CONVERGENCE CRITERIA AND THEIR FULFILMENT BY THE COUNTRIES OUTSIDE THE EURO-ZONE

In order to ensure the sustainable convergence required for the achievement of economic and monetary union (EMU), the Treaty sets five convergence criteria which must be met by each Member State before it can take part in the third stage of EMU and hence before it can adopt the euro. Compliance is checked on the basis of reports produced by the Commission and the European Central Bank (ECB). The criteria are: • government finances (the Commission when drawing up its annual recommendation to the Council of Finance Ministers examines compliance with budgetary discipline on the basis of the following two criteria): o the ratio of annual government deficit to gross domestic product must not exceed 3% at the end of the preceding financial year [http://europa.eu/scadplus/leg/en/lvb/l25014.htm]; o the ratio of government debt to gross domestic product must not exceed 60% at the end of the preceding financial year; • there must be a sustainable degree of price stability and an average inflation rate, observed over a period of one year before the examination, which does not exceed by more than one and a half percentage points that of the three best performing Member States in terms of price stability during the year preceding the examination of the situation in that Member States; • there must be a long-term nominal interest rate which does not exceed by more than two percentage points that of the three best performing Member States in terms of price stability. The period taken into consideration is the year preceding the examination of the situation in the Member State concerned; • the normal fluctuation margins provided for by the exchange-rate mechanism must be respected without severe tensions for at least the last two years before the examination. [http://europa.eu/scadplus/glossary/convergence_criteria_en.htm].