All EU member states, except Denmark which benefits from an exemption, are required to adopt the common currency. However, non-compliance with this obligation is not sanctioned and many members prefer to retain the leverage provided by an independent monetary policy rather than actively working towards the adoption of the euro.
“Non-euro area Member States of the European Union (EU) have, since 2022, made limited progress towards economic convergence with the euro area, mainly due to difficult economic conditions,” says the ECB in its biannual report assessing the progress made by Bulgaria, Hungary, Poland, the Czech Republic, Romania and Sweden towards the adoption of the euro.
However, these countries face much more worrying problems than simply respecting economic criteria, added the ECB.
“Indicators published by international organizations suggest that the quality of institutions and governance in the countries under review, with the exception of Sweden, remains weaker than elsewhere in the EU.”
This deviation from the criteria for adopting the euro is largely due to the economic fallout from the war in Ukraine linked to the heavy dependence of the countries mentioned on Russia for energy.
According to the report, Hungary emerges as one of the worst performing countries.
Budapest has failed to follow rules on inflation, debt, budget deficit and long-term borrowing costs while the Hungarian forint is highly volatile. Furthermore, Hungary ignored rules related to the independence of the central bank and the ban on monetary financing of the government, the ECB said.
Poland and Romania are not doing much better: both countries only meet the criteria in terms of debt.
For its part, Bulgaria, which intends to succeed in adopting the euro next year, has not respected the inflation criteria and the ECB has declared itself concerned about the longer-term outlook.
“In the longer term, there are concerns about the sustainability of inflation convergence in Bulgaria,” the ECB said. “Sustainable convergence in Bulgaria requires stability-oriented economic policies and large-scale structural reforms.”
(Written by Balazs Koranyi; French version Pauline Foret, edited by Blandine Hénault)
