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For a country to be able to introduce the euro, it must fulfil certain economic and legal requirements, i.e. the convergence criteria. The European Commission and the European Central Bank, ECB, assess a country's compliance with the convergence criteria.
The five economic criteria for convergence are as follows:
The general government deficit may as a general rule not exceed 3 per cent of GDP.
The general government debt may as a general rule not exceed 60 per cent of GDP.
Inflation may not exceed inflation in the 3 EU member states with the lowest inflation by more than 1.5 percentage points.
The long-term interest rate may not exceed the long-term interest rate in the 3 EU member states with the lowest inflation by more than 2 percentage points.
The member state's currency must for at least 2 years have observed the normal fluctuation bands in ERM II without devaluation on its own initiative.
The legal convergence requirement entails that the member state's legislation must be in accordance with the EU Treaty's provisions on central-bank independence, etc.
The basis for a decision on whether to accept a new member into the euro area is the convergence assessments by the European Commission and the ECB, which are submitted to the European Parliament for consultation and discussed by the heads of state and of government of the EU member states. The EU Ministers of Economic Affairs and Finance, on the recommendation of the European Commission, then decide whether the country may join the euro area. |
