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Brussels, 20 October 2004

Commission adopts the 2004 Convergence Report assessing readiness for euro membership

The European Commission today adopted its Convergence Report 2004. Progress with convergence towards the requirements of EMU is examined in the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, Slovakia and Sweden. The report examines whether the Member States without an opt-out meet the convergence criteria on price stability, the government budgetary position, exchange rates and interest rates and whether they ensure compatibility of their legislation with that required for euro membership. The report indicates that none of the countries examined fulfils all conditions for adopting the euro at this stage. In this light the Commission concludes that there should be no change in the status of the eleven countries assessed as a “Member State with a derogation.”

According to EU Commissioner Joaquin Almunia, under whose responsibility the report has been drafted, “Satisfying the accession criteria has required a huge effort by all new member states. A lot of progress has been made with convergence but the road to euro membership requires further efforts. I hope that the next report in 2006 provides a good incentive for further progress.”

The convergence criteria comprise:


Five countries had inflation rates below the reference value (2.4% in August 2004), namely the Czech Republic, Estonia, Cyprus, Lithuania and Sweden, and hence fulfil the criterion.

Government budgetary position

The criterion on the government budgetary position is met when a country is not the subject of a Council decision on the existence of an excessive deficit under Article 104(6) of the Treaty. At present, five of the eleven Member States examined, namely Estonia, Latvia, Lithuania, Slovenia and Sweden, fulfil the criterion.

Exchange rate stability

The Treaty refers to the exchange rate criterion as the observance of the normal fluctuation margins of the exchange rate mechanism (ERM) of the European Monetary System for at least two years without severe tensions and in particular without devaluing against the euro. While the three currencies participating in ERM II since 28 June 2004 have been stable vis-à-vis the euro, none of the countries examined has participated in ERM II for the required period.

Long-term interest rates
Long-term interest rates were below the reference value (6.4% in August 2004) in the Czech Republic, Cyprus, Latvia, Lithuania, Malta, Slovenia, Slovakia and Sweden. These eight countries were found to meet the interest rate criterion. For Estonia, where no long-term government bonds or comparable securities are available, there are no reasons to conclude that Estonia would not fulfil the long-term interest rate criterion.

Legal compatibility

This covers the examination of the compatibility of Member State’s legislation, including the statutes of its national central bank, with Articles 108 and 109 of the Treaty and the Statute of the ESCB. Three areas are covered: (i) the objectives of the national central banks, (ii) their independence and (iii) their full integration into the European System of Central Banks before euro adoption. It is mainly in this last area that Member States examined are mainly not fully compliant.

The full convergence report is available on the following website:

[ Figures and graphics available in PDF and WORD PROCESSED]

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