Entry Criteria to the Euro :: Euro Finances Economics Essays

Entry Criteria to the Euro1.Entry criteriaThe four approach criteria are set out in Article 121(1) of the ECTreaty.A Member defer must satisfy all four criteria in order to be able toenter the euro area.(Treaty quotes Sourcehttp//europa.eu.int/scadplus/leg/en/lvb/l25014.htm 02/02/2004)1.1. Price StabilityThe Treaty stipulates The achievement of a high tier of pricestability ... will be apparent from a dictate of inflation which isclose to that of, at most, the three best-performing Member declares in price of price stability.The inflation localize of a Member State must not exceed by more than 1.5%that of the three best-performing Member States in terms of pricestability for a year introductory the prove for criteria compliance. mental test PASSED-----------1.2. Government FinancesThe Treaty stipulates The sustainability of the political sympathies financial patch ... will be apparent from having achieved a governmentbudgetary puzzle without a deficit that is excessive ....This stipulation gave rise to two criteria being drawn up by theCommission for the Council of Finance Ministers.A. The annual government deficit must not exceed 3% of gross domestic help product (gross domestic product) at the end of the preceding financial yearto the test for criteria compliance.B. Outstanding government debt must not exceed 60% of GDP at the endof the preceding financial year to the test for criteriacompliance. TEST PASSED1.3. Exchange RatesThe Treaty stipulates the observance of the normal fluctuationmargins provided for by the exchange-rate mechanism of the EuropeanMonetary System, for at least two years, without devaluing against the capital of both other Member State.A. The Member State must ware controlled its exchange rate in linewith the Euro within the normal margins of the exchange-ratemechanism, without any break during the two years preceding thetest for criteria compliance.B. The Member State must not have devalued its currency against theEuro on its knowledge initiative during the same period.The pound has been controlled in line with the normal margins of theERM and in that location has been no devaluation in the last two years. TEST PASSED-----------1.4. Long-Term amuse RatesThe Treaty stipulates the durability of convergence achieved by theMember State ... being reflected in the long-term interest-ratelevels.The nominal long-term interest rate must not exceed 2%of the threebest-performing Member States in terms of price stability. The periodtaken into consideration is the year preceding the test for criteriacompliance.