EU reportedly to back Croatia, Bulgaria for ERM2 entry

By bne IntelIiNews July 9, 2020

Members of the eurozone reportedly are ready to back Bosnia and Croatia for membership in the Exchange Rate Mechanism (ERM2) and the European banking union, Reuters reported on July 9, quoting four unnamed sources. 

If Bulgaria and Croatia enter ERM2, this would get them closer to adoption of the euro, in what would be the first enlargement of the eurozone since 2015.

The two countries hope to get a green light this month. According to Reuters, the decision will be taken by the end of this week by the EU’s finance ministers during a video conference.

It added that the decision would most likely be announced outside market hours to avoid any speculations.

In June, the European Central Bank (ECB) said in its latest Convergence Report that Bulgaria’s average inflation in the twelve months to the end of March 2020 is above the required for membership in the eurozone and the country’s legislation also does not meet the requirements.

Meanwhile, the country put in an extraordinary effort to meet the last requirement of the ECB for membership in the banking union, helping the locally-owned Fibank to complete its capital hike.

Croatia fulfils the price stability criterion, the criterion on public finances, and the long-term interest rate criterion but – along with the other aspiring members of the eurozone – does not yet fulfil the exchange rate criterion, as it is not yet a member of the ERM2.

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