6/7/2016, 1:34 PM (Source: TeleTrader)
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ECB: Eurozone candidates unfit for EMU

The European Central Bank (ECB) said that of the seven countries, members of the European Union but not of the European Monetary Union (EMU), not a single one has managed to comply with all criteria to participate in the monetary union.

"The seven countries under review comply with most of the quantitative economic criteria, but none of them fulfils all of the obligations laid down in the Treaty, including the legal convergence criteria," said the ECB in its Convergence Report 2016.

The countries under examination were: Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden. The process compares annual levels of inflation in the countries, looking for the reference value at 0.7% for the EU. Stability of prices was achieved in six of seven countries. In the fiscal filed, again six out of seven countries managed to post deficit-to-GDP ratio below 3%. Croatia didn't make it since the country is still running an excessive deficit procedure. Debt levels in Croatia and Hungary were above 60%.

In turn, only Croatia was better than other six countries in "incompatibilities as regards the prohibition of monetary financing and the legal integration of the respective central banks into the Eurosystem."

In Hungary, Poland, Romania and Sweden the exchange rates were highly volatile during the tw-year reference period. All seven countries recorded long-term interest rates below the reference value of 4%, with best being the Czech Republic and Sweden.

The ECB said that none of the seven countries had "legal framework fully compatible with all the requirements for the adoption of the euro."

"Incompatibilities persist regarding central bank independence, in particular central banks’ institutional and financial independence, as well as personal independence," said the Convergence Report which must be published every two years. This suggests that the Eurozone, dubbed EU19, is not going to be expanded any time soon.

Breaking the News / ZR