eunbil · GU0N2739 · 2007-07-06 00:00:00 — COMMISSION OF THE EUROPEAN COMMUNITIES COM(2007) yyy final 2007/aaaa (CNS) in accordance with Article 122(2) of the Treaty on the adoption by of the single currency on 1 January 2008 (presented by the Commission) Commission proposal for a Council decision in accordance with Article 122(2) On 3 1998 the Council decided that , , , , , , , the , , and fulfilled the necessary conditions for the adoption of the single currency on 1 January 1999. and the made use of their opt-out and were not, therefore, assessed by the Council. and were considered by the Council as Member States with a derogation. On 19 2000, the Council decided that fulfilled the necessary conditions to adopt the euro on 1 January 2001. The countries which joined Union on 1 2004 (the , , , , , , , , and ) became Member States with a derogation in accordance with Article 4 of the respective Act of Accession. On 11 2006, the Council decided that fulfilled the necessary conditions to adopt the euro on 1 January 2007. and , who joined Union on 1 January 2007, became Member States with a derogation in accordance with Article 5 of the respective Act of Accession. Article 122(2) lays down the procedures for the abrogation of derogations. These procedures are to be initiated at least once every two years or at the request of a with a derogation. According to these procedures the Commission and have to report to the Council in accordance with Article 121(1) on the progress made in the fulfilment by Member States with a derogation of their obligations regarding the achievement of economic and monetary union. Based on its own report and that of the ECB, the Commission can submit to the Council a proposal for a Council decision to abrogate the derogation of the Member States fulfilling the necessary conditions. All countries with a derogation were assessed by the Commission and the ECB in 2006. On 13 February 2007, submitted a request for a new convergence assessment with a view to introduce the euro on 1 January 2008 in case the derogation were to be abrogated. As a response to this request, the Commission and the ECB prepared Convergence Reports for . The Commission Convergence Report 2007 on was adopted by the College on 16 2007. The ECB has adopted its report on the same day. The reports include an examination of the compatibility between 's national legislation, including the statutes of its national central bank, and Articles 108 and 109 of the Treaty and the Statute of the ESCB and the ECB. The reports also examine the achievement of a high degree of sustainable convergence by reference to the fulfilment of the convergence criteria and take account of several other factors mentioned in the final sub-paragraph of Article 121(1). In its convergence report, the Commission concludes that a high degree of sustainable convergence has been achieved in . On the basis of its report and that of the ECB, the Commission has adopted the attached proposal for a Council decision to abrogate the derogation of with effect from 1 January 2008. 2007/aaaa (CNS) in accordance with Article 122(2) of the Treaty on the adoption by of the single currency on 1 January 2008 THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing Community, and in particular Article 122, paragraph 2 thereof, Having regard to the proposal from the Commission, Having regard to the report from the Commission1, Having regard to the report from Central Bank2, Having regard to the opinion of Parliament, Having regard to the discussion of the Council, meeting in the composition of Heads of State or Government, (1)The third stage of economic and monetary union (EMU) started on 1 January 1999. , meeting in on 3 1998 in the composition of Heads of State or Government, decided that , , , , , , , the , , and fulfilled the necessary conditions for adopting the single currency in 1 January 1999.3 (2)decided on 19 2000 that fulfilled the necessary conditions for adopting the single currency on 1 January 2001.4 decided on 11 2006 that fulfilled the necessary conditions for adopting the single currency on 1 January 2007.5 (3)In accordance with paragraph 1 of the Protocol on certain provisions relating to the of and Northern annexed to the Treaty, the notified the Council that it did not intend to move to the third stage of EMU on 1 January 1999. This notification has not been changed. Report adopted on 16 2007(COM (2007)). Report adopted on 16 2007. Council Decision 1998/317/EC of 3 1998 (OJ L 139, , p.30). Council Decision 2000/427/EC of 19 2000 (OJ L 167 of , p.19). Council Decision 2006/495/EC of 11 2006 (OJ L 195 of , p.25). with paragraph 1 of the Protocol on certain provisions relating to annexed to the Treaty and the Decision taken by the Heads of State or Government in in , has notified the Council that it will not participate in the third stage of EMU. has not requested that the procedure referred to in Article 122(2) of the Treaty be initiated. (4)By virtue of Decision 1998/317/EC has a derogation as defined in Article 122 of the Treaty. In accordance with Article 4 of the Act of Accession6, the , , , , , , , and have a derogation as defined in Article 122 of the Treaty. In accordance with Article 5 of the respective Act of Accession7, and have a derogation as defined in Article 122 of the Treaty. (5)() was established on 1 1998. has been replaced by an exchange rate mechanism, the setting-up of which was agreed by a resolution of of an exchange-rate mechanism in the third stage of economic and monetary union of 16 1997.8 The procedures for an exchange-rate mechanism in stage three of economic and monetary union () were laid down in the Agreement of between the ECB and the national central banks of the Member States outside the euro area laying down the operating procedures for an exchange rate mechanism in stage three of economic and monetary union.9 (6)Article 122(2) of the Treaty lays down the procedures for abrogation of the derogation of the Member States concerned. According to that Article at least once every two years, or at the request of a with a derogation, the Commission and the ECB shall report to the Council in accordance with the procedure laid down in Article 121(1) of the Treaty. On 13 February 2007, submitted a formal request for a convergence assessment. (7)National legislation in the Member States including the statutes of national central banks shall as necessary be adapted with a view to ensuring compatibility with Articles 108 and 109 of the Treaty and the Statute of the ESCB. The reports of the Commission and the ECB provide a detailed assessment of the compatibility of the legislation of with Articles 108 and 109 of the Treaty and the Statute of the ESCB. (8)According to Article 1 of the Protocol on the convergence criteria referred to in Article 121 of the Treaty establishing Community, the criterion on price stability referred to in the first indent of Article 121(1) of the Treaty means that a has a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than one and a half percentage points that of, at most, the three best performing Member States in terms of price stability. For the purpose of the criterion on price stability, inflation will be measured by the harmonised of consumer 6OJ L 236, 23.9.2003, p. 7OJ L 157, 21.6.2005, p. 8OJ C 236, , p. 9OJ C 345, 13.11.1998, p.6 as amended by the Agreement of (OJ C 362, 16.12.2000, p. prices (HICPs) defined in Council Regulation (EC) No 2494/95.10 In order to assess the price stability criterion a Member State's inflation has been measured by the percentage change in the arithmetic average of 12 monthly relative to the arithmetic average of 12 monthly of the previous period. In the one-year period ending in 2007, the three best-performing Member States in terms of price stability were , and , with inflation rates of, respectively 1.3 percent, 1.5 percent and 1.6 percent. A reference value calculated as the simple arithmetic average of the inflation rates of the three best-performing Member States in terms of price stability plus 1.5 percentage points was considered in the reports of the Commission and the ECB. On this basis, the reference value in the one-year period ending in 2007 was 3.0 percent. (9)According to Article 2 of the Protocol on the convergence criteria referred to in Article 121 of the Treaty establishing Community, the criterion on the government budgetary position referred to in the second indent of Article 121(1) of the Treaty shall mean that at the time of the examination the is not the subject of a Council decision under Article 104(6) of the Treaty that an excessive deficit exists. (10)According to Article 3 of the Protocol on the convergence criteria referred to in Article 121 of the Treaty establishing Community, the criterion on participation in the exchange-rate mechanism of referred to in the third indent of Article 121(1) of the Treaty means that a has respected the normal fluctuation provided for by the exchange-rate mechanism () of without severe tensions for at least the last two years before the examination. In particular, the must not have devalued its currency's bilateral central rate against any other Member State's currency on its own initiative for the same period. Since 1 January 1999 the provides the framework for assessing the fulfillment of the exchange rate criterion. In assessing the fulfillment of this criterion in their reports, the Commission and the ECB have examined the two-year period ending in . (11)According to Article 4 of the Protocol on the convergence criteria referred to in Article 121 of the Treaty establishing Community, the criterion on the convergence of interest rates referred to in the fourth indent of Article 121(1) of the Treaty means that, observed over a period of one year before the examination, a has had an average nominal long-term interest rate that does not exceed by more than two percentage points that of, at most, the three best performing Member States in terms of price stability. For the purpose of the criteria on the convergence of interest rates, comparable interest rates on 10-year benchmark government bonds were used. In order to assess the fulfillment of the interest-rate criterion a reference value calculated as the simple arithmetic average of the nominal long-term interest rates of the three best performing Member States in terms of price stability plus two percentage points was considered in the reports of the Commission and the ECB. On this basis, the reference value in the one year period ending in 2007 was 6.4 percent. 10Council Regulation (EC) No 2494/95 of 23 October 1995 concerning harmonised of consumer prices (OJ L 257, 27.10.1995, p. 1) as amended by Regulation (EC) No 1882/2003 of Parliament and the Council (OJ L 284, 31.10.2003, p. (12)In accordance with Article 5 of the Protocol on the convergence criteria referred to in Article 121 of the Treaty establishing Community, the data used in the current assessment of the fulfillment of the convergence criteria will be provided by the Commission. For the preparation of this proposal the Commission provided data. Budgetary data were provided by the Commission after reporting by the Member States by in accordance with Council Regulation (EC) No 3605/93 of 22 on the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing Community.11 (13)On the basis of reports presented by the Commission and the ECB on the progress made in the fulfilment by of its obligations regarding the achievement of economic and monetary union, the Commission concludes that: In , national legislation, including the Statute of the national central bank, is compatible with Articles 108 and 109 of the Treaty and the Statute of the ESCB. Regarding the fulfilment by of the convergence criteria mentioned in the four indents of Article 121 (1) of the Treaty: the average inflation rate in in the year ending 2007 stood at 2.0 percent, which is below the reference value and is likely to remain below the reference value in the months ahead; is not the subject of a Council Decision on the existence of an excessive government deficit; has been a member of since 2 2005; in the two-year period ending , the Cypriot pound (CYP) has not been subject to severe tensions and has not devalued, on its own initiative, the CYP bilateral central rate against the euro; in the year ending 2007, the long-term interest rate in was, on average, 4.2 percent which is below the reference value. has achieved a high degree of sustainable convergence by reference to these criteria, and fulfils the necessary conditions for the adoption of the euro. (14), acting by qualified majority on a proposal by the Commission, shall decide which Member States with a derogation fulfil the necessary conditions for the adoption of the single currency and abrogate the derogations of the Member States concerned. 11OJ L 332, 31.12.1993, p. Regulation as last amended by Council Regulation (EC) No 2103/2005 (OJ L 337, 22.12.2005, p. HAS ADOPTED THIS DECISION: fulfils the necessary conditions for the adoption of the single currency. The derogation in favour of referred to in Article 4 of the Act of Accession is abrogated with effect from 1 January 2008. This Decision is addressed to the Member States. This Decision shall be published in the .