Convergence criteria to be met in order to participate in the European Monetary Union

The convergence criteria are the test assessing the economic preparedness to participate in the third stage of EMU. These criteria were established by the Maastricht Treaty, ratified by all the EU Member States in 1993 and refer to:

• Price stability: the inflation rate (HICP) of a given Member State must not exceed by more than 11 percentage points that of the three best-performing Member States in terms of price stability during the year preceding the examination of the situation in that Member State and there must be a sustainable degree of price stability.
• Government finance: the sustainability of the government financial position will be apparent from having achieved a government budgetary position without a deficit that is excessive, namely: (i) the ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding financial year. If this is not the case, the ratio must have declined substantially and continuously and reached a level close to 3% or, alternatively, must remain close to 3% while representing only an exceptional and temporary excess; (ii) the ratio of gross government debt to GDP must not exceed 60% at the end of the preceding financial year. If this is not the case, the ratio must have sufficiently diminished and must be approaching 60% at a satisfactory pace.
• Long-term interest rates: the nominal long-term interest rate must not exceed by more than 2 percentage points that of, at most, the three best-performing Member States in terms of price stability. The interest rates can be measured on the basis of long-term government certificates or other comparable securities.
• Exchange rate stability: the observance of the normal fluctuation margins provided for by the exchange rate mechanism (ERM II), for at least two years, without devaluing the national currency against euro, without severe tensions, especially without devaluing its currency on its own initiative.

In January 1999, the new Exchange-rate mechanism (ERM II) replaced the Exchange-rate mechanism (ERM) with the aim to fix the currencies of the non-euro area Member States to the euro by establishing, by common accord, a fix but adjustable central rate between the euro and the respective currency with a standard fluctuation band of 15% above and below that rate. A narrower band can be established by common accord upon progress towards convergence.

Criteria of participation in ERM II

The Agreement defining the specific condition for participating in the Exchange rate mechanism II (ERM II) will be signed by the ECB President and the NBR Governor. Prior to this, the ministers of the euro area Member States the ECB and the ministers and governors of the central banks of the non-euro area Member States participating in the ERM II decide on a central rate between the euro and the RON and on the standard fluctuation band for the intervention of the participating central banks.