EMU Convergence Criteria

EMU Convergence Criteria

privided by Princeton Economic Institute

Inflation:
A price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than 1.5% that of, at most, the three best-performing member states in terms of price stability.Public Finances:
A government budgetary position should not have an ‘excessive deficit’. This will be assessed by reference to:

1. whether the ratio of the planned or actual government deficit to GDP exceeds 3%, unless
   • either the ratio has declined substantially and continuously and reached a level that comes close to this value; or
   • alternatively , the excess over 3% is only exceptional and temporary and the ratio remains close to this value

    

2. whether the ratio of the government debt to GDP exceeds 60%, unless the ratio is sufficiently diminishing and approaching this value at a satisfactory pace.

Exchange Rate Stability:
This requires the observance of the normal fluctuation margins provided for by the ERM, for at least two years, without devaluing against the currency of any other member state, on its own initiative, and without severe tensions.

Long Term Interest Rates:
For one year before the examination, a member state must have an average nominal long term interest rate that does not exceed by more than 2% that of, at most, the three best performing member states in terms of price stability. Interest rates shall be measured on the basis of long-term government bonds or comparable securities.