Adopting the euro: Convergence criteria and state of play

17-07-2015

Adopting the single currency is the third stage of Economic and Monetary Union (EMU). Even though all Member States participate in EMU, not all of them use the euro: the United Kingdom and Denmark have opted out, while Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania and Sweden are yet to adopt it, being formally obliged to do so under the Maastricht Treaty. Before this happens, they need to fulfil the convergence criteria of price stability, soundness and sustainability of public finances, durability of convergence and exchange rate stability. Furthermore, they must align their national legislation with the EU acquis on national central banks. Many argue that during the euro's founding phase the convergence criteria were relaxed in order to enable a wide take-up of the currency. This however is no longer the case, as the Member States which have joined since the euro came into use have had to fulfil the criteria stringently. Bulgaria, the Czech Republic and Sweden fulfil all but one criterion (exchange rate stability) and in fact none of the seven countries have decided to join the relevant currency-pegging mechanism. Furthermore, none except Croatia have made their central bank legislation compatible with the euro area. Public opinion in these countries is divided: a majority in Romania, Hungary, Croatia and Bulgaria is in favour of adopting the euro, while in the other countries most people would vote against it. However, only 18% of all respondents want the single currency to be introduced as soon as possible. Reportedly, most of the non-euro-area Member States cannot be expected to join the euro before 2020.

Adopting the single currency is the third stage of Economic and Monetary Union (EMU). Even though all Member States participate in EMU, not all of them use the euro: the United Kingdom and Denmark have opted out, while Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania and Sweden are yet to adopt it, being formally obliged to do so under the Maastricht Treaty. Before this happens, they need to fulfil the convergence criteria of price stability, soundness and sustainability of public finances, durability of convergence and exchange rate stability. Furthermore, they must align their national legislation with the EU acquis on national central banks. Many argue that during the euro's founding phase the convergence criteria were relaxed in order to enable a wide take-up of the currency. This however is no longer the case, as the Member States which have joined since the euro came into use have had to fulfil the criteria stringently. Bulgaria, the Czech Republic and Sweden fulfil all but one criterion (exchange rate stability) and in fact none of the seven countries have decided to join the relevant currency-pegging mechanism. Furthermore, none except Croatia have made their central bank legislation compatible with the euro area. Public opinion in these countries is divided: a majority in Romania, Hungary, Croatia and Bulgaria is in favour of adopting the euro, while in the other countries most people would vote against it. However, only 18% of all respondents want the single currency to be introduced as soon as possible. Reportedly, most of the non-euro-area Member States cannot be expected to join the euro before 2020.