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Convergence criteria

(Photo: EU Commission)

Convergence criteria

Convergence means  that countries move closer to one another. To join the single currency, the Euro, EU member states are obliged to meet four criteria, fixed in a Protocol on the excessive deficit procedure and in the treaties: 

- Price stability: The inflation rate must not exceed the inflation rate of the three top-performing member states by more than 1.5%. The European Central Bank has laid down that the annual inflation in all EU member states must be between zero and 2%. 

- Government finances: The annual budget deficit must be below 3% of GDP and overall public debt below 60% of GDP. 

- Exchange rates: For two years the currency must be in a fixed relation with the Euro without a devaluation. 

- Long-term interest rates: May not exceed the average interest rate of the three best performing member states by more than 2%. The public debt criterion can be accepted at a higher debt level if the direction of its movement is satisfactory. 

Once a country has joined the third stage of the Economic and Monetary Union, it is bound by the Stability and Growth Pact and the annual “structural deficit” may not exceed 0.5%. 

Links 

See Economic and Monetary Union

http://europa.eu/scadplus/leg/en/lvb/l25014.htm 

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