ECB PUBLISHED CONVERGENCE REPORT 2008

The European Central Bank (ECB) publishes its Convergence Report 2008, an assessment of the economic and legal convergence of ten EU Member States: Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovakia and Sweden. The report examines whether a high degree of sustainable economic convergence has been achieved in these countries. In addition, it gauges compliance with the statutory requirements to be fulfilled for national central banks to become an integral part of the Eurosystem (legal convergence), ECB reported.             

Overall, the report concludes that in recent years some countries have made progress with economic convergence, but in many countries important challenges have come to the fore, particularly in the form of rising inflation. Looking at the individual convergence criteria, the 2008 Convergence Report shows the following results.

Over the 12-month reference period from April 2007 to March 2008, the reference value for the criterion on price stability was 3.2%. Over the reference period, Slovakia and Sweden had average HICP inflation rates below the reference value, whereas Poland was at the reference value. A particularly large deviations being observed in Bulgaria, Estonia, Latvia, Lithuania and Hungary. These developments in inflation have mostly taken place against the background of dynamic economic conditions, but they also reflect external factors.

The Czech Republic, Hungary, Poland and Slovakia are currently subject to an EU Council decision on the existence of an excessive deficit. In contrast, Bulgaria, Estonia and Sweden recorded fiscal surpluses in 2007, while Latvia posted a balanced budget. As regards general government debt, only Hungary exhibited a debt ratio above the 60% of GDP reference value in 2007; in the other countries debt ratios were lower.

Among the countries examined in this Convergence Report, Estonia, Latvia, Lithuania and Slovakia are currently in ERM II. All of these currencies have participated in ERM II for more than two years before the convergence examination, and none of their central rates was devalued in the period under review. The central rate of the Slovak koruna was, however, revalued in March 2007 (see below).

Of the ten Member States examined, only Lithuanian legislation is fully compatible with the Treaty and the Statute requirements for Stage Three of Economic and Monetary Union. Slovak legislation complies with the requirements for central bank independence, while Slovakia's legal integration into the Eurosystem is in the process of being finalised. Estonian legislation complies with the requirements for central bank independence while there are incompatibility issues regarding Estonia's legal integration into the Eurosystem.

Legislation in Bulgaria, the Czech Republic, Latvia, Hungary, Poland, Romania and Sweden does not comply with all the requirements for central bank independence or legal integration into the Eurosystem. In addition, legislation in Bulgaria, the Czech Republic, Latvia, Hungary, Poland and Romania does not fully comply with the monetary financing prohibition.