Est. 1min 21-10-2004 (updated: 05-06-2012 ) euro.jpg Euractiv is part of the Trust Project >>> Languages: Français | DeutschPrint Email Facebook X LinkedIn WhatsApp Telegram None of the EU’s ten new member states meet all the criteria needed to join the eurozone. Lithuania comes closest while Hungary and Poland remain furthest away. The Commission-ECB report examines: the compatibility of the member states’ national legislations with the Treaty and the statute of the ECB the degree of sustainable convergence achieved by the “member states with derogation” The report applies four key convergence criteria: price stability (calculated on the basis of an average inflation rate over a period of one year) the government’s budgetary position (linked to the decisions made in accordance with the ‘excessive deficit procedure’) exchange rate stability (observance of the normal fluctuation margins of the Exchange Rate Mechanism – ERM II – for at least two years without severe tensions) the long-term interest rate (observance over a period of one year of an average nominal interest rate – 6.4 per cent in August 2004 – not exceeding by more than 2 per cent that of the three best-performing member states) Read more with Euractiv ECB warns of high cost of money if budget deficits are not cut Jean-Claude Trichet has urged governments to reinforce their efforts to obide by the Stability and Growth Pact or face higher interest rates, which would dampen growth and employment in Europe. Subscribe now to our newsletter EU Elections Decoded Email Address * Politics Newsletters PositionsThe report found that the criterion of: (1) price stability has been fulfilled by five member states (the Czech Republic, Cyprus, Estonia, Lithuania and Sweden) (2) government budgetary position (ie no 'excessive deficit') has been fulfilled by five member states (Estonia, Latvia, Lithuania, Slovenia and Sweden) (3) exchange rate stability has not been fulfilled by any member state (only Estonia, Lithuania and Slovenia are members of ERM II, but only since 28 June 2004, ie for a period of less than the required minimum of two years) (4) the long-term interest rate has been fulfilled by nine member states (the Czech Republic, Cyprus, Latvia, Lithuania, Malta, Slovenia, Slovakia and Sweden plus Estonia, where the fiscal context is different but the report found "no reason" to conclude that the country would not qualify) Member state (1) (2) (3) (4) Czech Republic YES NO NO YES Estonia YES YES NO YES Cyprus YES NO NO YES Latvia NO YES NO YES Lithuania YES YES NO YES Hungary NO NO NO NO Malta NO NO NO YES Poland NO NO NO NO Slovenia NO YES NO YES Slovakia NO NO NO YES Sweden YES YES NO YES Accordingly, none of the ten new member states yet fulfil the criteria for joining the eurozone, and all eleven states have retained the status of "member state with derogation". At the same time, Monetary Affairs Commissioner Joaquín Almunia praised the member states' efforts, adding that "the road to euro membership requires further efforts". ECB President Jean-Claude Trichet commented that "all countries have challenges" but he refused to suggest a timetable for the affected countries' accession to the euro. "Progress with fiscal consolidation has generally been too slow and a majority of countries have yet to achieve a situation which, in a broader view, might be judged as sustainable in the medium term," he said. BackgroundAt least once every two years, the Commission, in co-operation with the European Central Bank (ECB), is obliged by the Treaty to compile a report to the Council on the convergence records of the "member states with derogation". The latter term identifies those countries that have not yet adopted the EU's common currency. Accordingly, the new report covers eleven member states: the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, Slovakia (all obliged to adopt the euro) and Sweden. Sweden has not qualified for membership of the eurozone and thus belongs to the "member states with derogation" category. Denmark and the UK have chosen to be outside the eurozone for now. Given their special opt-out arrangements, they are not examined in the report. Further ReadingEU official documents GD Wirtschaft und Finanzen:Konvergenzbericht 2004[SEC(2004) 1268] (20.Oktober 2004) GD Wirtschaft und Finanzen:Kommission verabschiedet Konvergenzbericht 2004 zur Eurotauglichkeit(20.Oktober 2004) GD Wirtschaft und Finanzen:Convergence report 2004 - Technical annex Press articles Business Day:'EU newcomers not yet ready to join euro' TurkishPress:EU newcomers not yet ready to join euro: Brussels RTE News:New EU 10 not ready for euro yet FxStreet.com:ECB says most new EU members need to cut deficits to adopt euro
