Euro adoption criteria and their implementation

The Treaty on the Functioning of the European Union (hereinafter — Treaty) provides that all Member States of the EU shall harmonise their economic and exchange rate policies, conduct an appropriate fiscal policy, and join the euro area once they fulfil the conditions for the adoption of the single currency set out in the Treaty.

On July 23, 2014 the European Union General Affairs Council of Ministers has adopted the final decision on Lithuania’s participation in the Economic and Monetary Union (EMU) from 1 January 2015. From this date Lithuania will become the 19th full-fledged member of the eurozone, which will start using the euro as the single currency of the European Union.The irrevocably fixed conversion rate of the litas to the euro has also been approved: EUR 1 = LTL 3. 45280. This ratio is the same as the current official exchange rate between the litas and the euro fixed by the Bank of Lithuania even in February 2002, when the litas was pegged to the euro. These decisions have completed the procedure of Lithuania’s acceptance into the eurozone.

The EU institutions assess the economic convergence with the euro area of a country which is preparing to adopt the euro and its eligibility for the changeover to the single currency of the EU. As provided in Article 140.2 of the Treaty, at the proposal of the European Commission (EC) and after consultations with the European Parliament and discussions in the European Council, the Economic and Financial Affairs (ECOFIN) Council of the EU decides whether the country complies with the mandatory conditions for the adoption of the euro.

At least once every two years or at the request of an EU Member State with derogation to temporarily use its national currency after joining the EU, the EC and the European Central Bank (ECB) draw up convergence reports and submit them to the ECOFIN Council.

Convergence reports deal with the legal and economic convergence with the euro area of all countries that are outside the euro area, excluding Denmark and the United Kingdom, which have special status. Legal convergence is the harmonisation of national law with the provisions of the Treaty and the Statute of the European System of Central Banks (ESCB) and the ECB. In the assessment of economic convergence it is assessed whether a Member State wishing to adopt the euro complied with the convergence criteria established by Article 140.1 of the Treaty and the Protocol (No. 13).
Convergence criteria

Price stability:
average annual HICP inflation may not exceed the average inflation of the three best performing Member States in terms of price stability by more than 1.5 percentage points. Such price stability must be sustainable.

● At the time of the examination the Member State is not the subject of a Council decision that an excessive deficit exists, and the position of country’s public finances is sustainable:
- the general government deficit may not exceed 3 per cent of the gross domestic product (GDP) or it must be approaching this level rapidly and gradually. Strict control over the budget deficit ensures a stable financial standing, helps to attract foreign investment and promotes economic growth;
- the general government debt may not exceed 60 per cent of GDP or it must be decreasing rapidly and gradually. This is an indicator of the sustainability of the country’s financial standing — interest is paid for the debt, therefore large and increasing public debt is expensive and can restrict general government expenditure in the future.

National currency:
the country must participate for at least two years in the Exchange Rate Mechanism II (ERM II). The national currency of a Member State participating in the ERM II must not exceed the established fluctuation band vis-a-vis the euro (±15%); the Member State may not have devalued the central rate of its currency; the role of foreign exchange interventions is also assessed.

Long-term interest rates:
average nominal long-term interest rates must not exceed the interest rates of the three best performing Member States in terms of price stability by more than 2 percentage points. The average of the nominal harmonised long-term interest rates of a Member State over the last 12 months is compared to the unweighted arithmetic average of the respective interest rates in the three best performing Member States in terms of price stability.

Compliance of Lithuania’s indicators with the economic convergence criteria

In the Convergence Reports published on June 4, 2014 by the ECB and the EC, convergence criteria were calculated and Lithuania’s (as well as seven other EU Member States’) progress in fulfilling obligations to participate in the economic and monetary union was presented.


Lithuania's indicator1

Reference value

Average annual HICP inflation2                                    

0.6 per cent

1.7 per cent3

Long-term interest rates 4

3.6 per cent

6.2 per cent5

Public finances6:

- the general government deficit-to-GDP ratio
- application of the EDP7
- the general government debt-to-GDP ratio



2.1 per cent
Not applied
39.4 per cent


3.0 per cent
Not applied
60.0 per cent

Exchange rate8

LTL 3.4528

LTL 3.4528 ±15 per cent

Sources: Convergence Reports (June 2014).

1 The table contains values used in Convergence Reports 2014. The latest values of Lithuanian indicators are published by Statistics Lithuania.
2 Average annual HICP inflation in April 2014.
3 The arithmetic average of average annual inflation of the three best performing countries in terms of price stability in April 2014 (Latvia, Portugal and Ireland), increased by 1.5 percentage points.
4 The arithmetic average of twelve months (May 2013–April 2014).
5  The arithmetic average of the long-term interest rates of the three best performing countries in terms of price stability, increased by 2 percentage points.
6 2013 data.
7 EDP — excessive deficit procedure. It is namely non-application of the EDP, which shows that the country is in compliance with the general government deficit criterion. Article 2 of the Protocol (No. 13) of the Treaty sets out that the criterion means that at the time of examination a Member State must not be an object of the decision of the Council of the European Union on excessive deficit in the respective Member State.
8 Litas for 1 euro.

ECB Convergence Report June 2014
EC Convergence Report June 2014

Updated 04/06/2014