None of the countries in Central and Southeast Europe committed to adopting the euro — Bulgaria, the Czech Republic, Croatia, Hungary, Poland and Romania — meet all the formal criteria to join the euro area, the European Commission said on May 23 in its 2018 Convergence Report.
Two of the member states, Bulgaria and Croatia, fulfil all of the convergence criteria except for the exchange rate criterion, as they are not members of the Exchange Rate Mechanism.
The Croatian former economy minister Martina Dalic said earlier in May that Croatia is likely to introduce the euro as official currency in five to seven years. In October, Prime Minister Andrej Plenkovic said the Adriatic country plans to enter the Eurozone waiting room — the European Exchange Rate Mechanism (ERM2) — before 2020. To join the Eurozone, countries should participate in the ERM II for at least two years without strong deviations from the ERM II central rate. Plenkovic said on May 10 that the country is now ready to start the process of introducing the euro, according to hrt.hr.
Bulgaria has also shown optimism regarding the adoption of the European single currency. Prime Minister Boyko Borissov said on April 26 he expects his country to join the ERM2 within a year.
Bulgaria, which joined the EU in 2007, had high hopes of making progress in further integration within the bloc during its EU Council presidency in the first half of this year. In January, Finance Minister Vladislav Goranov announced Bulgaria would most likely apply to join ERM2 in the first half of 2018, though Sofia has had mixed messages from EU officials.
On the same day, the European Central Bank delivered a blow to Sofia's hopes of speedy adoption of the single currency with its own report, in which expressed concerns in particular over inflation and the independence of the central bank.
The convergence criteria include price stability, sound public finances, exchange rate stability and convergence in long-term interest rates. The compatibility of national legislation with the rules of the Economic and Monetary Union is also assessed.
According to the report, all concerned member states fulfil the criterion on public finances, while Bulgaria, the Czech Republic, Croatia and Hungary fulfil the long-term interest rate criterion. Bulgaria, Croatia and Poland meet the price stability criterion. Out of the analysed countries, the legislation is fully compatible with the rules of the Economic and Monetary Union only in Croatia.
The report noted that in Bulgaria, in terms of compliance with the rules of the Economic and Monetary Union, incompatibilities and imperfections exist in the fields of central bank independence and the prohibition of monetary financing. However, the country fulfils the criteria on price stability, public finances and the convergence of long-term interest rates.
Neighbouring Romania meets only one of the criteria for joining the euro zone, that on public finances. The report noted that in terms of legislation, incompatibilities concern the independence of the central bank, the prohibition of monetary financing and central bank integration into the ESCB at the time of euro adoption. Romania does not fulfil the criterion on price stability either. The average inflation rate in the country during the 12 months to March 2018 was 1.9% and is expected to rise. Romania does not fulfil the criterion on the convergence of long-term interest rates. The average long-term interest rate in Romania in the year to March 2018 was 4.1%, above the reference value of 3.2%.