Convergence in the European Union in 1996
To review progress on convergence and the compatibility of national legislation with Treaty obligations, with a view to establishing whether a majority of Member States fulfilled the necessary conditions for the adoption of a single currency.
Commission report of 6 November 1996 on convergence in the European Union in 1996 [COM (96) 560 final - Not published in the Official Journal].
Substantial progress towards achieving a high degree of sustainable convergence had been made in all Member States since the beginning of the second stage of EMU. In many Member States progress gathered further momentum during 1996, especially as regards budgetary convergence.
Most Member States were still applying provisions incompatible with Articles 107 and 108 of the Treaty, in particular as far as the statutes of the central banks were concerned. Several Member States were preparing or had already brought forward proposals for relevant changes in their legislation.
Regarding price stability, the best results were obtained by Finland, the Netherlands and Germany, giving a reference value of 2.6 %. In ten Member States (Belgium, Denmark, Germany, France, Ireland, Luxembourg, the Netherlands, Austria, Finland and Sweden), average inflation rates were below the reference value. The other five Member States (Greece, Spain, Italy, Portugal and the United Kingdom) had inflation rates above the reference value but these differentials were narrowing.
Figures for 1995 showed that only three Member States (Denmark, Ireland and Luxembourg) were without an excessive government deficit in relation to the 3 % of GDP reference value. A fourth, the Netherlands, was likely to meet the budget criterion in 1996.
By the end of 1996, three Member States (France, Luxembourg and the United Kingdom) were expected to have a gross government debt to Gross Domestic Product GDP ratio below the reference value of 60 % of GDP. Germany and Finland, whose debt ratio had up to then been below the reference value, were likely to exceed the threshold by the end of 1996.
Of the eleven currencies participating in the exchange-rate mechanism, nine had been members for well over two years (the currencies of Belgium, Denmark, Germany, Spain, France, Ireland, Luxembourg, the Netherlands and Portugal). Austria joined the exchange-rate mechanism at the beginning of 1995 and Finland in mid-October 1996. Four Member States (Greece, Italy, Sweden and the United Kingdom) were not members of the exchange-rate mechanism.
The reference value for long-term interest rates was set at 8.7 %. Eleven Member States (Belgium, Denmark, Germany, France, Ireland, Luxembourg, the Netherlands, Austria, Finland, Sweden and the United Kingdom) had average interest rates below the reference value.
Judging primarily from the persistence of budgetary imbalances (although they were becoming less pronounced) in many Member States - twelve still had an excessive government deficit - it was clear that a majority of Member States had not yet made sufficient progress towards achieving a high degree of sustainable convergence.
Summary by Member State
Which Member States met the convergence criteria?
|1996||Rate of inflation||Budget deficit||Government debt||Exchange rate||Interest rate|
5) FOLLOW-UP WORK
Council Decision 96/736/EC of 13 December 1996 in accordance with Article 109 j (3) of the Treaty establishing the European Community, on entry into the third stage of economic and monetary union [Official Journal L 335 of 24.12.1996].
On the basis of the reports from the Commission and the European Monetary Institute and the recommendation from the Commission, the Council assessed, for each Member State, whether it fulfilled the necessary conditions for the adoption of the single currency. According to its assessment, a majority of Member States did not fulfil the necessary conditions. Therefore, the Community was not to embark on the third stage of EMU in 1997 and the procedure laid down in Article 109j (4) of the Treaty was to be applied as early as possible in 1998.