Decision 2022/1211 - Adoption by Croatia of the euro on 1 January 2023 - Main contents

EN

Official Journal of the European Union

L 187/31

The third stage of economic and monetary union (‘EMU’) started on 1 January 1999. The Council, meeting in Brussels on 3 May 1998 in the composition of Heads of State or Government, decided that Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland fulfilled the necessary conditions for adopting the euro on 1 January 1999 (5).

By Decision 2000/427/EC (6), the Council decided that Greece fulfilled the necessary conditions for adopting the euro on 1 January 2001. By Decision 2006/495/EC (7), the Council decided that Slovenia fulfilled the necessary conditions for adopting the euro on 1 January 2007. By Decisions 2007/503/EC (8) and 2007/504/EC (9), the Council decided that Cyprus and Malta fulfilled the necessary conditions for adopting the euro on 1 January 2008. By decision 2008/608/EC (10), the Council decided that Slovakia fulfilled the necessary conditions for adopting the euro. By decision 2010/416/EU (11) the Council decided that Estonia fulfilled the necessary conditions for adopting the euro. By decision 2013/387/EU (12) the Council decided that Latvia fulfilled the necessary conditions for adopting the euro. By decision 2014/509/EU (13) the Council decided that Lithuania fulfilled the necessary conditions for adopting the euro.

In accordance with point 1 of Protocol No 16 on certain provisions relating to Denmark annexed to the Treaty establishing the European Community and with the Decision taken by the Heads of State or Government in Edinburgh in December 1992, Denmark has notified the Council that it will not participate in the third stage of EMU. Denmark has not requested that the procedure referred to in Article 140(2) of the Treaty on the Functioning of the European Union (TFEU) be initiated.

By virtue of Decision 98/317/EC, Sweden is a Member State with a derogation within the meaning of Article 139(1) TFEU. In accordance with Article 4 of the 2003 Act of Accession (14), the Czech Republic, Hungary and Poland are each Member States with a derogation within the meaning of Article 139(1) TFEU. In accordance with Article 5 of the 2005 Act of Accession (15), Bulgaria and Romania are each Member States with a derogation within the meaning of Article 139(1) TFEU. In accordance with Article 5 of the 2012 Act of Accession (16), Croatia is a Member State with a derogation within the meaning of Article 139(1) TFEU.

The European Central Bank (‘ECB’) was established on 1 July 1998. The European Monetary System has been replaced by an exchange rate mechanism, the setting-up of which was agreed by the Resolution of the European Council on the establishment of an exchange-rate mechanism in the third stage of economic and monetary union of 16 June 1997 (17). The procedures for an exchange-rate mechanism in stage three of economic and monetary union (ERM II) were laid down in the Agreement of 16 March 2006 between the European Central Bank and the national central banks of the Member States outside the euro area laying down the operating procedures for an exchange rate mechanism in stage three of economic and monetary union (18).

Article 140(2) TFEU lays down the procedures for abrogating the derogations of the Member States concerned. At least once every two years, or at the request of a Member State with a derogation, the Commission and the ECB are to report to the Council in accordance with the procedure laid down in Article 140(1) TFEU.

National legislation in the Member States, including the statutes of national central banks, is to be adapted as necessary with a view to ensuring compatibility with Articles 130 and 131 TFEU and with the Statute of the European System of Central Banks and of the European Central Bank (‘Statute of the ESCB and of the ECB’). The reports of the Commission and the ECB provide a detailed assessment of the compatibility of the legislation of Croatia with Articles 130 and 131 of the Treaty and with the Statute of the ESCB and of the ECB.

In accordance with Article 1 of Protocol No 13 on the convergence criteria annexed to the TFEU, the criterion on price stability referred to in the first indent of Article 140(1) TFEU means that a Member State has a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than one and a half percentage points that of, at most, the three best performing Member States in terms of price stability. For the purpose of the criterion on price stability, inflation is measured by the harmonised indices of consumer prices (HICPs) defined in Regulation (EU) 2016/792 of the European Parliament and of the Council (19). To assess the price stability criterion, a Member State’s inflation is measured by the percentage change in the arithmetic average of 12 monthly indices, relative to the arithmetic average of 12 monthly indices from the previous period. A reference value calculated as the simple arithmetic average of the inflation rates of the three best-performing Member States in terms of price stability, plus 1,5 percentage points, was used in the reports of the Commission and the ECB. In the one-year period ending in April 2022, the inflation reference value was calculated to be 4,9 %, with France, Finland and Greece as the three best-performing Member States in terms of price stability, with inflation rates of 3,2 %, 3,3 % and 3,6 %, respectively. It is warranted to exclude from the best performers countries the inflation rates of which cannot be seen as a meaningful benchmark for other Member States. Such outliers were in the past identified in 2004, 2010, 2013, 2014 and 2016. Currently, it is warranted to exclude Malta and Portugal from the best performers – in April 2022, the 12-month average inflation rates of Malta and Portugal were respectively 2,1 % and 2,6 % and that of the euro area 4,4 %. For the calculation of the reference value, Malta and Portugal are replaced by Finland and Greece, the Member States with the next-lowest average inflation rates.

In accordance with Article 2 of Protocol No 13, the criterion on the government budgetary position referred to in the second indent of Article 140(1) TFEU requires that, at the time of the examination, the Member State not be the subject of a Council decision under Article 126(6) TFEU that an excessive deficit exists.

In accordance with Article 3 of Protocol No 13, the criterion on participation in the exchange-rate mechanism of the European Monetary System referred to in the third indent of Article 140(1) TFEU requires a Member State to have respected the normal fluctuation margins provided for by the exchange-rate mechanism (ERM) of the European Monetary System, without severe tensions, for at least the last two years before the examination. In particular, the Member State must not have devalued its currency’s bilateral central rate against the euro on its own initiative for the same period. Since 1 January 1999, the ERM II provides the framework for assessing the fulfilment of the exchange rate criterion. In assessing the fulfilment of this criterion in their reports, the Commission and the ECB have examined the two-year period ending on 18 May 2022.

In accordance with Article 4 of Protocol No 13, the criterion on the convergence of interest rates referred to in the fourth indent of Article 140(1) TFEU means that, observed over a period of one year before the examination, a Member State have had an average nominal long-term interest rate that does not exceed by more than two percentage points that of, at most, the three best performing Member States in terms of price stability. The criterion used to assess the convergence of interest rates was comparable interest rates on ten-year benchmark government bonds. To assess the fulfilment of the interest-rate criterion, a reference value calculated as the simple arithmetic average of the nominal long-term interest rates of the three best performing Member States in terms of price stability, plus two percentage points, was considered in the reports of the Commission and the ECB. The reference value is based on the long-term interest rates in France (0,3 %), Finland (0,2 %) and Greece (1,4 %) and in the one-year period ending in April 2022 it was 2,6 %.

In accordance with Article 5 of Protocol No 13, the data used in assessing the fulfilment of the convergence criteria was provided by the Commission. Budgetary data were provided by the Commission after reporting by the Member States before 1 April 2022, in accordance with Council Regulation (EC) No 479/2009 (20).

On the basis of reports presented by the Commission and the ECB on the progress made by Croatia in fulfilling its obligations regarding the achievement of economic and monetary union, it is concluded that in Croatia, national legislation, including the Statute of the national central bank, is compatible with Articles 130 and 131 of the Treaty and with the Statute of the ESCB and of the ECB.

On the basis of reports presented by the Commission and the ECB on the progress made by Croatia in fulfilling its obligations regarding the achievement of economic and monetary union, it is concluded that, regarding the fulfilment by Croatia of the convergence criteria mentioned in the four indents of Article 140(1) TFEU: the average inflation rate in Croatia in the year ending in April 2022 stood at 4,7 %, which is below the reference value, and it is likely to remain below the reference value in the months ahead; Croatia is not the subject of a Council decision on the existence of an excessive deficit; Croatia has been a member of ERM II since 10 July 2020 and during the two years preceding the assessment, the kuna (HRK) exchange rate has not been subject to severe tensions and Croatia has not devalued the HRK bilateral central rate against the euro on its own initiative; and in the year ending April 2022, the long-term interest rate in Croatia was, on average, 0,8 %, which is well below the reference value.

In the light of the assessment on legal compatibility and on the fulfilment of the convergence criteria as well as the additional factors, Croatia fulfils the necessary conditions for the adoption of the euro,