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Enlargement of the eurozone is at present a continuing process within the European Union (EU). All member states of the EU, except for Denmarkmarker, the United Kingdommarker and de facto Swedenmarker, are obliged to adopt the euro as their sole currency when they meet the criteria. This includes two years in the European Exchange Rate Mechanism (ERM II) and keeping inflation inline with the EU average.

Following on from the 11 EU states who were part of the initial introduction in 1999: Greecemarker joined in 2001 before the coins and notes were released and the national currencies were retired for good; Sloveniamarker joined on 1 January 2007; Cyprusmarker and Maltamarker joined on 1 January 2008; and Slovakiamarker joined on 1 January 2009.

Out of the remaining states, the earliest expected accession would take place in 2011, though most states will not meet the criteria to join until around 2013. Denmark, which has an opt-out, is considering holding a referendum on joining, though the United Kingdom and Sweden are maintaining their current opposition to joining the eurozone. Icelandmarker on the other hand may join the EU rapidly to adopt the euro, but not before 2011.

Accession criteria

In order to join the eurozone officially, (thus being able to mint coins separately), a country must first be a member of the European Union, and then meet certain economic criteria, including accession to ERM II, which fixes the acceding country's national currency's exchange rate to the euro, within a specified band (normally ±15%).

European microstates that have monetary agreements with acceding countries can continue these agreements to mint separate coins on the accession of the larger state, but do not get a say in the economic affairs of the eurozone. This has been used to allow Monaco, San Marino and the Vatican City to mint their own coins, and Andorra is negotiating a similar agreement.

In 2009 the IMFmarker suggested that countries should be allowed to "partially adopt" the euro, which would allow them to use the euro but would not give them a seat on the European Central Bankmarker.

Historical enlargements

For an account of how the euro was introduced to the original member states, see Introduction of the euro.


Greece

Greece was first to join the eurozone after the launch of the currency in 1999. The exchange rate between the Greek drachma and the euro was fixed on 19 June 2000 at 340.750 GRD, and Greece formally joined the eurozone on 1 January 2001. Greek drachma coins and notes were replaced with euro coins and banknotes on 1 January 2002, together with all the original euro countries.

Slovenia

Slovenia was the first country to join the eurozone after the launch of the coins and banknotes. The euro replaced the Slovenian tolar on 1 January 2007. The exchange rate between the euro and tolar had been set on 11 July 2006 at 239.640 SIT, but unlike the previous launches, cash and non-cash transactions were introduced simultaneously.

Cyprus

Cyprus replaced the Cypriot pound with the euro on 1 January 2008. A formal letter of application was submitted on 13 February 2007. On 16 May 2007 the European Commissionmarker, backed by the European Central Bankmarker, gave its go-ahead for the introduction in January 2008. The final decision was taken by the EU finance ministers (Ecofin) on 10 July 2007 and the conversion rate was fixed at 0.585274 CYP. The euro is only used in the government-controlled areas of the Republic, the Sovereign Base Areas of Akrotiri and Dhekeliamarker (under UK jurisdiction, outside the EU) and in the United Nations Buffer Zone in Cyprus. The de facto Turkish Republic of Northern Cyprusmarker continues to use the new Turkish lira as its primary currency and the euro as its secondary currency.

Malta

Malta replaced the Maltese lira with the euro on 1 January 2008. The aims were officially confirmed on 26 February 2007. On 16 May 2007, the European Commissionmarker backed by the European Central Bankmarker gave its green light for the introduction in January 2008. The EU finance ministers gave the green light on 10 July 2007 and the conversion rate was fixed at 0.4293 MTL.

Slovakia

Slovakiamarker adopted the euro on 1 January 2009. The koruna was part of ERM II from 28 November 2005, requiring that it trade within 15% of an agreed central rate; this rate was changed on 17 March 2007 and again on 28 May 2008. The rate of 30.126 SKK from May 2008 was finally confirmed on 8 July 2008.

To assist the process of conversion to the euro, on 1 April 2008, the National Bank of Slovakia (NBS) announced their plan for withdrawal of the Slovak koruna notes and coins. A few days later, on 5 April 2008, Slovakia officially applied to enter the eurozone. On 7 May 2008, the European Commissionmarker approved the application and asked member states to endorse the bid during the EU finance ministers' meeting in July 2008.

Slovakia fulfilled the euro convergence criteria. At 2.2%, Slovakia's twelve-month inflation was well below the 3.2% threshold. However, for March 2008 annual inflation was 3.6%. Fiscal deficit was 2.2% versus the reference value of 3.0%. And finally, the government debt ratio was 29.4% of GDP in 2007, well below the maximum ratio of 60.0%. Public opinion supported the switch, with 58% in favour and 35% opposed, but 65% worried about the inflationary impacts of the adoption. Three months after the adoption of the currency 83 percent of Slovaks consider Slovakia's decision to adopt the euro to have been right.

ERM II members

Apart from Denmarkmarker and the United Kingdommarker, which have opt-outs under the Maastricht Treaty, all other EU members are expected to join the eurozone. The following members have acceded to ERM II, in which they must spend two years, before they can adopt the euro.

Estonia

The kroon is part of ERM II, though in practice it is pegged to the euro at a rate of 15.6466 krooni = 1 euro (it was formerly pegged to the Deutsche Mark at 8 krooni = 1 Mark). Estonia has currently no official target date for the changeover, although the last target date was for 1 January 2011. The kroon is pegged to the euro at a fixed rate, and almost all shops show prices in euro. Stamps also carry their euro face value. Estonia originally aimed to adopt the euro on 1 January 2007, but this was postponed to 1 January 2008 (because Estonia did not meet the inflation criterion) and then to 1 January 2010, but this is not official yet. The date had slipped further due to the expected inflation level. However, the April 2009 annual inflation rate as listed by the ECB is only 0.9%, which is below the limit.

On 11 November 2007, Estonian Prime Minister Andrus Ansip vowed to continue tight fiscal policies because he wanted the country to adopt the euro as soon as possible despite current high inflation. On 31 March 2009 the Estonian government said it would aim for the country to adopt the euro on January 1, 2011, but they want to keep open the possibility of joining on July 1, 2010.

On 22 May 2009, Eesti Pank suggested that Estonia might be able to fulfill the convergence criteria already in autumn 2009. On 16 June 2009, Eesti Pank expected that Estonia will be able to fulfill the convergence criteria by the end of the year and then adopt the euro not later than 1 January 2011, with the budget deficit criterion being the main obstacle.[531571][531572]

Lithuania

The Lithuanian litas is part of ERM II and in practice it is pegged to the euro at a rate of 3.45280 litai = €1. Lithuaniamarker originally set 1 January 2007 as the target date for joining the euro, but their application was rejected by the European Commission because inflation was slightly higher than the permitted maximum. In December 2006 the government approved a new convergence plan which, whilst reaffirming that the government wanted to join the eurozone "as soon as possible", said that expected inflation increases in 2007-8 would mean the best period for joining the euro would be 2010 or after. Prime Minister Gediminas Kirkilas said on 4 December 2007 that Lithuania "will be able to join the eurozone in the time frame of 2010 to 2011."

An opinion poll published in January 2007 suggested that more Lithuanians opposed euro adoption than supported it.

However, according to SEB bankas analysts, Lithuania will not be able to adopt the euro until 1 January 2013 at the earliest, due to the current high inflation, reaching 11% in October 2008, well above the Maastricht criterion of 4.2%.

Lithuania has expressed interest in a suggestion from the IMF that countries who aren't able to meet the Maastricht criteria are able to "partially adopt" the euro, using the currency but not getting a seat at the European Central Bankmarker.

Latvia

Latviamarker has been a member of the European Union since 1 May 2004 and is a member of the Economic and Monetary Union of the European Union. Its currency, the Latvian lats, is in ERM II, and floats within 15% of the central rate, Ls 0.702804 = €1. Latvia had originally planned to adopt the euro on 1 January 2008 but in 2007 this was put back to 2012 , then 2013 and later 2014.

Denmark

Denmark has pegged its krone to the euro (€1 = DKK 7.46038 ± 2.25%) and the krone remains in the ERM. In December 1992 Denmarkmarker negotiated a number of opt-out clauses from the Maastricht treaty (see Edinburgh Agreement), including not adopting the euro as currency. This was done in response to the Maastricht treaty having been rejected by the Danish people in a referendum earlier that year. As a result of the changes, the treaty was finally ratified in a subsequent referendum held in 1993. On 28 September 2000, another referendum was held in Denmark regarding the euro resulting in a 53.2% vote against joining.

On 22 November 2007, the newly re-elected Danish government declared its intention to hold a new referendum about abolishing the four opt-out clauses, including the euro, by 2011. Several polls have been done per year. During 2008 and 2009 they have generally but not always shown a support among the Danes about adopting the euro.

The economic crisis has also led to a debate within the Faroe Islandsmarker, an autonomous Danish dependency outside the EU, about whether the islands should adopt the currency along the lines of other non-EU euro users as previously they would have maintained their currency when Denmark adopts the euro.

Obliged to join

The following members must first join ERM II before they can adopt the euro:

Bulgaria

The lev is not part of ERM II, but has been pegged to the euro since its launch (1.95583 leva is 1 euro). It was previously pegged on a par to the German Mark. Hence, Bulgaria already fulfilled the great majority of the EMU membership criteria and must, from 2009, comply with the Maastricht criteria to join the eurozone in 2012, the tentative deadline set by Finance Minister Plamen Oresharski.

While the currency board which pegs Bulgaria to the euro has been seen as beneficial to the country fulfilling EMU criteria so early, the ECB has been pressuring Bulgaria to drop it as it did not know how to let a country using a currency board join the euro. The Prime Minister has stated the desire to keep the currency board until the euro was adopted. However, factors such as a high inflation, an unrealistic exchange rate with the euro and the country's low productivity are negatively affected by the system.

Bulgaria meets three and fails on one criteria in order to join the eurozone. It derogates on the price stability criterion, which envisages that its inflation does not exceed that of the three EU member states with the lowest inflation (Malta, the Netherlands and Denmark) by more than 1.5%. Bulgaria’s inflation in the 12 months to March 2008 reached 9.4%, well above the reference value of 3.2%, the report said.

On the upside, Bulgaria fulfills the state budget criterion, which foresees that the deficit does not exceed 3% of the country’s gross domestic product (GDP). Over the past few years, the report said, the country has consistently improved its budget fundamentals and since 2003, a break-even point, the budget ran surpluses and in 2007 was at 3.4% of GDP. The EC forecasts that it will remain at 3.2% of GDP in both 2008 and 2009.

In regard to public debt, Bulgaria has also been within the prescribed cap of up to 60% of GDP. Government debt has also been declining consistently, from 50% of GDP to 18% in 2007. The expectation is to reach 11% of GDP in 2009.

Some recent analysis says that Bulgaria will not be able to join the Eurozone earlier than 2015, due to the high inflation and the repercussions of the global financial crisis of 2008. However, the Bulgarian government is considering unilateral introduction of the euro, which is not seen favorably by the European Commissionmarker.

Bulgaria is expected to enter ERM2 in November 2009, but in October 2009 Prime Minister and Finance Minister Simeon Dyankov said that Bulgaria will probably apply to join the currency mechanism at the end of January 2010.

Czech Republic

The Czech Republicmarker is similarly bound by the Treaty of Accession 2003 to join the euro at some point, but this is not likely to come soon. The koruna is not part of ERM II. Since joining the EU in 2004, the Czech Republicmarker has adopted a fiscal and monetary policy that aims to align its macroeconomic conditions with the rest of the European Union. Currently, the most pressing issue is the large Czech fiscal deficit. Originally, the Czech Republic aimed for entry into the ERM II in 2008 or 2009, but the current government has officially dropped the 2010 target date, saying it will clearly not meet the economic criteria. It has been suggested that 2013 is the earliest possible changeover date.Although the country is economically better positioned than others EU Members to join the euro, it is not expected before 2015 due to the political reluctance in this subject.

On 1 January 2009 former Czech prime minister Mirek Topolánek announced that November 1, 2009 will be the date when the government will determine a date for adopting the euro, but former Finance Minister Miroslav Kalousek said the country could adopt the currency in 2013 at the earliest.

Hungary

Hungary's government has all but dropped plans to adopt the euro by the original date of 1 January 2010. Most financial studies, such as those produced by Standard & Poor's and by Fitch Ratings, suggest that Hungary will be unable to adopt the common European currency before 2011-2012, due to the country's high deficit, which in 2006 exceeded 10% of the GDP. The deficit fell below 5% of GDP in 2007, and was expected to be 3.8% at the end of 2008.

According to Reuters, central bank Governor Andras Simor expected to sit down with the government in the first half of 2009 "to discuss euro adoption". Hungary's finance minister has said that Hungary may start talks on joining ERM-2 near the end of 2009, and enter the Eurozone in 2013-2014 at the earliest.

Poland

Polandmarker is bound by the Treaty of Accession 2003 to join the euro at some point, but current indications are that this will not be for several years to come as economic criteria must be met. The złoty is not part of ERM II, itself a requirement for euro membership.

On 10 September 2008, speaking at the launch of an economic forum in a Polish resort of Krynica-Zdrójmarker, Polish Prime Minister Donald Tusk announced the ruling government's objective to join the Eurozone in 2012, by holding a referendum in 2010 and being approved by the European Central Bankmarker in 2011. However, since the Polish constitution will need to be changed first and they will have to join ERM 2 before the second quarter of 2009, this target date is still very aggressive.However the Finance Minister Dominik Radziwill said on 10 July 2009 that Poland could enter the Eurozone in 2014, meeting the fiscal criteria in 2012.

Romania

Romaniamarker is scheduled to replace the current national currency, the Romanian leu, with the euro once Romania fulfils the convergence criteria. The euro is scheduled to be adopted by Romania in 2014.

Sweden

According to the 1994 accession treaty, approved by referendum (52% in favour of the treaty), Sweden is required to join the euro if, at some point, the convergence criteria are fulfilled. However, on 14 September 2003, 56% of Swedes voted against adopting the euro in a second referendum. The Swedish government has argued that staying outside the euro is legal since one of the requirements for eurozone membership is a prior two-year membership of the ERM II; by simply choosing to stay outside the exchange rate mechanism, the Swedish government is provided a formal loophole avoiding the requirement of adopting the euro. Most of Sweden's major parties continue to believe that it would be in the national interest to join, but they have all pledged to abide by the result of the referendum for the time being and show no interest in raising the issue.

Before the September 2006 parliamentary elections, all major parties agreed not to raise the question before the next parliamentary elections (due in September 2010). The parties seem to agree that Sweden would not adopt the euro until after a second referendum. Prime Minister Fredrik Reinfeldt stated in December 2007 that there will be no referendum until there is stable support in the polls. While previously the polls showed stable support for the "no" alternative, a poll from April 2009 showed 47% yes, 45% no, and 8% uncertain.

Not obliged to join

Denmark

See above

United Kingdom

The Britishmarker currency is the pound sterling and the country has an opt-out from eurozone membership. Gordon Brown, Chancellor of the Exchequer at the time under Tony Blair's government, set "five economic tests" that must be passed before it can recommend that the UK join the euro; and pledged to hold a public referendum for deciding membership should those five economic tests be met. In addition to this own internal (national) criteria, the UK has to meet the EU's economic convergence criteria (Maastricht criteria), before being allowed to adopt the euro. As of 2008, the UK satisfies all the convergence criteria set by the EU for adoption of the euro, except membership of the ERM II.

The United Kingdom redesigned most of its coinage in 2008. The German newspaper Der Spiegel saw this as an indication that the country has no intention of switching to the euro within the foreseeable future. Though in a recent contradicting settlement the European Commissioner, José Barroso, told French radio that British politicians were considering the move because of the effects of the global credit crisis. In February 2009, Monetary Policy Affairs Commissioner Joaquin Almunia said "The chance that the British pound sterling will join: high."

The Sovereign Base Areas of Akrotiri and Dhekeliamarker introduced the euro at the same time as Cyprus, on January 1 2008. Previously, they used the Cypriot Pound. They do not have separate euro coins.

Future members

Croatia

It is assumed that Croatiamarker will soon become a member of the European Union. Negotiations are nearly finished and membership is expected in 2011. Croatia would then be obliged to eventually adopt the euro. In 2006, Croatia fulfilled the convergence criteria (inflation 2.6%, budget balance -3.0%, public debt 56.2%). However, the adoption of the euro would probably take at least three years following membership.

Iceland

Because of instability in the Icelandic króna there has been discussion in Icelandmarker about adopting the euro. However, according to Jürgen Stark, a Member of the Executive Board of the European Central Bank, "Iceland would not be able to adopt the EU currency without first becoming a member of the EU". Iceland has since then applied for EU membership. See also Iceland and the European Union.

Iceland has a problem with the convergence criteria, from 2008 and on. Inflation 10-15% (2008-2009), 1-year interest 6.5% (summer 2009) , budget deficit 24 Bn ISK, 6.9% of GNP, government debt 1400 Bn ISK (estimate end 2009, 400% of GNP). There are hopes for improvements, much lower estimated inflation in 2010, but the debt is a big problem. The Icesave dispute is a major source for this debt.

Andorra

Andorramarker is using the euro in reality, but there are discussions about allowing Andorra to enter the Eurozone more formally and to be able to mint their own euro coins. See also Andorran euro coins.

Summary of adoption progress

The new member states, who have joined the union in 2004 and later, shall adopt the euro as soon as they meet the criteria. For them, the single currency was "part of the package" of European Union membership. Unlike for the UK and Denmark, "opting out" is not permitted.

The remaining states are expected to enter the third stage of the EMU and adopt the euro at different pace: 2011 for Estoniamarker; 2012 for Bulgariamarker, Latviamarker, and Polandmarker; early 2013 for Lithuaniamarker; 2014 for Romaniamarker. The Czech Republicmarker was set to join on 1 January 2010, but can no longer do so due to economic conditions. A new date has not been set; it might not be before 2015. Hungarymarker has also abandoned its original target date 2010, without setting any new date.

On 16 May 2006, the European Commissionmarker recommended Sloveniamarker to become a new member of the eurozone. This occurred on 1 January 2007. In May 2007, the European Commission recommended the same for Cyprus and Malta, and their accession to the eurozone took place on 1 January 2008. On 7 May 2008, the European Commission recommended the same for Slovakia, which joined the eurozone on 1 January 2009.

Showing the ability to move towards full economic and monetary union is one requisite of "good membership". The ECB and European Commission produce reports every two years analysing the economic and other conditions of non-eurozone EU members, reporting on their suitability for joining the eurozone. The first to include the 10 new members was published in October 2004.

State

Target

ERM

entry

Co-

ordinating

institution

Changeover

plan

Intro-

duction

Dual

circulation

period

Exchange

till

Dual

price

display

National

mint

Coin

design

Currency

needed

Law

Commu-

nication

strategy

June 2010 or January 2011 28 June 2004 The National Changeover Committee, created on 27 January 2005 Report approved by the government on 21 June 2005. NCP will be approved in November 2005 Big-Bang

2 weeks Commercial banks 60 days, Central bank indefinitely 6 months before and after €-day No Approved

1 design
150-200 million coins Umbrella law under consideration Endorsed by the National Changeover Committee on 21 June 2005
1 January 2013 early 2010 Not yet approved 15 days Central bank: indefinitely Yes Approved

1 design
1 January 2012 Expected in 2009 Big-Bang Yes Public survey

under consideration
Not before 2013 28 June 2004 Commission for the Coordination of the Adoption of the euro in Lithuania, created on 30 May 2005 First version approved by the government on 27 September 2005 Big-Bang

60 calendar days before and after €-day Yes Approved

3 designs
118.3 million banknotes, 290 million coins Draft law on the adoption of the euro is prepared Endorsed by the government on 27 September 2005
1 January 2014 Not before 2012 Inter-institutional working group MoF-NBP Yes Not yet

decided
Not before 2014 2 May 2005 The Steering Committee for the preparation and coordination of the euro changeover was established on 18 July 2005 Approved on 6 July 2005 Big-Bang with possible phase out features 2 weeks October 2007-June 2008 No Approved

3 designs
87 million banknotes and 300 million coins
Not before 2015 Expected in 2010 Approved on 11 April 2007 Big-Bang 5 months before adoption

12 months after adoption
Yes Competition

under

consideration
230 million banknotes and 950 million coins
Not set Expected in 2009-2010 Preparatory work is ongoing in the Ministry of Finance and Magyar Nemzeti Bank (Central Bank of Hungary) Big-Bang with possible phase out features

1 month Yes Not yet

decided
Referendum to be held 1 January 1999 Yes
Not under consideration Not under consideration
Not under consideration Not under consideration


See also



References

  1. Lithuanian PM keen on fast-track euro idea, The Guardian, 2009-04-07
  2. Slovakia joins euro family, Xinhua, 2009-01-01
  3. http://www.tasr.sk/30.axd?k=20090327TBB00215
  4. Non, nein, no: Europe turns negative on the euro, The Times, 2006-12-31, Retrieved 2007-01-01
  5. Estonia govt backs 2011 euro adoption target
  6. Adoption of the euro in Lithuania, Bank of Lithuania, Retrieved 2007-01-11
  7. Euro in 2014 "at the earliest", says Latvian central bank
  8. Løgtingsmál nr. 11/2009: Uppskot til samtyktar um at taka upp samráðingar um treytir fyri evru sum føroyskt gjaldoyra (Faroese)
  9. Rich Faroe Islands may adopt euro
  10. Euro wanted as currency in Faroe Islands
  11. Bulgaria to seek eurozone entry within GERB’s term – Finance Minister
  12. http://www.sofiaecho.com/2009/10/20/802098_expert-puts-unilateral-euro-adoption-back-on-the-table
  13. Czech government to set euro adoption date on November 1 - Summary
  14. http://www.forbes.com/afxnewslimited/feeds/afx/2009/01/22/afx5951139.html
  15. http://www.forbes.com/feeds/afx/2009/07/10/afx6639963.html
  16. "UPDATE 1-EU's Almunia: high chance UK to join euro in future" in.reuters.com 02 February 2009 Link retrieved 02-02-09
  17. Iceland cannot adopt the Euro with joining EU, says Stark (sic)
  18. [1] [2] [3]
  19. http://www.novinite.com/view_news.php?id=109870



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