The EMU Criteria and the EU Leaders' Decision on which Member States qualified for EMU 

As already stated, in May 1998 the EU Heads of State or Government decided that eleven Member States, including Ireland, fulfil the necessary conditions to enter EMU and adopt the euro from 1 January 1999.  

This decision was made with the benefit of detailed convergence reports from the European Monetary Institute and the European Commission, together with a recommendation from the Commission, all of which were published on 25 March 1998. The emphasis of the reports was on the achievement of a high degree of sustainable convergence among Member States and this was assessed primarily on the basis of the progress made by the Member States in fulfilling the four convergence criteria set out in Article 109j(1) of the Maastricht Treaty.  

Briefly, the criteria for EMU relate first to the avoidance of an excessive budget deficit, meaning that the general Government deficit must not exceed 3 per cent of gross domestic product (GDP) unless it has declined substantially and continuously and reached a level close to 3 per cent, or unless the excess over 3 per cent is small, exceptional and temporary; and  

the ratio of general Government debt to GDP must be below 60 per cent or, if above, must be sufficiently diminishing and approaching 60 per cent at a satisfactory pace.  

There are also criteria in relation to inflation, interest rates and currency stability. These are briefly as follows:  

average inflation must not exceed by over 1.5 per cent that of the three best-performing Member States; 

the average nominal long-term interest rate must not exceed by more than 2 per cent that of the three best-performing Member States in terms of price stability; 

a Member State's currency must without severe tensions have respected the normal fluctuation margins of the Exchange Rate Mechanism of the European Monetary System for two years before the assessment and its central rate must not have been devalued on the Member State's initiative against any other Member State's currency in that period.  

The Treaty requires the Commission and EMI to report on other matters: these include the level of compatibility between national central bank legislation and the Treaty obligation that the central banks of EMU members be independent.  

On the basis of the two convergence reports, the European Commission recommended to ECOFIN that the following eleven Member States be judged to qualify to enter the third stage of EMU on 1 January 1999: Austria, Belgium, Finland, France, Germany, Italy, Luxembourg, Netherlands, Portugal, Spain, and, of course, Ireland. Denmark and the United Kingdom exercised their Treaty opt-outs from EMU and Sweden and Greece were judged by the Commission not to have fulfilled all the criteria for entry. As the next step in the process, the European Parliament met on 29-30 April 1998 and adopted a Resolution on the convergence reports and the Commission recommendation which it forwarded to ECOFIN.  

On the basis of these reports and of the recommendation from the Commission, ECOFIN met on 1 May, assessed for each Member State the fulfilment of the conditions for adoption of the euro and formulated its recommendation to the Heads of State or Government. The European Parliament met on the morning of 2 May and delivered its formal opinion to the Heads of State or Government, who met that afternoon and confirmed that the eleven Member States listed above qualified to join EMU and adopt the euro from 1 January 1999.