Euro Convergence Criteria

The euro convergence criteria (also known as the Maastricht criteria) are the criteria for European Union member states to enter the third stage of European Economic and Monetary Union (EMU) and adopt the euro as their currency. The four main criteria, which actually comprise five criteria as the "fiscal criteria" consist of both a "debt criteria" and a "deficit criteria", are based on Article 140 (ex article 121.1) of the Treaty on the Functioning of the European Union.

In 2009 the International Monetary Fund (IMF) floated a suggestion that countries should be allowed to "partially adopt" the euro - adopting the currency but not qualifying for a seat on the European Central Bank (ECB). Monaco, San Marino and the Vatican City State are in a similar situation: they have adopted the euro and mint their own coins, but they do not have ECB seats. The proposal by IMF, did however not change EU's policy of only allowing the European microstates (with populations less than 100,000) to "partially adopt" the euro. All normal-sized sovereign states can only adopt the euro, if they first accedes as a new EU Member State and fully comply with all five convergence criteria.

As part of the EU treaty, all 27 EU Member States are also obliged to adhere and comply with the Stability and Growth Pact (SGP), which as a framework to ensure price stability and fiscal responsibility, has adopted identical criteria for the governments budget deficit and debt. Due to the fact that several countries did not exercise a sufficient level of fiscal responsibility during the first 10 years of the euro's lifetime, two major SGP reforms were recently introduced. The first reform was the so-called Sixpack (entered into force 13 December 2011), and the second reform is the new more ambitious Fiscal Compact - being signed by 25 out of 27 EU member states and expected to enter into force 1 January 2013.