Convergence in EMU: What and How?

Please note: Each In-Depth Analysis is assigned a DOI (digital object identifier), which is a safe and long term way of ensuring a hyperlink to the full text of this report. However, when ESO creates this record, on occasion the DOI still has not been activated by the EU Bookshop. If you find the source url hyperlink does not work please use the alternative location hyperlink listed as a related url.Convergence is one of the key goals of the European Union and has been at the centre of many recent debates. This paper strives to identify the types of convergence that are pivotal to the well-functioning of the euro area and discusses their role in the context of the EMU’s governance framework.

Evidence suggests that key economic indicators have converged for some member states before coming to a halt (or even diverge) with the onset of the global financial and euro area debt crises. As economic convergence depends mostly on the policies of the member states, the authors call for a strengthening of national responsibility for structural reforms. They discuss strengths and shortcomings of the proposed reform delivery tool and present a proposal of ‘national convergence roadmaps’.

The authors propose that member states can apply for resources from the European Structural and Investment Funds by committing to convergence targets and submitting reform plans in the context of the European Semester. If positively assessed by the European Commission and approved by the Council, the reform efforts could be financially rewarded – conditional on the potential for positive spill-overs, continuous implementation of the reforms and achievement of the convergence targets.

Note, that a separate EPRS In-Depth Analysis with the same title was published in April 2018 (access via related url hyperlink above).

Convergence in EMU: What and How?

One major characteristics of an optimal currency area was its ability to maintain or foster integration and convergence among its Member States. This objective required reaching a stable economic and financial situation and developing resilience to shocks.

After reviewing the state of convergence in the euro area, this paper proposed a number of recommendations, aimed at improving convergence towards the steady state, as well as financial and cyclical convergence. Recommendations focused on several policy areas, including cohesion policy, the statute of the ECB, public and private debt sustainability, fiscal rules and minimum wage policy.

European Parliament: European Parliamentary Research Service: Study, May 2018: Convergence in EMU: What and How? http://www.europarl.europa.eu/RegData/etudes/IDAN/2018/614502/IPOL_IDA(2018)614502_EN.pdf

European Parliament: European Parliamentary Research Service: In-Depth Analysis: April 2018: Convergence in EMU: What and How? http://www.europarl.europa.eu/RegData/etudes/IDAN/2018/614504/IPOL_IDA(2018)614504_EN.pdf

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