). European Commission. 3 June 2013.
  16. ^ "Report on convergence in the European Union in 1996 (COM.96 560 final)" (PDF). Commission of the European Communities. 6 November 1996. Retrieved 21 November 2012.
  17. ^ "Council Decision 96/736/EC (13 December 1996)" (PDF). CVCE. 13 December 1996. Retrieved 21 November 2001.
  18. ^ "European Economy no.65 (three reports): 1) Commission's recommendation concerning the third stage of economic and monetary union. 2) Convergence Report 1998. 3) Growth and employment in the stability-oriented framework of EMU" (PDF). European Commission. 16 March 1998. Retrieved 21 November 2012.
  19. ^ "Latvia formally applies for eurozone membership". Euractiv.com. 4 March 2013. Retrieved 4 March 2013.
  20. ^ a b c d "Exchange rate statistics: August 2015" (PDF). Central rates and intervention rates in Exchange Rate Mechanism II. Deutsche Bundesbank. 14 August 2015.
  21. ^ Bulgaria agrees to conditions for joining euro, Financial Times 12 July 2018
  22. ^ a b c d e f g h i Eurobarometer November 2017
  23. ^ Ilic, Igor (2017-10-30). "Croatia wants to adopt euro within 7-8 years: prime minister". Reuters. Retrieved 2017-10-31.
  24. ^ Czech election stalemate on joining euro, EUObserver 13 October 2017
  25. ^ "Regeringsgrundlag juni 2015: Sammen for Fremtiden (Government manifest June 2015: Together for the Future)" (PDF) (in Danish). Venstre. 27 June 2015. Archived from the original (PDF) on 1 July 2015.
  26. ^ "Orbán: Hungary will not adopt the euro for many decades to come". Hungarian Free Press. 3 June 2015.
  27. ^ Poland's new government not in hurry to join euro - finance minister, Reuters 19 January 2016
  28. ^ "Romania may join euro zone in 2022, says foreign minister - report". CNBC. 2017-08-28. Retrieved 2017-08-28.
  29. ^ Erika Svantesson (9 May 2009). "Alliansen splittrad i eurofrågan" [Alliance fragmented over euro question]. DN.se (in Swedish). Dagens Nyheter AB. Retrieved 2014-12-18.
  30. ^ "Lithuanian PM keen on fast-track euro idea". London South East. 7 April 2007.
  31. ^ "HICP (2005=100): Monthly data (12-month average rate of annual change)". Eurostat. 16 August 2012. Retrieved 6 September 2012.
  32. ^ "The corrective arm/ Excessive Deficit Procedure". European Commission. Retrieved 2018-06-02.
  33. ^ "Long-term interest rate statistics for EU Member States (monthly data for the average of the past year)". Eurostat. Retrieved 18 December 2012.
  34. ^ "Government deficit/surplus data". Eurostat. 22 April 2013. Retrieved 22 April 2013.
  35. ^ "General government gross debt (EDP concept), consolidated - annual data". Eurostat. Retrieved 2018-06-02.
  36. ^ "ERM II – the EU's Exchange Rate Mechanism". European Commission. Retrieved 2018-06-02.
  37. ^ "Euro/ECU exchange rates - annual data (average)". Eurostat. Retrieved 5 July 2014.
  38. ^ "Former euro area national currencies vs. euro/ECU - annual data (average)". Eurostat. Retrieved 5 July 2014.
  39. ^ a b c d "Convergence Report 2018". European Central Bank. 2018-05-22. Retrieved 2018-06-02.
  40. ^ "Convergence Report - May 208". European Commission. May 2018. Retrieved 2018-06-02.
  41. ^ a b "European economic forecast - spring 2018". European Commission. May 2018. Retrieved 2 June 2018.
  42. ^ "Luxembourg Report prepared in accordance with Article 126(3) of the Treaty" (PDF). European Commission. 12 May 2010. Retrieved 18 November 2012.
  43. ^ "Convergence Report 2004" (PDF). European Commission. 20 October 2004. Retrieved 19 August 2005.
  44. ^ "Nominal Convergence Monitor April 2014 (Monitor konwergencji nominalnej kwietniu 2014)" (PDF) (in Polish). Ministry of Finance (Poland). 4 July 2014.
  45. ^ "Release Calendar for Euro Indicators". Eurostat. Archived from the original on 19 January 2013. Retrieved 18 December 2012.

External links

António Costa

António Luís Santos da Costa GCIH (born 17 July 1961) is a Portuguese lawyer and politician serving as the 119th and current Prime Minister of Portugal since 26 November 2015. Previously, he was Minister of Parliamentary Affairs from 1997 to 1999, Minister of Justice from 1999 to 2002, Minister of State and Internal Administration from 2005 to 2007, and Mayor of Lisbon from 2007 to 2015. He was elected as Secretary-General of the Socialist Party in September 2014.

António Guterres

António Manuel de Oliveira Guterres (; Portuguese: [ɐ̃ˈtɔnju ɡuˈtɛʁɨʃ]; born 30 April 1949) is a Portuguese politician and diplomat who is serving as the ninth Secretary-General of the United Nations. Previously, he was the United Nations High Commissioner for Refugees between 2005 and 2015.Guterres was the Prime Minister of Portugal from 1995 to 2002 and was the Secretary-General of the Socialist Party from 1992 to 2002. He served as President of the Socialist International from 1999 to 2005.

In both a 2012 and 2014 poll, the Portuguese public ranked him as the best Prime Minister of the previous 30 years.

Bulgaria and the euro

Bulgaria committed to switching its currency, the lev, to the euro upon its joining the European Union in 2007, as stated in its EU accession treaty.

The transition will occur once the country meets all the euro convergence criteria; it currently meets three of the five criteria, the exception being its membership for at least two years of the EU's official exchange rate mechanism (ERM II), which it has not yet joined despite the Bulgarian lev having been pegged to the euro since its introduction in 1999. In 2011 Bulgaria's Minister of Finance Simeon Djankov stated that adoption of the euro would be postponed until after the Eurozone crisis had stabilized. Bulgarian euro coins have not yet been designed, but their motif has been chosen to be the Madara Rider.

Bulgarian lev

The lev (Bulgarian: лев, plural: лева, левове / leva, levove) is the currency of Bulgaria. It is divided in 100 stotinki (стотинки, singular: stotinka, стотинка). In archaic Bulgarian the word "lev" meant "lion", a word which in the modern language became lăv (IPA: /lɤf/) (in Bulgarian: лъв). Stotinka comes from the word "sto" (сто) - a hundred.

Copenhagen criteria

The Copenhagen Criteria are the rules that define whether a country is eligible to join the European Union. The criteria require that a state has the institutions to preserve democratic governance and human rights, has a functioning market economy, and accepts the obligations and intent of the EU.

These membership criteria were laid down at the June 1993 European Council in Copenhagen, Denmark, from which they take their name. Excerpt from the Copenhagen Presidency conclusions:

Membership requires that candidate country has achieved stability of institutions guaranteeing democracy, the rule of law, human rights, respect for and protection of minorities, the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union. Membership presupposes the candidate's ability to take on the obligations of membership including adherence to the aims of political, economic and monetary union.

Most of these elements have been clarified over the last decade by legislation and other decisions of the European Council, the European Commission and the European Parliament, as well as by the case law of the European Court of Justice and the European Court of Human Rights. However, there are sometimes slightly conflicting interpretations in current member states—some examples of this are given below.

Czech Republic and the euro

The Czech Republic is bound to adopt the euro in the future and to join the eurozone once it has satisfied the euro convergence criteria by the Treaty of Accession since it joined the European Union (EU) in 2004. The Czech Republic is therefore a candidate for the enlargement of the eurozone and it uses the Czech koruna as its currency, regulated by the Czech National Bank, a member of the European System of Central Banks, and does not participate in European Exchange Rate Mechanism II (ERM II).

Although the Czech Republic is economically well positioned to adopt the euro, following the European debt crisis there has been considerable opposition among the public to the adoption of the euro currency. According to a poll conducted in April 2017, 29% of Czechs were in favour of introducing the euro while 70% were opposed and 1% undecided. As of 2017, there is no target date by the government for joining the ERM II or adopting the euro. The ruling cabinet that was formed following the 2017 legislative election does not plan to proceed with euro adoption within its term.

Debt-to-GDP ratio

In economics, the debt-to-GDP ratio is the ratio between a country's government debt (measured in units of currency) and its gross domestic product (GDP) (measured in units of currency per year). A low debt-to-GDP ratio indicates an economy that produces and sells goods and services sufficient to pay back debts without incurring further debt. Geopolitical and economic considerations – including interest rates, war, recessions, and other variables – influence the borrowing practices of a nation and the choice to incur further debt.

Economic and Monetary Union of the European Union

The Economic and Monetary Union (EMU) is an umbrella term for the group of policies aimed at converging the economies of member states of the European Union at three stages. The policies cover the 19 eurozone states, as well as non-euro European Union states.

Each stage of the EMU consists of progressively closer economic integration. Only once a state participates in the third stage it is permitted to adopt the euro as its official currency. As such, the third stage is largely synonymous with the eurozone. The euro convergence criteria are the set of requirements that needs to be fulfilled in order for a country to join the eurozone. An important element of this is participation for a minimum of two years in the European Exchange Rate Mechanism ("ERM II"), in which candidate currencies demonstrate economic convergence by maintaining limited deviation from their target rate against the euro.

Nineteen EU member states, including most recently Lithuania, have entered the third stage and have adopted the euro as their currency. All new EU member states must commit to participate in the third stage in their treaties of accession. Only Denmark and the United Kingdom, whose EU membership predates the introduction of the euro, have legal opt outs from the EU Treaties granting them an exemption from this obligation. The remaining seven non-euro member states are obliged to enter the third stage once they comply with all convergence criteria.

Economy of the European Union

The European Union is the second largest economy in the world in nominal terms (after the United States) and according to purchasing power parity or PPP (after China). The European Union's GDP was estimated to be $18.8 trillion (nominal) in 2018, representing ~22% of global economy (Nominal global GDP).

The euro, used by 19 of its 28 members, is the second largest reserve currency as well as the second most traded currency in the world after the United States dollar. The euro is the official currency in 25 countries, in the eurozone and in six other European countries, officially or de facto.

The European Union (EU) economy consists of an internal market of mixed economies based on free market and advanced social models. The GDP per capita (PPP) was $37,800 in 2017, compared to $59,495 in the United States, $42,695 Japan and $16,636 in China. There are significant disparities in GDP per capita (PPP) between member states ranging from $105,148 in Luxembourg to $21,678 in Bulgaria. With a low Gini coefficient of 31, the European Union has a more egalitarian repartition of incomes than the world average.Major economic hubs and financial centres where the large number of institutions, companies and banks is located are Amsterdam, Brussels, Bucharest, Dublin, Frankfurt, Göteborg, Helsinki, Lisbon, London, Madrid, Milan, Paris and Warsaw.

Euronext is the main stock exchange of the Eurozone and the 7th world largest by market capitalisation. Foreign investments made in the European Union total $5.1 trillion in 2012, while the EU's investments in foreign countries total $9.1 trillion, by far the highest domestic and foreign investments in the world.Since the beginning of the public debt crisis in 2009, opposite economic situations have emerged between Southern Europe on one hand, and Central and Northern Europe on the other hand: a higher unemployment rate and public debt in the Mediterranean countries with the exception of Malta, and a lower unemployment rate with higher GDP growth rate in the Eastern and in Northern member countries. In 2015, public debt in the European Union was 85% of GDP, with disparities between the lowest rate, Estonia with 9.7%, and the highest, Greece with 176%.The ten largest trading partners of the European Union are the United States, China, Switzerland, Russia, Turkey, Japan, Norway, South Korea and India (trade with all these countries crossed $110 billion mark in 2016). The EU is represented as a unified entity in the World Trade Organization (WTO), the G-20 and G7, alongside with the EU's member countries participating.

Eurobonds

European bonds are proposed government bonds issued in euros jointly by the 19 eurozone nations. The idea was first raised by the European Commission in 2011. Eurobonds would be debt investments whereby an investor loans a certain amount of money, for a certain amount of time, with a certain interest rate, to the eurozone bloc altogether, which then forwards the money to individual governments.

Eurobonds have been suggested as a way to tackle the European sovereign debt crisis as the indebted states could borrow new funds at better conditions as they are supported by the rating of the non-crisis states.

Because Eurobonds would allow already highly indebted states access to cheaper credit thanks to the strength of other eurozone economies, they are controversial, and may suffer from the free rider problem.

Eurozone

The eurozone, officially called the euro area, is a monetary union of 19 of the 28 European Union (EU) member states which have adopted the euro (€) as their common currency and sole legal tender. The monetary authority of the eurozone is the Eurosystem. The other nine members of the European Union continue to use their own national currencies, although most of them are obliged to adopt the euro in the future.

The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. Other EU states (except for Denmark and the United Kingdom) are obliged to join once they meet the criteria to do so. No state has left, and there are no provisions to do so or to be expelled. Andorra, Monaco, San Marino, and Vatican City have formal agreements with the EU to use the euro as their official currency and issue their own coins. Kosovo and Montenegro have adopted the euro unilaterally, but these countries do not officially form part of the eurozone and do not have representation in the European Central Bank (ECB) or in the Eurogroup.The ECB, which is governed by a president and a board of the heads of national central banks, sets the monetary policy of the zone. The principal task of the ECB is to keep inflation under control. Though there is no common representation, governance or fiscal policy for the currency union, some co-operation does take place through the Eurogroup, which makes political decisions regarding the eurozone and the euro. The Eurogroup is composed of the finance ministers of eurozone states, but in emergencies, national leaders also form the Eurogroup.

Since the financial crisis of 2007–08, the eurozone has established and used provisions for granting emergency loans to member states in return for enacting economic reforms. The eurozone has also enacted some limited fiscal integration: for example, in peer review of each other's national budgets. The issue is political and in a state of flux in terms of what further provisions will be agreed for eurozone change.

First Rutte cabinet

The First Rutte cabinet, also called the Rutte–Verhagen cabinet was the cabinet of the Netherlands from 14 October 2010 until 5 November 2012. The cabinet was formed by the political parties People's Party for Freedom and Democracy (VVD) and the Christian Democratic Appeal (CDA) after the election of 2010. The right-wing cabinet was a minority government in the House of Representatives but was supported by the Party for Freedom (PVV) for a majority. It was the first of three cabinets of Mark Rutte, the Leader of the People's Party for Freedom and Democracy as Prime Minister, with Maxime Verhagen the Leader of the Christian Democratic Appeal serving as Deputy Prime Minister.

History of the Italian Republic

After World War II and the overthrow of Mussolini's fascist regime, Italy's history was dominated by the Christian Democracy (Democrazia Cristiana, DC) political party for 48 years—from the 1946 election until the 1994 election—while the opposition was led by the Italian Communist Party (PCI).

This situation changed due to an external shock—the crisis and dissolution of the Soviet Union—and an internal one—the Tangentopoli corruption scandal and operation mani pulite (Italian for "Clean Hands"). These international and national political turmoils led to the reform of the electoral system (from almost perfect proportional to uninominal/multi-seat circumscriptions) and radical restructuring of the Italian political system, including the dissolution of most traditional political parties, including Christian Democracy and Communist Party.

In 1994, in the midst of the mani pulite operation which shook political parties, media magnate Silvio Berlusconi, owner of three private TV channels, several newspapers and magazines, and Italy's main publishing house Mondadori, won the March 27 general election and formed the Berlusconi I Cabinet.

Although ousted after a few months of government, Berlusconi became one of Italy's most important political and economic figures for the next two decades. After leading the Opposition to the Dini (1995–1996), Prodi I (1996–1998), D'Alema I (1998–1999), D'Alema II (1999–2000) and Amato II Cabinet (2000–2001), Berlusconi returned to power in 2001 after winning the 13 May general election. He eventually lost the 2006 general election five years later to Romano Prodi and his Union coalition but won the 2008 general election and returned to power in June 2008. In November 2011, Berlusconi lost his majority in the Chamber of Deputies, and resigned. His successor, Mario Monti formed a new government, composed of "technocrats" and supported by both the center-left and the center-right parties.

After the 2013 election resulted in a hung parliament, in April the Vice-Secretary of the Democratic Party, Enrico Letta, formed a Cabinet composed by both center-left and the center-right parties. On 22 February 2014, after tensions in the Democratic Party (PD), the PD's Secretary Matteo Renzi sworn as new Prime Minister.

History of the euro

The euro came into existence on 1 January 1999, although it had been a goal of the European Union (EU) and its predecessors since the 1960s. After tough negotiations, particularly due to opposition from the United Kingdom, the Maastricht Treaty entered into force in 1993 with the goal of creating an economic and monetary union by 1999 for all EU states except the UK and Denmark (even though Denmark has a fixed exchange rate policy with the euro).

In 1999 the currency was born virtually and in 2002 notes and coins began to circulate. It rapidly took over from the former national currencies and slowly expanded behind the rest of the EU. In 2009 the Lisbon Treaty finalised its political authority, the Eurogroup, alongside the European Central Bank.

Italian General Confederation of Labour

The Italian General Confederation of Labour (Italian: Confederazione Generale Italiana del Lavoro; CGIL) is a national trade union based in Italy. It was formed by agreement between socialists, communists, and Christian democrats in the "Pact of Rome" of June 1944. But in 1950, socialists and Christian democrats split forming UIL and CISL, and since then the CGIL has been influenced by the Communist Party (PCI) and until recent years by its political heirs.It has been the most important Italian trade union since its creation. It has a membership of over 5.5 million. Along with the decline of membership within its political counterpart, the Democratic Party (PD), its membership is in steep decline since 2013, with the percentage of pensioners in constant rise. On July 1, 2015, the number of working adults reached a ceiling at 2.185.099. The CGIL is currently the second largest trade union in Europe, after the German DGB, which has over 6 million members.

The CGIL is affiliated with the International Trade Union Confederation and the European Trade Union Confederation, and is a member of the Trade Union Advisory Committee to the OECD.

Poland and the euro

Poland does not use the euro as its currency. However, under the terms of their Treaty of Accession with the European Union, all new Member States "shall participate in the Economic and Monetary Union from the date of accession as a Member State with a derogation", which means that Poland is obliged to eventually replace its currency, the złoty, with the euro.

There is no target date for Polish euro adoption, and no fixed date for when the country will join ERM-II (the fifth euro convergence criterion). The country's former Deputy Prime Minister Janusz Piechociński has stated that Poland will not join the Euro until at least 2020.Euro adoption will require the approval of at least two thirds of the Sejm to make a constitutional amendment changing the official currency from the złoty to the euro. The ruling Law and Justice Party opposes euro adoption. Former PM Donald Tusk has said that he may agree to a referendum on euro participation in order to gain their support for a constitutional amendment. Public opinion is against participation according to polls, with more than 70 percent believing that adoption of the euro would be bad for the Polish economy according to one poll from September 2012.There is not yet any official information on the design process for the Polish national sides of the euro coins.

Romania and the euro

Romania is required by its EU accession agreement to replace the current national currency, the Romanian leu, with the euro, as soon as Romania fulfills all of the six nominal euro convergence criteria. The leu is not yet part of the European Exchange Rate Mechanism (ERM II), of which minimum two years of stable membership is one of the six nominal convergence criteria to comply with to qualify for euro adoption. The current Romanian government in addition established a self-imposed criteria to reach a certain level of "real convergence", as a steering anchor to decide the appropriate target year for ERM II-membership and euro adoption. As of March 2018, the scheduled date for euro adoption in Romania is 2024, according to Liviu Dragnea, head of the ruling Party of Social Democrats.

Theo Waigel

Theodor "Theo" Waigel (born 22 April 1939) is a German politician of the Christian Social Union in Bavaria (CSU).

Waigel is a lawyer, and earned a doctorate in 1967. He was a member of the Bundestag from 1972 to 2002. He served as Federal Minister of Finance of Germany in the Cabinet of Chancellor Helmut Kohl from 1989 to 1998, and as Chairman of the Christian Social Union in Bavaria from 1988 to 1999. He is known as the father of the Euro, the European currency. He played a vital role in its introduction as German Minister of Finance. He also managed to impose an austerity program on West Germans and overcome the massive deficits of German unification to meet the strict fiscal benchmarks mandated by Europe's single currency. In 2009, he was appointed Honorary Chairman of the CSU.

United Kingdom and the euro

The United Kingdom has never sought to adopt the euro as its official currency for the duration of its membership of the European Union (EU), and secured an opt-out at the euro's creation via the Maastricht Treaty in 1992. Polls have shown that the majority of British people have been against adopting the euro, and in a June 2016 referendum the UK voted to withdraw from the EU which would virtually eliminate the chance of any future adoption. Despite never being a member of the eurozone, the currency is used in the UK's Cypriot territories and as a secondary currency in Gibraltar; furthermore, London is home to the majority of the euro's clearing houses.

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