A Political and Economic Dictionary of Western Europe, First Edition
The convergence criteria are the four economic tests that national economies of member countries of the European Union (EU) were required to pass in order to be eligible for membership of the final stage of Economic and Monetary Union and the euro area. These criteria were laid out in the Treaty on European Union as follows:
● Price Stability. The inflation rate of a member state must be within 1.5 percentage points of the three member states with the lowest rate during the year preceding the examination of the situation.
● Government Finances. The amount owed by a government—the annual budget deficit—must be below 3% of the total output of the economy, the gross domestic product (GDP). The total amount of money owed by government—the public debt—must be less than 60% of GDP.
● Exchange Rates.
These must be kept within the margins of the exchange rate mechanism without a break and without severe tensions for a period of two years.
● Long-term Interest Rates. These must be within 2% of the three best-performing member states in the EU.
Eleven member states met the convergence criteria to join the euro area in 1999. Greece met the criteria in 2000. Denmark, Sweden and the United Kingdom opted to keep their national currencies. The 10 states—Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia—that joined the EU on 1 May 2004 will adopt the euro only when they have fulfilled the convergence criteria.
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