Common Statement on acceding countries and ERM2 Athens, 5 April 2003

AuthorSecretariat General
ProfessionCouncil of the European Union

Page 225

  1. The Econ Council on 8 November 2000 forwarded a report to the Nice European Council on the exchange-rate aspects of enlargement, which contin ues to describe the position of the EU-15 on these aspects, in particular ERM2. Ministers, the ECB President, Governors, and the Commissioner in Athens on 5 April conrmed the Econ position and agreed to the following.

  2. Upon accession, new Member States shall treat their exchange-rate policy as a matter of common interest (Treaty Article 124). Lasting convergence of economic fundamentals is a prerequisite for sustainable exchange rate stabil ity. To this end, new Member States must pursue disciplined and responsible monetary policy directed towards price stability. Sound scal and structural policies are, at least, equally essential for sustainable exchange rate stability.

  3. Acceding countries will enter the EU as Member States with a derogation.

    This means, inter alia, that:

    - they would be able in principle to bring in with them their existing exchange-rate regimes;

    - competitive devaluations will not be allowed 84;

    - they will participate in the coordination of economic policies (notably by virtue of Articles 99 and 104 of the Treaty and the SGP) and will be expected to work towards real and nominal convergence;

    - they are expected to join the ERM2, although not necessarily immediately after accession, and eventually the euro.

  4. Economic policies of acceding Member States should be oriented towards achieving real and sustainable nominal convergence. Exchange-rate regimes should not be looked at in isolation, rather they should be part of the overall economic, nancial and monetary framework of acceding countries. Participation in ERM2 should help to achieve real and nominal convergence, and should not be seen as a mere waiting room for the adoption of the euro. ERM2 provides a degree of flexibility to accommodate the varying degrees, pace and strategies of economic convergence. However, in certain cases, staying outside the ERM2 for some time may be useful in light of large and volatile capital flows, large scal imbalances, and/or risks of large economic shocks.Page 226

  5. ERM2 is based on the European Council Resolution on the establishment of an exchange rate mechanism in the third stage of economic and monetary union (Amsterdam, 16 June 1997) and the Central Bank Agreement of 1 September 1998 laying down the operating procedures. Its key features are: (i) stable but adjustable central rates to the euro for the participating currencies (with standard fluctuation bands being +/-15 % around the central rate); and (ii) a common procedure for the main decisions relating to the conditions of participation in the mechanism (central rate and fluctuation band).

  6. A new Member State may join ERM2 upon request any time after acces sion, subject to the agreement on the central parity and fluctuation band in accordance with the common procedure. Dierences in the economic situation among new Member States, as well as the voluntary and multilateral nature of the procedure also imply that decisions are taken on a case-by-case basis at the time of entry in the mechanism. They shall ensure equal treatment between new and current Member States. While ERM2 is flexible enough to accommod ate the features of a number of exchange rate strategies, some regimes have been already identied at this stage as incompatible with ERM2, namely free floating (or managed float without a mutually agreed central rate), crawling pegs and pegs against anchors others than the euro. The countries concerned will therefore need to change those regimes for participation in ERM2. Com patibility of Currency Board arrangements with participation in ERM2 will be assessed case-by-case. Unilateral 'euroisation' is not compatible with the Treaty.

  7. Decisions on central rates and the standard fluctuation band shall be taken by mutual agreement of the ministers of the euro-area Member States, the ECB and the ministers and central bank governors of the non-euro area Member States participating in the new mechanism, following a common procedure involving the European Commission, and after consultation of the Economic and Financial Committee. The ministers and governors of the central banks of the Member States not participating in the exchange rate mechanism will take part but will not have the right to vote in the procedure. All parties to the mutual agreement, including the ECB, will have the right to initiate a conden tial procedure aimed at reconsidering central rates.

  8. The assessment of the fullment of the Maastricht convergence criteria and the procedures to be followed for the introduction of the euro will ensure equal treatment between future Member States and the current participants in the euro area. A minimum stay of two years in the mechanism prior to the con vergence assessment without severe tensions is expected. Moreover, the assess ment of exchange-rate stability against the euro will focus on the exchange rate being close to the central rate while also taking into account factors that may have led to an appreciation, in line with what was done in the past.


    [84] See section 1.2 of the Amsterdam Resolution of 16 June 1997: "The single market must not be endangered by real exchange rate misalignments, or by excessive nominal exchange rate fluctuations between the euro and other EU currencies, which would disrupt trade flows between Member States. The surveillance of Member States' macroeconomic policies in the Council under Article 103 (i.e. the BEPGs, now under Article 99) of the Treaty will be organised, inter alia, with a view to avoiding such misalignments or fluctuations'.

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