Report from the Commission to the European Parliament and the Council. Convergence report 2014 (prepared in accordance with Article 140(1) of the Treaty on the Functioning of the European Union)

Article 140(1) of the Treaty on the Functioning of the European Union (hereafter TFEU) requires the Commission and the European Central Bank (ECB) to report to the Council, at least once every two years, or at the request of a Member State with a derogation, on the progress made by the Member States in fulfilling their obligations regarding the achievement of economic and monetary union. The latest Commission and ECB Convergence Reports relating to all Member States with a derogation were adopted in May 2012.

The 2014 Convergence Report covers the following eight Member States with a derogation: Bulgaria, the Czech Republic, Croatia, Lithuania, Hungary, Poland, Romania and Sweden. A more detailed assessment of the state of convergence in these Member States is provided in a Technical Annex to this Report. At the time of the Convergence Report in 2012, Member States had shown uneven progress with convergence, as many of them were undergoing significant adjustments of previously accumulated macroeconomic imbalances, against the background of the economic and financial crisis. The present examination takes place in a still difficult external environment, though with a generally stronger recovery in Member States with a derogation and lower risk perception by financial markets.

The content of the reports prepared by the Commission and the ECB is governed by Article 140(1) of the TFEU. This Article requires the reports to include an examination of the compatibility of national legislation, including the statutes of the national central bank, with Articles 130 and 131 of the TFEU and the Statute of the European System of Central Banks and of the European Central Bank (hereafter ESCB/ECB Statute). The reports must also examine whether a high degree of sustainable convergence has been achieved in the Member State concerned by reference to the fulfilment of the convergence criteria (price stability, public finances, exchange rate stability, long-term interest rates), and by taking account of other factors mentioned in the final sub-paragraph of Article 140(1) of the TFEU. The four convergence criteria are developed in a Protocol annexed to the Treaties (Protocol No 13 on the convergence criteria).

The economic and financial crisis, along with the recent euro-area sovereign debt crisis, has exposed gaps in the economic governance system of the Economic and Monetary Union (EMU) and showed that its existing instruments need to be used more comprehensively. With the aim of ensuring a sustainable functioning of EMU, an overall strengthening of economic governance in the Union has been undertaken since then. The assessment of convergence is thus aligned with the broader "European Semester" approach which takes an integrated and upstream look at the economic policy challenges facing the EMU in ensuring fiscal sustainability, competitiveness, financial market stability and economic growth.

The key innovations in the area of governance reform, reinforcing the assessment of each Member States' convergence process and its sustainability, include inter alia the strengthening of the excessive deficit procedure by the 2011 reform of the Stability and Growth Pact and new instruments in the area of surveillance of macroeconomic imbalances. In particular, this report takes into account the assessment of the 2014 Convergence Programmes and the findings under the Alert Mechanism Report of the Macroeconomic Imbalances Procedure.

• Primary Source

EUR-Lex: COM(2014)326: Follow the progress of this report through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2014:326:FIN

EUR-Lex: SDW(2014)177: Commission Staff Working Document accompanying the report http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD:2014:177:FIN

ESO: Background information: Commission assesses eight EU countries’ readiness to join the euro area; proposes that Lithuania join in 2015 http://www.europeansources.info/record/press-release-commission-assesses-eight-eu-countries-readiness-to-join-the-euro-area-proposes-that-lithuania-join-in-2015/

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