Jean-Claude Trichet: Press briefing on the ECB Convergence Report
Opening remarks by Mr Jean-Claude Trichet, President of the European Central Bank, at the press
briefing on the ECB Convergence Report, Frankfurt, 20 October 2004.
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Ladies and Gentlemen, welcome to this special press briefing on the publication of the ECB's
Convergence Report 2004.
Let me start by saying that only 15 years ago I could not have imagined that we would, in October
2004, be presenting to you a report examining the economic and legal convergence of Sweden and
ten countries from central and eastern Europe and the Mediterranean. At that time, most of these
countries were still deprived of democracy and economic freedom. The prospect of joining the
European Union and eventually adopting a single European currency was out of sight for the most
imaginative minds.
But since 1 January 1999 the euro has been a reality, and since 1 May 2004 ten new countries are
with us in the European Union. The rules of EU membership say that at least once every two years, or
at the request of a Member State not participating in the euro area, a report needs to be prepared by
the ECB and by the European Commission. Let me briefly recall the relevant Treaty Articles and the
procedure laid down therein.
According to Article 122 of the Treaty establishing the European Community, the two institutions must
report to the Council on the progress made in the fulfilment by the Member States of their obligations
regarding the achievement of Economic and Monetary Union, in accordance with the procedure laid
down in Article 121 (1). Article 121 (1) stipulates that these reports must include an examination of the
compatibility between each Member State'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. The reports must
also examine the achievement of a high degree of sustainable convergence. This is to be done by
reference to the fulfilment by each Member State of the criteria on prices, fiscal positions, exchange
rates and long-term interest rates.
Thereafter, the Treaty foresees that, after consulting the European Parliament and after discussion in
the Council meeting in the composition of the Heads of State or Government, the Council must, acting
by a qualified majority on a proposal from the Commission, decide which Member States with a
derogation fulfil the necessary conditions to adopt the euro on the basis of the criteria set out in
Article 121 (1).
The publication of this report, which represents the common view of the General Council of the ECB,
is the first step in this procedure, together with today's publication of the Commission's Convergence
Report. More generally, it is an important milestone in the process that will ultimately lead to euro area
enlargement and the adoption of the euro in those EU countries that still have national currencies.
However, let me also use this occasion to stress again that there is no pre-set timetable for the
enlargement of the euro area. In order to adopt the euro, non-participating EU Member States have to
achieve a high degree of sustainable economic and legal convergence.
Let me now make a few specific remarks about the report you just have received. The Member States
examined are the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland,
Slovenia, Slovakia and Sweden. Two other Member States, namely Denmark and the United
Kingdom, have a special status. Convergence Reports only have to be provided for these two
countries if they so request. Since no such request has been made, they are not covered by this year's
Convergence Report.
To ensure continuity and equal treatment, the ECB has examined the degree of sustainable economic
convergence and compliance with the statutory requirements for the independence of the national
central banks and their legal integration into the Eurosystem using the common analytical framework
applied in previous ECB and EMI Convergence Reports.
In more detail, the report builds on a number of principles set out in those previous reports. First, the
criteria are applied according to the Treaty, in a strict manner, to ensure that only those Member
States having economic conditions that are conducive to the maintenance of price stability and the
viability of the euro area can participate in it. The convergence must not only be nominal, satisfactory
at a specific point in time, but also sustainable. Second, the convergence criteria constitute a coherent
and integrated package, and they must all be satisfied. There is no hierarchy of criteria. Third, the
criteria have to be met on the basis of current data. Fourth, the application of the criteria should be
consistent, transparent and simple.
Given that the economic convergence criteria must be achieved on a sustained basis, the available
evidence is first reviewed from a backward-looking perspective, covering, in principle, the past eight
years. This helps to better determine the extent to which current achievements are the result of
genuine structural adjustments. At the same time, due account must be taken of the fact that backdata
for most of the new Member States may be heavily influenced by the transition these countries have
been passing through. Thereafter, and to the extent appropriate, a forward-looking perspective is
adopted. In this context, particular attention is drawn to the fact that the sustainability of favourable
economic developments hinges critically on appropriate and lasting policy responses to existing and
future challenges.
Overall, it is emphasised that ensuring the sustainability of economic convergence depends both on
the achievement of a sound starting position and on the policies pursued after adoption of the euro.
As regards the examination of legal convergence, the report focuses on two areas: first, it assesses
whether national legislation ensures the effective independence of a national central bank. The
concept of independence - which is the cornerstone of effective monetary policy decision-making by
the Eurosystem/ESCB - is assessed by reference to a number of types of independence, namely:
functional, institutional, personal and financial independence. Second, the report highlights the
provisions of national legislation that would in the ECB's opinion prevent or hinder the integration of a
national central bank into the Eurosystem.
The Convergence Report 2004 is an important record of the degree to which these countries have
achieved progress with economic and legal convergence and flags the priority areas where further
efforts are needed before the euro can be adopted.
Let me now give the floor to Mr Issing, who will present to you the main findings of our examination.