EN
ENError! Unknown document property name.EN
/ EUROPEANCOMMISSIONBrussels, 12.5.2010
SEC(2010) 598 final
COMMISSION STAFF WORKING DOCUMENT
CONVERGENCE REPORT 2010
Accompanying document to the
REPORT FROM THE COMMISSION
CONVERGENCE REPORT 2010
(Prepared in accordance with Article 140(1) of the Treaty)
{COM(2010) 238 final}
ENError! Unknown document property name.EN
European Commission
Directorate-General for Economic and Financial Affairs
Convergence Report 2010
EUROPEAN ECONOMYxxx/2010
Member States
BGBulgaria
CZCzech Republic
EEEstonia
LVLatvia
LTLithuania
HUHungary
PLPoland
RORomania
SESweden
EU-27European Union, 27 Member States
EU-25European Union, 25 Member States before 1 January 2007 (i.e. EU-27 excl. BG and RO)
Currencies
EUR Euro
ECU European currency unit
BGNBulgarian lev
CZKCzech koruna
EEKEstonian kroon
LVLLatvian lats
LTLLithuanian litas
HUFHungarian forint
MFIMonetary Financial Institution
PLNPolish zloty
RONRomanian leu (ROL until 30 June 2005)
SKKSlovak koruna
SEKSwedish krona
DEMDeutsche Mark
USD US dollar
SDRSpecial Drawing Rights
Other abbreviations
BoPBalance of Payments
CBACurrency board arrangement
CDSCredit Default Swaps
CEECentral and Eastern Europe
CISCommonwealth of Independent States
CPIConsumer price index
CR5Concentration ratio (aggregated market share of five banks with the largest market share)
ECBEuropean Central Bank
EDPExcessive Deficit Procedure
EMIEuropean Monetary Institute
EMUEconomic and monetary union
ERM IIExchange rate mechanism II
ESA95European System of Accounts
ESCBEuropean System of Central Banks
EurostatStatistical Office of the European Communities
FDIForeign direct investment
FSCFinancial Supervision Commission
GDPGross domestic product
HICPHarmonised index of consumer prices
ICTInformation and communications technology
MTOMedium-term objective
NCBsNational central banks
NEERNominal effective exchange rate
NPLNon-performing loans
PPSPurchasing Power Standard
R&DResearch and development
REERReal effective exchange rate
SGPStability and Growth Pact
TFEUTreaty on the Functioning of the European Union
TFPTotal factor productivity
ULC Unit labour costs
VATValue added tax
1
The Convergence Report and its Technical Annex were prepared in the Directorate-General for Economic and Financial Affairs. The main contributors were Zdeněk Čech, Anton Jevcak, Ewa Klima, Paul Kutos, Géraldine Mahieu, Laura Ruud, Sara Tägtström, Milda Valentinaite and Joachim Wadefjord.
Other contributors were Benjamin Angel, Sean Berrigan, Piotr Bogumil, Lina Bukeviciute Georg Busch, Adriaan Dierx, Gatis Eglitis, Balazs Forgo, Malgorzata Galar, Olivia Galgau, Agne Geniusaite, Nikolay Gertchev, Gabriele Giudice, Oskar Grevesmuhl, Isabel Grilo, Zoltan Gyenes, Renata Hruzova, Fabienne Ilzkovitz, Barbara Kauffmann, Filip Keereman, Julda Kielyte, Daniel Kosicki, Bozhil Kostov, Baudouin Lamine, João Nogueira Martins, Olivia Mollen, Balazs Parkanyi, Julien Rousselon, Aleksander Rutkowski, Dominique Simonis, Harald Stieber, Michal Strojwas, Ingrid Toming, Mariana Tomova, Corina Weidinger Sosdean, Ralph Wilkinson and Markus Wintersteller.
Statistical assistance was provided by Gerda Symens and André Verbanck.
The report was coordinated by Massimo Suardi and approved by Servaas Deroose, Acting Deputy Director General, and Marco Buti, Director General.
Questions and comments may be referred to Géraldine Mahieu ().
1
Convergence Report 20101
Convergence Report 2010 - Technical annex3
1.Introduction5
1.1.Role of the report5
1.2.Application of the criteria7
1.2.1.Compatibility of legislation7
1.2.2.Price stability7
1.2.3.Government budgetary position10
1.2.4.Exchange rate stability12
1.2.5.Long-term interest rates13
1.2.6.Additional factors14
2.Bulgaria17
2.1.Legal compatibility17
2.1.1.Introduction17
2.1.2.Objectives17
2.1.3.Independence17
2.1.4.Integration in the ESCB18
2.1.5.Prohibition of monetary financing18
2.1.6.Assessment of compatibility18
2.2.Price Stability19
2.2.1.Respect of the reference value19
2.2.2.Recent inflation developments19
2.2.3.Underlying factors and sustainability of inflation20
2.3.Government budgetary position24
2.3.1.Developments 2004-200924
2.3.2.Medium-term prospects25
2.4.Exchange rate stability27
2.5.Long-term interest rate29
2.6.Additional factors30
2.6.1.Developments of the balance of payments30
2.6.2.Product market integration31
2.6.3.Financial market integration33
3.Czech Republic35
3.1.Legal compatibility35
3.1.1.Introduction35
3.1.2.Objectives35
3.1.3.Independence35
3.1.4.Integration in the ESCB35
3.1.5.Prohibition of monetary financing36
3.1.6.Assessment of compatibility36
3.2.Price stability37
3.2.1.Respect of the reference value37
3.2.2.Recent inflation developments37
3.2.3.Underlying factors and sustainability of inflation37
3.3.Government budgetary position41
3.3.1.The excessive deficit procedure for the Czech republic41
3.3.2.Developments until 200941
3.3.3.Medium-term prospects42
3.4.Exchange rate stability44
3.5.Long-term interest rate45
3.6.Additional factors46
3.6.1.Developments of the balance of payments46
3.6.2.Product market integration47
3.6.3.Financial market integration49
4.Estonia51
4.1.Legal compatibility51
4.1.1.Introduction51
4.1.2.Objectives51
4.1.3.Independence51
4.1.4.Integration in the ESCB51
4.1.5.Prohibition of monetary financing52
4.1.6.Assessment of compatibility52
4.2.Price stability53
4.2.1.Respect of the reference value53
4.2.2.Recent inflation developments53
4.2.3.Underlying factors and sustainability of inflation53
4.3.Government budgetary position58
4.3.1.Developments 2004-200958
4.3.2.Medium-term prospects58
4.4.Exchange rate stability61
4.5.Long-term interest rates63
4.6.Additional factors65
4.6.1.Developments of the balance of payments65
4.6.2.Product market integration66
4.6.3.Financial market integration68
5.Latvia71
5.1.Legal compatibility71
5.1.1.Introduction71
5.1.2.Objectives71
5.1.3.Independence71
5.1.4.Integration in the ESCB72
5.1.5.Prohibition of monetary financing72
5.1.6.Assessment of compatibility72
5.2.Price stability73
5.2.1.Respect of the reference value73
5.2.2.Recent inflation developments73
5.2.3.Underlying factors and sustainability of inflation74
5.3.Government budgetary position78
5.3.1.The excessive deficit procedure for Latvia()78
5.3.2.Developments 2004-200978
5.3.3.Medium-term prospects79
5.4.Exchange rate stability82
5.5.Long-term interest rate84
5.6.Additional factors85
5.6.1.Developments of the balance of payments85
5.6.2.Product market integration87
5.6.3.Financial market integration89
6.Lithuania93
6.1.Legal compatibility93
6.1.1.Introduction93
6.1.2.Objectives93
6.1.3.Independence93
6.1.4.Integration in the ESCB93
6.1.5.Prohibition of monetary financing93
6.1.6.Assessment of compatibility93
6.2.Price stability94
6.2.1.Respect of the reference value94
6.2.2.Recent inflation developments94
6.2.3.Underlying factors and sustainability of inflation94
6.3.Government budgetary position98
6.3.1.The excessive deficit procedure for Lithuania()98
6.3.2.Developments 2004-200998
6.3.3.Medium-term prospects99
6.4.Exchange rate stability101
6.5.Long-term interest rate103
6.6.Additional factors104
6.6.1.Developments of the balance of payments104
6.6.2.Product market integration105
6.6.3.Financial market integration107
7.Hungary109
7.1.Legal compatibility109
7.1.1.Introduction109
7.1.2.Objectives109
7.1.3.Independence109
7.1.4.Integration in the ESCB109
7.1.5.Prohibition of monetary financing110
7.1.6.Assessment of compatibility111
7.2.Price stability112
7.2.1.Respect of the reference value112
7.2.2.Recent inflation developments112
7.2.3.Underlying factors and sustainability of inflation112
7.3.Government budgetary position116
7.3.1.The excessive deficit procedure for Hungary()116
7.3.2.Developments 2004-2009116
7.3.3.Medium-term prospects117
7.4.Exchange rate stability120
7.5.Long-term interest rate122
7.6.Additional factors123
7.6.1.Developments of the balance of payments123
7.6.2.Product market integration124
7.6.3.Financial market integration126
8.Poland129
8.1.Legal compatibility129
8.1.1.Introduction129
8.1.2.Objectives129
8.1.3.Independence129
8.1.4.Integration in the ESCB130
8.1.5.Prohibition of monetary financing130
8.1.6.Assessment of compatibility131
8.2.Price stability132
8.2.1.Respect of the reference value132
8.2.2.Recent inflation developments132
8.2.3.Underlying factors and sustainability of inflation133
8.3.Government budgetary position137
8.3.1.The excessive deficit procedure for Poland()137
8.3.2.Developments 2004-2009137
8.3.3.Medium-term prospects138
8.4.Exchange rate stability140
8.5.Long-term interest rate142
8.6.Additional factors143
8.6.1.Developments of the balance of payments143
8.6.2.Product market integration144
8.6.3.Financial market integration146
9.Romania149
9.1.Legal compatibility149
9.1.1.Introduction149
9.1.2.Objectives149
9.1.3.Independence149
9.1.4.Integration in the ESCB150
9.1.5.Prohibition of monetary financing150
9.1.6.Assessment of compatibility151
9.2.Price stability152
9.2.1.Respect of the reference value152
9.2.2.Recent inflation developments152
9.2.3.Underlying factors and sustainability of inflation153
9.3.Government budgetary position156
9.3.1.The excessive deficit procedure for Romania()156
9.3.2.Developments 2004-2009156
9.3.3.Medium-term prospects157
9.4.Exchange rate stability159
9.5.Long-term interest rate161
9.6.Additional factors162
9.6.1.Developments of the balance of payments162
9.6.2.Product market integration163
9.6.3.Financial market integration165
10.Sweden169
10.1.Legal compatibility169
10.1.1.Introduction169
10.1.2.Objectives169
10.1.3.Independence169
10.1.4.Integration in the ESCB169
10.1.5.Prohibition of monetary financing170
10.1.6.Assessment of compatibility170
10.2.Price stability171
10.2.1.Respect of the reference value171
10.2.2.Recent inflation developments171
10.2.3.Underlying factors and sustainability of inflation171
10.3.Government budgetary position175
10.3.1.Developments 2004-2009175
10.3.2.Medium-term prospects175
10.4.Exchange rate stability177
10.5.Long-term interest rate178
10.6.Additional factors179
10.6.1.Developments of the balance of payments179
10.6.2.Product market integration180
10.6.3.Financial market integration181
LIST OF Tables
2.2.1.Bulgaria - Components of inflation20
2.2.2.Bulgaria - Other inflation and cost indicators21
2.3.1.Bulgaria - Budgetary developments and projections25
2.6.1.Bulgaria - Balance of payments31
2.6.2.Bulgaria - Product market integration32
3.2.1.Czech Republic - Components of inflation38
3.2.2.Czech Republic - Other inflation and cost indicators39
3.3.1.Czech Republic - Budgetary developments and projections42
3.6.1.Czech Republic - Balance of payments47
3.6.2.Czech Republic - Product market integration48
4.2.1.Estonia - Components of inflation54
4.2.2.Estonia - Other inflation and cost indicators55
4.3.1.Estonia - Budgetary developments and projections60
4.6.1.Estonia - Balance of payments66
4.6.2.Estonia - Product market integration68
5.2.1.Latvia - Components of inflation74
5.2.2.Latvia - Other inflation and cost indicators75
5.3.1.Latvia - Budgetary developments and projections79
5.6.1.Latvia - Balance of payments86
5.6.2.Latvia - Product market integration88
6.2.1.Lithuania - Components of inflation95
6.2.2.Lithuania - Other inflation and cost indicators96
6.3.1.Lithuania - Budgetary developments and projections99
6.6.1.Lithuania - Balance of payments105
6.6.2.Lithuania - Product market integration106
7.2.1.Hungary - Components of inflation113
7.2.2.Hungary - Other inflation and cost indicators114
7.3.1.Hungary - Budgetary developments and projections117
7.6.1.Hungary - Balance of payments124
7.6.2.Hungary - Product market integration125
8.2.1.Poland - Components of inflation133
8.2.2.Poland - Other inflation and cost indicators134
8.3.1.Poland - Budgetary developments and projections138
8.6.1.Poland - Balance of payments144
8.6.2.Poland - Product market integration145
9.2.1.Romania - Components of inflation153
9.2.2.Romania - Other inflation and cost indicators154
9.3.1.Romania - Budgetary developments and projections157
9.6.1.Romania - Balance of payments163
9.6.2.Romania - Product market integration165
10.2.1.Sweden - Components of inflation172
10.2.2.Sweden - Other inflation and cost indicators173
10.3.1.Sweden - Budgetary developments and projections176
10.6.1.Sweden - Balance of payments179
10.6.2.Sweden - Product market integration181
LIST OF Graphs
2.2.1.Bulgaria - Inflation criterion since 200419
2.2.2.Bulgaria - HICP inflation19
2.2.3.Bulgaria - Inflation, productivity and wage trends21
2.4.1.Exchange rates - BGN/EUR27
2.4.2.Bulgaria - 3-M Sofibor spread to 3-M Euribor27
2.5.1.Bulgaria - Long-term interest rate criterion29
2.5.2.Bulgaria - Long-term interest rates29
2.6.1.Bulgaria - Saving and investment30
2.6.2.Bulgaria - Effective exchange rates30
2.6.3.Bulgaria - Recent development of the financial system relatively to the euro area33
2.6.4.Bulgaria - Foreign ownership and concentration in the banking sector33
2.6.5.Bulgaria - selected banking sector soundness indicators relatively to the euro area34
2.6.6.Bulgaria - Recent developments in bank credit to households and corporations relatively to the euro area34
2.6.7.Bulgaria - Share of foreign currency loans (as percentage of total loans to households / corporations)34
3.2.1.Czech Republic - Inflation criterion since 200437
3.2.2.Czech Republic - HICP inflation37
3.2.3.Czech Republic - Inflation, productivity and wage trends38
3.4.1.Exchange rates - CZK/EUR44
3.4.2.Czech Republic - 3-M Pribor spread to 3-M Euribor44
3.5.1.Czech Republic - Long-term interest rate criterion45
3.5.2.Czech Republic - Long-term interest rates45
3.6.1.Czech Republic - Saving and investment46
3.6.2.Czech Republic - Effective exchange rates46
3.6.3.Czech Republic - Recent development of the financial system relatively to the euro area49
3.6.4.Czech Republic - Foreign ownership and concentration in the banking sector49
3.6.5.Czech Republic - selected banking sector soundness indicators relatively to the euro area50
3.6.6.Czech Republic - Recent developments in bank credit to households and corporations relatively to the euro area 50
3.6.7.Czech Republic - Share of foreign currency loans (as percentage of total loans to households / corporations)50
4.2.1.Estonia - Inflation criterion since 200453
4.2.2.Estonia - HICP inflation53
4.2.3.Estonia - Inflation, productivity and wage trends55
4.4.1.EEK - Spread vs central rate61
4.4.2.Exchange rates - EEK/EUR61
4.4.3.Estonia - 3-M Talibor spread to 3-M Euribor62
4.5.1.Estonia - Interest rate indicator63
4.6.1.Estonia - Effective exchange rates65
4.6.2.Estonia - Saving and investment65
4.6.3.Estonia - Recent development of the financial system relatively to the euro area68
4.6.4.Estonia - Foreign ownership and concentration in the banking sector69
4.6.5.Estonia - selected banking sector soundness indicators relatively to the euro area69
4.6.6.Estonia - Recent developments in bank credit to households and corporations relatively to the euro area69
4.6.7.Estonia - Share of foreign currency loans (as percentage of total loans to households / corporations)69
5.2.1.Latvia - Inflation criterion since 200473
5.2.2.Latvia - HICP inflation73
5.2.3.Latvia - Inflation, productivity and wage trends76
5.4.1.LVL - Spread vs central rate82
5.4.2.Exchange rates - LVL/EUR82
5.4.3.Latvia - 3-M Rigibor spread to 3-M Euribor83
5.5.1.Latvia - Long-term interest rate criterion84
5.5.2.Latvia - Long-term interest rates84
5.6.1.Latvia - Saving and investment85
5.6.2.Latvia - Effective exchange rates85
5.6.3.Latvia - Banking sector rescue measures relatively to the euro area89
5.6.4.Latvia - Recent development of the financial system relatively to the euro area89
5.6.5.Latvia - Foreign ownership and concentration in the banking sector89
5.6.6.Latvia - selected banking sector soundness indicators relatively to the euro area90
5.6.7.Latvia - Recent developments in bank credit to households and corporations relatively to the euro area90
5.6.8.Latvia - Share of foreign currency loans (as percentage of total loans to households / corporations)90
6.2.1.Lithuania - Inflation criterion since 200494
6.2.2.Lithuania - HICP inflation94
6.2.3.Lithuania - Inflation, productivity and wage trends96
6.4.1.LTL - Spread vs central rate101
6.4.2.Exchange rates - LTL/EUR101
6.4.3.Lithuania - 3-M Vilibor spread to 3-M Euribor101
6.5.1.Lithuania - Long-term interest rate criterion103
6.5.2.Lithuania - Long-term interest rates103
6.6.1.Lithuania - Saving and investment104
6.6.2.Lithuania - Effective exchange rates104
6.6.3.Lithuania - Recent development of the financial system relatively to the euro area107
6.6.4.Lithuania - Foreign ownership and concentration in the banking sector107
6.6.5.Lithuania - selected banking sector soundness indicators relatively to the euro area107
6.6.6.Lithuania - Recent developments in bank credit to households and corporations relatively to the euro area108
6.6.7.Lithuania - Share of foreign currency loans (as percentage of total loans to households / corporations)108
7.2.1.Hungary - Inflation criterion since 2004112
7.2.2.Hungary - HICP inflation112
7.2.3.Hungary - Inflation, productivity and wage trends114
7.4.1.Exchange rates - HUF/EUR120
7.4.2.Hungary - 3-M Bubor spread to 3-M Euribor120
7.5.1.Hungary - Long-term interest rate criterion122
7.5.2.Hungary - Long-term interest rates122
7.6.1.Hungary - Saving and investment123
7.6.2.Hungary - Effective exchange rates123
7.6.3.Hungary - Banking sector rescue measures relatively to the euro area126
7.6.4.Hungary - Recent development of the financial system relatively to the euro area126
7.6.5.Hungary - Foreign ownership and concentration in the banking sector126
7.6.6.Hungary - selected banking sector soundness indicators relatively to the euro area127
7.6.7.Hungary - Recent developments in bank credit to households and corporations relatively to the euro area127
7.6.8.Hungary - Share of foreign currency loans (as percentage of total loans to households / corporations)127
8.2.1.Poland - Inflation criterion since 2004132
8.2.2.Poland - HICP inflation132
8.2.3.Poland - Inflation, productivity and wage trends134
8.4.1.Exchange rates - PLN/EUR140
8.4.2.Poland - 3-M Wibor spread to 3-M Euribor140
8.5.1.Poland - Long-term interest rate criterion142
8.5.2.Poland - Long-term interest rates142
8.6.1.Poland - Saving and investment143
8.6.2.Poland - Effective exchange rates143
8.6.3.Poland - Recent development of the financial system relatively to the euro area146
8.6.4.Poland - Foreign ownership and concentration in the banking sector147
8.6.5.Poland - selected banking sector soundness indicators relatively to the euro area147
8.6.6.Poland - Recent developments in bank credit to households and corporations relatively to the euro area147
8.6.7.Poland - Share of foreign currency loans (as percentage of total loans to households / corporations)147
9.2.1.Romania - Inflation criterion since 2004152
9.2.2.Romania - HICP inflation152
9.2.3.Romania - Inflation, productivity and wage trends154
9.4.1.Exchange rates - RON/EUR159
9.4.2.Romania - 3-M Robor spread to 3-M Euribor160
9.5.1.Romania - Long-term interest rate criterion161
9.5.2.Romania - Long-term interest rates161
9.6.1.Romania - Saving and investment162
9.6.2.Romania - Effective exchange rates162
9.6.3.Romania - Recent development of the financial system relatively to the euro area166
9.6.4.Romania - Foreign ownership and concentration in the banking sector166
9.6.5.Romania - selected banking sector soundness indicators relatively to the euro area166
9.6.6.Romania - Share of foreign currency loans (as percentage of total loans to households / corporations)167
9.6.7.Romania - Recent developments in bank credit to households and corporations relatively to the euro area167
10.2.1.Sweden - Inflation criterion since 2004171
10.2.2.Sweden - HICP inflation171
10.2.3.Sweden - Inflation, productivity and wage trends173
10.4.1.Exchange rates - SEK/EUR177
10.4.2.Sweden - 3-M Stibor spread to 3-M Euribor177
10.5.1.Sweden - Long-term interest rate criterion178
10.5.2.Sweden - Long-term interest rates178
10.6.1.Sweden - Saving and investment180
10.6.2.Sweden - Effective exchange rates180
10.6.3.Sweden - Banking sector rescue measures relatively to the euro area effective amounts181
10.6.4.Sweden - Recent development of the financial system relatively to the euro area182
10.6.5.Sweden - Foreign ownership and concentration in the banking sector182
10.6.6.Sweden - selected banking sector soundness indicators relatively to the euro area182
10.6.7.Sweden - Recent developments in bank credit to households and corporations relatively to the euro area182
10.6.8.Sweden - Share of foreign currency loans (as percentage of total loans to households / corporations)182
LIST OF Boxes
1.1.1.Article 140 of the Treaty6
1.2.1.Assessment of price stability and the reference value8
1.2.2.Excessive deficit procedure11
1.2.3.Data for the interest rate convergence criterion14
1
Report
1
Convergence Report 2010 - Technical annex
Chapter 1 - Introduction
1.1.Role of the report
The euro was introduced on 1 January 1999 by eleven Member States, following several years of successful adjustment efforts to achieve a high degree of sustainable convergence. The decision([1]) by the Council (meeting in the composition of the Heads of State or Government) on 3 May 1998 in Brussels on the eleven Member States deemed ready to participate in the single currency had, in accordance with the Treaty (Article 121(4) TEC)([2]), been prepared by the Ecofin Council on a recommendation from the Commission. The decision was based on the two Convergence Reports made by the Commission([3]) and the European Monetary Institute (EMI), respectively([4]). These reports, prepared in accordance with Article 121(1) TEC([5]), examined in considerable detail whether the Member States satisfied the convergence criteria and met the legal requirements.
Since then, Greece (2001), Slovenia (2007), Cyprus and Malta (2008) and Slovakia (2009) have joined the euro.
Those Member States which are assessed as not fulfilling the necessary conditions for the adoption of the euro are referred to as "Member States with a derogation". Article 140 of the Treaty lays down provisions and procedures for examining the situation of Member States with a derogation (Box 1.1). At least once every two years, or at the request of a MemberState with a derogation, the Commission and the European Central Bank (ECB) prepare Convergence Reports on such Member States. Denmark and the United Kingdom negotiated opt-out arrangements before the adoption of the Maastricht Treaty([6]) and do not participate in the third stage of EMU. Until these Member States indicate that they wish to participate in the third stage and join the euro, they are not the subject of an assessment as to whether they fulfil the necessary conditions.
In 2008, the Commission and the ECB adopted their latest regular Convergence Reports([7]). In parallel, on 4 April 2008 Slovakia submitted a request for an assessment of the fulfilment of the necessary conditions to adopt the euro on 1 January 2009. Following the Convergence Reports and on the basis of a proposal by the Commission, the Ecofin Council decided in July 2008 that Slovakia fulfilled the necessary conditions for adopting the euroas of 1 January 2009([8]). None of the other Member States assessed was deemed to meet the necessary conditions for adopting the euro.
In 2010, two years will have elapsed since the last regular reports were made. Denmark and the United Kingdom have not expressed a wish to enter the third stage of EMU. Therefore, this convergence assessment covers : Bulgaria, the CzechRepublic, Estonia, Latvia,Lithuania,Hungary, Poland, Romania and Sweden. This Commission services' Working Paper is a Technical Annex to the Convergence Report 2010 and includes a detailed assessment of the progress with convergence. The remainder of the first chapter presents the methodology used for application of the assessment criteria. Chapters 2 to 10 examine, on a country-by-country basis, fulfilment of the convergence criteria and other requirements in the order as they appear in Article 140(1). The cut-off date for the statistical data included in this Convergence Report was 23April 2010.
1
Convergence Report 2010 - Technical annex
Chapter 1 - Introduction
1.2.Application of the criteria
In accordance with Article 140(1) of the Treaty, the Convergence Reports shall examine the compatibility of national legislation with Articles 130 and 131 of the Treaty and the Statute of the European System of Central Banks (ESCB) and of the European Central Bank. The reports shall also examine the achievement of a high degree of sustainable convergence by reference to the fulfilment of the four convergence criteria dealing with price stability, the government budgetary position, exchange rate stability and long term interest rates as well as some additional factors (Box 1.2.1.). The four convergence criteria are developed further in a Protocol annexed to the Treaty (Protocol No 13 on the convergence criteria).
1.2.1.Compatibility of legislation
In accordance with Article 140(1) of the Treaty, the legal examination includes an assessment of compatibility between a MemberState’s legislation, including the statute of its national central bank, and Articles 130 and 131 of the Treaty and the Statute of the ESCB/ECB. This assessment mainly covers three areas. First, the objectives of the national central bank must be examined, in order to verify their compatibility with the objectives of the ESCB as formulated in Article 2 of the Statute of the ESCB/ECB. The ESCB’s primary objective is to maintain price stability. Without prejudice to this objective, it shall support the general economic policies in the Union. Second, the independence of the national central bank and of the members of its decision-making bodies (Article 130) must be assessed. This assessment covers all issues linked to a national central bank's institutional and financial independence and to the personal independence of the members of its decision-making bodies. Third, the integration of the national central bank into the ESCB has to be examined, in order to ensure that the national central bank acts in accordance with the ECB’s guidelines and instructions once the MemberState concerned has adopted the euro.