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Glossary of terms

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Convergence criteria

Member states of the European monetary union, also known as Euro group, should comply with four convergence criteria:
 
  1. price stability: inflation rate, observed over the period of one year, should not exceed by more than 1.5 percentage points that of, at most, the three best-performing member states in terms of price stability;
  2. government finances:
    • annual government deficit: the ratio of planned or actual government deficit to GDP (gross domestic produc) should be no more than 3%, and
    • government debt: the ratio of gross government debt to GDP should be no more than 60%;
  3. exchange rates: respect the normal fluctuation margins of the exchange rate mechanism (ERM); in particular, should not devalue the currency’s rate against any other member state’s currency on its own initiative;
  4. long-term interest rates: average nominal long-term interest rate not to exceed by more than 2 percentage points that of, at most, the three best performing member states.
 
[The convergence criteria are presented in Article 121(1) of the Treaty establishing the European Community, also known as EC Treaty]