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Conditions for joining the euro (convergence criteria)

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Conditions for joining the euro (convergence criteria)

 

SUMMARY

WHAT DOES PROTOCOL (NO 13) ON THE CONVERGENCE CRITERIA DO?

It sets out the 4 economic and financial conditions - known as the convergence criteria - which EU countries not using the euro must meet before being allowed to adopt the single currency. It also lays down the procedure for agreeing their membership.

KEY POINTS

The 4 conditions a future euro member must satisfy are:

Price stability: have an inflation rate for 1 year no more than 1.5 % above the three lowest national rates in the euro area. This is to demonstrate that inflation is under control.

Government finances: ensure these are sound and sustainable by limiting borrowing and the national debt and avoiding an excessive deficit. The deficit should be no more than 3 %, and debt no more than 60 %, of national GDP.

Exchange rate stability: avoid excessive currency fluctuations for at least 2 years by participating in the system (known as the Exchange Rate Mechanism) that covers exchange rates between euro and non-euro countries. In particular, it should not have devalued during that period.

Convergence of interest rates: have a long-term interest rate that does not exceed by 2 percentage points that of the 3 best performing euro members.

Other key points

Every 2 years, or at the request of a non-euro country, the European Commission and the European Central Bank assess the progress made by single currency candidates in meeting the convergence criteria. The assessments are published in convergence reports.

EU governments, on a proposal from the Commission, decide whether a country is ready to adopt the euro. The decision is taken after consulting the European Parliament and on the basis of a qualified majority recommendation from countries already using the single currency.

BACKGROUND

The legal foundation for the convergence criteria is Article 140 of the Treaty on the Functioning of the European Union (EU) and they are subject to Protocol No 13 annexed to the founding Treaties of the EU.

last update 02.12.2015

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