Seemingly ready to ignore the lessons of the last decade’s Euro-zone crisis which ravaged many of their neighbors, aspiring Eurozone members Croatia and Bulgaria were approved on July 10 to join the EU’s Exchange Rate Mechanism II (ERM II).
On July 10, Euro-zone finance ministers and the European Central Bank (ECB), formally ratified the next step for the two countries after official convergence reports determined that both countries’ economies were now sufficiently synchronized with the Euro-zone’s.
However, neither the ECB nor the European Commission indicated when the two countries might expect to join the Euro-zone. Bulgaria and Croatia have made huge efforts to prepare for entry into ERM II and the Banking Union.
Joining the ERM II has in the past been likened to the Eurozone’s “waiting room,” since it is an important and technically required benchmark before moving ahead with full adoption of the single currency.
The Bulgarian Lev entered ERM-2 with a central rate of 1.95583 to the euro, while the Croatian Kuna joined with a central rate of 7.53450 to the euro.
The convergence criterion on exchange rate stability requires participation in the ERM II. A Member State must participate in the mechanism without severe tensions for at least two years before it will qualify to adopt the euro.
The Banking Union mainly consists of two main initiatives, the Single Supervisory Mechanism, and the Single Resolution Mechanism.
Most importantly, banking union rules include direct supervision by the ECB of systemically important banks, which will start on October 1 in the two countries.
New Europe / ABC Flash Point Economy News 2020.