The euro zone could get bigger next year. After the European Commission said Lithuania was ready to adopt the common currency, the Parliament will vote on its opinion on 16 July. The final decision will be made by the Council at the end of July. Read on to find out how countries are assessed to see if they are ready to join the euro zone.
Which countries are expected to join the euro?
Convergence reports show how ready countries are to join the euro zone, which currently consists of 18 countries. They are only prepared for non-euro countries that are bound under the EU treaties to adopt the euro once they meet the strict economic convergence criteria required. The UK and Denmark are the only member states that are exempted from being expected to join the euro.
To learn more about which countries adopted the euro and when, click on the link for the map of the euro zone on the right.
What exactly are these criteria?
To be eligible to join the euro, a member state has to comply with five criteria, which were set out in the Maastricht Treaty in 1992:
- Annual inflation rate should be at most 1.5 percentage points above the average of the three best performing EU countries
- Budget deficit should be at most 3% of the gross domestic product
- Government debt should be at most 60% of the gross domestic product
- Long-term interest rates should be at most two percentage points above the average of the three best performing EU countries in terms of price stability
- The country should have been participating in the European exchange rate mechanism, which limits fluctuations between the euro and national currencies, for two years
For some of these criteria there can be some leeway, for example if a country is near the limit or has made significant progress. In addition, the countries’ legislation must fully comply with all the requirements for the adoption of the euro as laid down in the EU treaties, especially concerning the independence and role of their central banks.
How are decisions made about which country can adopt the euro?
Once there is a positive convergence report, the European Commission produces a proposal and the European Parliament is consulted. This then forms the basis for a decision taken by the governments in the Council.
- 5 March 2013: Latvia submits a formal request for a convergence assessment
- 5 June: the Commission and the European Central Bank publish convergence reports, saying Latvia is ready to join the euro
- 21 June: euro zone countries support Commission’s proposal to allow Latvia to join the euro
- 27-28 June: the European Council welcomes Latvia’s fulfilment of convergence criteria
- 3 July: the European Parliament supports Latvia joining the euro zone
- 9 July: the Council of the EU decides to allow Latvia to adopt the euro