Brussels, 03/05/2000 (Agence Europe) - On the initiative of Pedro Solbes, on Wednesday the European Commission approved its "convergence report" regarding Greece and Sweden (Denmark and the United Kingdom benefit from an opt out, whereas the other eleven Member States are already members of the euro zone). Regarding Greece, the Commission observed that the country now met the four convergence criteria, sine qua non condition to participate in the single currency. On the basis of this positive assessment and the convergence report published the same day by the European Central Bank, the Commission approved a draft decision to the Council by which Greece would become the twelfth Member State of the euro zone from 1 January next. This decision should be taken by the EcoFin Council following consultation with the EP and after the heads of state and government have discussed the issue at the summit in Santa Maria de Feira, on 19/20 June. As for Sweden, the Commission's report concludes that there is no reason to alter the status of the country which, although easily meets the three economic convergence criteria (price stability, situation of the public finances and convergence of interest rates), still does not satisfy the exchange rate criterion (the krona has not been part of the exchange rate mechanism for the past two years), nor is Swedish legislation regarded as being compatible with the statutes of the European System of Central Banks (insufficient independence of the Swedish Central Bank).
EUROPE recalls that this report comes two years after the first reports by the Commission and the European Monetary Institute (precursor to the ECB) published on 25 March 1998 and following the decision of the EcoFin Council of 3 May 1998 concerning Member States allowed to adopt the euro from 1 January 1999. For a Member State to be able to join the euro zone, its legislation must be compatible with the Treaty and the statutes of the ESCB; in accordance with Article 121 para 1, it must also have attained a high degree of economic convergence, this being measured in relation to criteria relating to price stability, the situation of public finances, exchange rate stability and the stability of long-term interest rates. In concrete terms, in its report, the Commission notes that the two countries concerned are positioned as following in relation to these criteria:
- Greece: a) legislation: it continues to be compatible with the Treaty and the ESCB; b) inflation: average inflation in Greece during the twelve months to March 2000 was 2%, thus below the reference value of 2.4%. Greece also meets the criterion of price stability the improvement being based on sound foundations, even though " there are risks associated with the reduction in short-term interest rates and movement of the exchange rate to its conversion rate in the approach to the adoption of the euro"; c) public finances: the public debt (which is not regarded as "excessive" since 17 December 1999) has been reduced from 10.2% of GDP in 1995 to 1.6% in 1999, or below the reference value of 3%; the debt ratio reached its highest level in 1996 at 111.3% of GDP and has since then dropped yearly to reach 104.% in 1999 (it should go down to 100% of GDP in 2001); exchange rate: the drachma has participated in the exchange rate mechanism for a total period of over two years, without there being serious tensions; e) interest rate: the long-term interest rate over the twelve month period ending last March was 6.4%, or below the reference value of 7.2%.
- Sweden. A) legislation: the legislation by which, in November 1998, Sweden amended the constitution and texts applicable to the Riksbank does not allow the Commission to overturn the negative decision is made in its 1998 convergence report; b) inflation: over the twelve month period ending in March 2000, the average rate was 0.8%, Sweden being one of the three Member states having secured the best results in this field; c) public finances: the public debt was reduced from 7.9% of GDP in 1995 to 2% in 1997 and turned into a surplus of 1.9% in 1998 and 1999; the debt ration was reduced to 65.5% of GDP in 1999 and should continue to fall in 2000 and the following years; exchange rate: the Swedish krona has never been part of the exchange rate mechanism; e) interest rate: the reference value (7.2%) has been respected constantly since 1996, the average long-term interest rate for the 12-month period ending in March 2000 having been 5.4%.
The Commission and the European Central Bank set out their conclusions before the European Economic and Monetary Committee; see pages 10/11 of this bulletin.