Euro convergence criteria

The euro convergence criteria (also known as the Maastricht criteria) are the criteria which European Union member states are required to meet to enter the third stage of the Economic and Monetary Union (EMU) and adopt the euro as their currency. The four main criteria, which actually comprise five criteria as the "fiscal criterion" consists of both a "debt criterion" and a "deficit criterion", are based on (ex article 121.1) of the Treaty on the Functioning of the European Union.
Full EMU membership is only open to EU member states. However, the European microstates of Andorra, Monaco, San Marino and the Vatican City, which are not members of the EU, have signed monetary agreements with EU which allow them officially to adopt the euro and issue their own variant of euro coins. These states had all previously used one of the eurozone currencies replaced by the euro, or a currency pegged to one of them. These states are not members of the eurozone and do not get a seat in the European Central Bank (ECB) or the Eurogroup.
As part of the EU treaty, all of the EU Member States are obliged to adhere to the Stability and Growth Pact (SGP), which serves as a framework to ensure price stability and fiscal responsibility, has adopted identical limits for governments budget deficit and debt as the convergence criteria. Due to the fact that several countries did not exercise a sufficient level of fiscal responsibility during the first 10 years of the euro's lifetime, two major SGP reforms were recently introduced. The first reform was the Sixpack which entered into force in December 2011, and it was followed in January 2013 by the even more ambitious Fiscal Compact, which was signed by 25 out of the then-27 EU member states.
Countries are expected to participate in the second version of the European Exchange Rate Mechanism (ERM-II) for two years before joining the Euro.
Criteria.
The Maastricht Treaty, which was signed in February 1992 and entered into force on 1 November 1993, outlined the 5 convergence criteria EU member states are required to comply with to adopt the new currency the euro. The purpose of setting the criteria was to achieve price stability within the eurozone and ensure it wasn't negatively impacted when new member states accede. The framework of the five criteria was outlined by of the Maastricht Treaty, and the attached and . The original treaty article was later renumbered to become article 121.1 of the Amsterdam Treaty, and later renumbered again to of the Treaty on the Functioning of the European Union. Aside from the renumbering, no significant change have happened to the content of the "convergence criteria article" and its referred to and . The precise definition and method of measuring compliance was subsequently further developed by the EMI (later known as ECB) in their first three reports published in April 1995, November 1995 and November 1996. The full definition of the five criteria are summarised below.
The ECB publishes a Convergence Report at least every two years to check how well the EU members aspiring for euro adoption comply with the criteria. The first full convergence report was published in November 1996, and concluded that only 3 out of 15 EU member states (Denmark, Luxembourg and Ireland) were completely compliant with the criteria at that point in time. As a majority of states were not in compliance, the Council decided to delay the introduction of the euro by two years to 1 January 1999. In March 1998 a more positive second convergence report concluded that 11 out of 12 applying countries were prepared for the electronic introduction of the euro on 1 January 1999, with only Greece failing to qualify by the deadline. Subsequent convergence reports have so far resulted in an additional 8 EU member states complying with all criteria and adopting the euro (Greece, Slovenia, Cyprus, Malta, Slovakia, Estonia, Latvia and Lithuania). The latest convergence report was published in June 2014, and checked for compliance in the reference year from May 2012 – April 2014, where Lithuania managed to fully comply – thus becoming the next 19th eurozone member. As the reference values for HICP inflation and long-term interest rates change on a monthly basis, any member state with a euro derogation has the right to ask the ECB for an updated compliance check, whenever they believe they have met all both economic and legal convergence criteria. For example, Latvia asked for such an extraordinary compliance check in March 2013 (outside the regular 2-year interval for automatic assessments).
In 2009, the authors of a confidential International Monetary Fund (IMF) report suggested that in light of the ongoing global financial crisis, the EU Council should consider granting new EU member states which are having difficulty complying with all five convergence criteria the option to "partially adopt" the euro, along the lines of the monetary agreements signed with the European microstates outside the EU. These states would gain the right to adopt the euro and issue a national variant of euro coins, but would not get a seat in ECB or the Eurogroup until they met all the convergence criteria. However, the EU has not made use of this alternative accession process.
Fulfillment of criteria.
Reference values.
The compliance check above was conducted in June 2014, with the HICP and interest rate reference values specifically applying for the last assessment month with available data (April 2014). As reference values for HICP and interest rates are subject for monthly changes, any EU member state with a euro derogation, has the right to ask for a renewed compliance check at any time during the year. For this potential extra assessment, the table below feature Eurostat's monthly recalculation of criteria values being used in the calculation process to determine the upper limit for HICP inflation and long-term interest rates, where a certain fixed buffer value is added to the moving yearly average for the three EU Member States with the lowest HICP figures (ignoring states classified as "outliers").
The black values in the table are sourced by the officially published convergence reports, while the lime-green values are only qualified estimates – not confirmed by any official convergence report – but sourced by monthly estimation reports published by the Polish Ministry of Finance. The reason why the lime-green values are only estimates, is because the "outlier" selection – ignoring certain states from the reference value calculation – beside of depending on a quantitative assessment also depends on a more complicated overall qualitative assessment, and hence it can not be predicted with absolute certainty who of the states the Commission will deem to be outliers. So any selection of outliers by the lime-green data lines – shall only be regarded as qualified estimates – which potentially could be different from those outliers which the Commission would have selected if they had published a specific report at the concerned point of time.
The national fiscal accounts for the previous full calendar year are released each year in April (next time 23 April 2015). As the compliance check for both the debt and deficit criteria always awaits this release in a new calendar year, the first possible month to request a compliance check will be April, which would result in a data check for the HICP and Interest rates during the reference year from 1 April to 31 March. Any EU Member State may also ask the European Commission to conduct a compliance check, at any point of time during the remainder of the year, with HICP and interest rates always checked for the past 12 months – while debt and deficit compliance always will be checked for the 3-year period encompassing the last completed full calendar year and the two subsequent forecast years. As of 12 September 2014, all of the remaining euro derogation states without an opt-out, had not yet entered ERM-II, which mean its highly unlikely any of them will ask the European Commission to conduct an extraordinary compliance check ahead of the publication of the next regular convergence report (scheduled for release in May/June 2016).