The euro has already been introduced in 20 of the 27 EU Member States. This report examines six of the seven Member States that have yet to adopt the single currency, namely Bulgaria, Czech Republic, Hungary, Poland, Romania and Sweden. These countries are committed under the Treaty on the Functioning of the European Union (hereinafter the "Treaty") to adopt the euro, which implies that they must strive to fulfil all the convergence criteria. The seventh Member State, Denmark, in 1992 notified the Council of the European Union (EU Council) of its intention not to participate in Stage Three of Economic and Monetary Union (EMU). This means that Convergence Reports need only be provided for Denmark if it so requests. Given that no such request has been submitted, Denmark is not covered in this report.
In producing this report, the ECB fulfils its requirement under Article 140 of the Treaty. Article 140 states that at least once every two years, or at the request of an EU Member State with a derogation, the ECB and the European Commission must report to the EU Council "on the progress made by the Member States with a derogation in fulfilling their obligations regarding the achievement of economic and monetary union". The six countries under review in this report have been examined as part of the regular two-year cycle. The European Commission has also prepared a report, and both reports are being submitted to the EU Council in parallel.
In this report, the ECB uses the framework applied in its previous Convergence Reports. It examines, for the six countries concerned, whether a high degree of sustainable economic convergence has been achieved, whether the national legislation is compatible with the Treaties and the Protocol on the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the "Statute of the ESCB"), and whether the statutory requirements are fulfilled for the relevant national central bank (NCB) to become an integral part of the Eurosystem.
The examination of the economic convergence process is highly dependent on the quality and integrity of the underlying statistics. The compilation and reporting of statistics must not be subject to political considerations or interference. EU Member States have been invited to consider the quality and integrity of their statistics as a matter of high priority, to ensure that a proper system of checks and balances is in place when these statistics are compiled, and to apply minimum standards in the domain of statistics. These standards are of the utmost importance in reinforcing the independence, integrity and accountability of the national statistical institutes and in supporting confidence in the quality of government finance statistics (see Chapter 6).
From 4 November 2014 it became mandatory for any EU Member State whose derogation is abrogated to join the Single Supervisory Mechanism (SSM) at the latest on the date on which it adopts the euro. At that point, all SSM-related rights and obligations start to apply to that country. Therefore, it is of the utmost importance that the necessary preparations are made. In particular, the banking system of any Member State joining the euro area, and therefore the SSM, is subject to a comprehensive assessment. Bulgaria is currently the only Member State that participates in the SSM under the close cooperation established with the ECB as part of the country's commitment to joining the banking union and the exchange rate mechanism (ERM II) simultaneously. The close cooperation framework with Българска народна банка (Bulgarian National Bank) entered into force on 1 October 2020, following the fulfilment of the necessary supervisory and legislative prerequisites. On that date, the ECB assumed responsibility for (i) the direct supervision of the significant institutions in Bulgaria, (ii) the common procedures for all supervised entities, and (iii) the oversight of less significant institutions, which continue to be supervised by the national supervisor. ECB Banking Supervision and Българска народна банка (Bulgarian National Bank) collaborated very closely to ensure the smooth integration of the national competent authority into the SSM.
This report is structured as follows. Chapter 2 describes the framework used for the examination of economic and legal convergence. Chapter 3 provides a horizontal overview of the key aspects of economic convergence. Chapter 4 contains the country summaries, which provide the main results of the examination of economic and legal convergence. Chapter 5 examines in more detail the state of economic convergence in each of the six EU Member States under review. Chapter 6 provides an overview of the convergence indicators and the statistical methodology used to compile them. Finally, Chapter 7 examines the compatibility of the national legislation of the Member States under review, including the statutes of their NCBs, with Articles 130 and 131 of the Treaty.
