The 2016 Convergence Report, published today, assesses Member States’ progress on moving towards euro adoption. This year’s report covers the seven Member States that are legally committed to adopt the euro: Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden.
The report is based on the convergence criteria, sometimes referred to as the ‘Maastricht criteria’, set out in article 140(1) of the Treaty on the Functioning of the European Union (TFEU). The criteria include price stability, sound public finances, exchange rate stability and convergence in long-term interest rates. The compatibility of national legislation with Economic and Monetary Union (EMU) rules is also assessed.
The Member States covered in the report have made progress with convergence, but none of them currently meet all conditions for euro adoption:
- All Member States except Sweden meet the price stability criterion.
- Six Member States fulfil the criterion on public finances, while Croatia is still subject to an excessive deficit procedure.
- No Member State fulfils the exchange rate criterion, as none of them are a member of the Exchange Rate Mechanism (ERM II): at least two years of participation is required before joining the euro area.
- All examined Member States fulfil the long-term interest rate criterion.
- Legislation is not fully compatible with EMU rules in most of the Member States covered, except Croatia.
The Convergence Report forms the basis for the Council of the EU’ decision on whether a Member State fulfils the conditions for joining the euro area. The Member States that have not yet fulfilled the necessary conditions for the adoption of the euro are referred to in the TFEU as “Member States with a derogation”. The report assesses whether these Member States have achieved a high degree of sustainable economic convergence, in terms of price stability, sound public finances, exchange rate stability and convergence in long-term interest rates. It also assesses the compatibility of their national legislation with EMU rules set out in the Treaty related to the independence of national central banks, the prohibition on monetary financing, and compatibility with the statutes of the European System of Central Banks (ESCB) and of the European Central Bank (ECB). The Convergence Report by the European Commission is complemented by the Convergence Report by the ECB. The two reports are prepared independently, but published in parallel.
Convergence Reports are issued every two years, or when there is a specific request from a Member State to assess its readiness to join the euro area, e.g. Latvia in 2013.
Denmark and the UK, which negotiated opt-out arrangements from the final stage of EMU in the Maastricht Treaty, are therefore not covered by the report.