Convergence criteria Totally Explained

Everything about Convergence Criteria totally explained

Convergence criteria (also known as the Maastricht criteria) are the criteria for European Union member states to enter the third stage of European Economic and Monetary Union (EMU) and adopt the euro. The four main criteria are based on Article 121(1) of the European Community Treaty. Those member countries who are to adopt the euro need to meet certain criteria.

Criteria

1. Inflation rate: No more than 1.5 percentage points higher than the three lowest inflation member states of the EU. 2. Government finance: ť Annual government deficit:

   The ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding fiscal year. If not, it's at least required to reach a level close to 3%. Only exceptional and temporary excesses would be granted for exceptional cases. ť Government debt:

   The ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year. Even if the target can't be achieved due to the specific conditions, the ratio must have sufficiently diminished and must be approaching the reference value at a satisfactory pace. 3. Exchange rate: Applicant countries should have joined the exchange-rate mechanism (ERM II) under the European Monetary System (EMS) for 2 consecutive years and shouldn't have devaluated its currency during the period. 4. Long-term interest rates: The nominal long-term interest rate must not be more than two percentage points higher than in the three lowest inflation member states.
   The purpose of setting the criteria is to maintain the price stability within the Eurozone even with the inclusion of new member states.

Fulfilment of criteria

	Convergence criteria					Obligation to adopt ⁴	Target date		Euro coins design
Country ¹	Inflation rate ²	Government finances		ERM II membership	Interest rate ³	set by the country	recommended by the Commission
Country ¹	Inflation rate ²	annual government deficit to GDP	gross government debt to GDP			set by the country
Reference value ⁵	max 3.2%	max. 3%	max. 60%	min. 2 years	max 6.5%	NA	NA	NA	NA
	9.4%	-3.4% ⁶	18%	0 years	4.7%	yes	2010-2011	NA	in progress
	4.4%	1.6%	28.7%	0 years	4.5%	yes	unset ⁸	NA	in progress
	2.1%	-3.9% ⁶	30.0%	joined ERM II on 1 January 1999	5.2%	opt-out	not yet set	NA	not yet
	8.3%	-2.8% ⁶	3.4%	joined ERM II on 28 June 2004	(4.1%)	yes	2011	To be announced	ready
	7.5%	5.5%	66%	0 years	6.9%	yes	2012-2014	NA	in progress
	12.3%	0%	9.7%	joined ERM II on 2 May 2005	5.4%	yes	2012	To be announced	ready
	7.4%	1.2%	17.3%	joined ERM II on 28 June 2004	4.6%	yes	2010	To be announced	ready
	3.2%	2.0%	45.2%	0 years	5.7%	yes	2012	NA	in progress
	5.9%	2.5%	13%	0 years	7.1%	yes	2014	NA	none yet
	2.2%	2.2%	29.4%	joined ERM II on 28 November 2005	4.5%	yes	2009	accepted	ready
	2.0%	-3.5% ⁶	40.6%	0 years	4.2%	yes	not yet set	NA	none yet
	2.1%	2.5%	42.6%	0 years ⁹	5.25%	opt-out	NA	NA	none yet
Croatia	2.7%	2.2%	40.8%	0 years		NA	NA	NA	NA
Republic of Macedonia	3.2%	0.6%	39.5%	0 years		NA	NA	NA	NA
Turkey	9.5%	0.6%	60.7%	0 years	10%	NA	NA	NA	NA
Albania	2.4%			0 years		NA	NA	NA	NA
Bosnia and Herzegovina	0.9%			0 years		NA	NA	NA	NA
Serbia				0 years		NA	NA	NA	NA
Montenegro ¹⁰				0 years ¹⁰		NA	NA	NA	NA
Kosovo ¹⁰				0 years ¹⁰		NA	NA	NA	NA

¹ Current EU member states that have not yet adopted the Euro, candidates and official potential candidates.
² No more than 1.5% higher than the 3 best-performing EU member states.
³ No more than 2% higher than the 3 best-performing EU member states.
⁴ Formal obligation for Euro adoption in the country EU Treaty of Accession or the Framework for membership negotiations.
⁵ Values from May 2007 report (External Link

). To be updated each year.
⁶ Negative deficit value means surplus.
⁷ Inflation reference value of the March 2006 report was 2.6%, thus the non-entrance of Lithuania to the Eurozone on 1.1.2007 despite that it covers the criteria currently.
⁸The Czech Republic worked with an official target date of 2010 until 2006, when both the central bank and the government officially dropped this target rate as unachievable. Some vague discussions about 2015 currently in progress, though no official target date is currently set.
⁹United Kingdom participated in the ERM-I from October 1990 to September 1992.
¹⁰Kosovo and Montenegro use the euro as their currency, but they're de jure not part of the Eurozone and aren't allowed mint any coins or print any notes. Kosovo and Montenegro don't have any national currency, so it's currently uncertain what a Kosovan and Montenegrin ERM II membership would mean.
Further Information

Get more info on 'Convergence Criteria'.

External Link Exchanges

Do you know how hard it is to get a link from a large encyclopaedia? Well we're different and will prove it. To get a link from us just add the following HTML to your site on a relevant page:

<a href="http://convergence_criteria.totallyexplained.com">Convergence criteria Totally Explained</a>

Then simply click through this link from your web page. Our crawlers will verify your link, extract the title of your web page and instantly add a link back to it. If you like you can remove the words Totally Explained and embed the link in article text.
As long as your link remains in place, we'll keep our link to you right here. Please play fair - our crawlers are watching. Your site must be closely related to this one's topic. Any kind of spamming, dubious practises or removing the link will result in your link from us being dropped and, potentially, your whole site being banned.