REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL CONVERGENCE REPORT 2026 (prepared in accordance with Article 140(1) of the Treaty on the Functioning of the European Union)
Date: 2026-06-24
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Czechia, Economic and Monetary Union, Hungary, Poland, Romania, Sweden, convergence criteria, euro, euro area, price stability

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.6.2026  COM(2026) 585 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL CONVERGENCE REPORT 2026         (prepared in accordance with Article 140(1) of the Treaty on the Functioning of the European Union) {SWD(2026) 585 final}  
 
 
1. 

PURPOSE OF THE REPORT 

The euro is intended to be the single currency of the European Union as a whole. It is  currently used 
every  day  by  around  355  million  people  in  the  21  Member  States  of  the  euro  area.  The  practical 
benefits  of  the  euro  include  more  stable  prices,  lower  transaction  costs  for  people  and  businesses, 
more transparent and competitive markets and increased trade within the EU and with the rest of the 
world. The euro is currently the second most used currency worldwide. 

Article 140(1) of the Treaty on the Functioning of the European Union (TFEU) requires the Commission 
and the European Central Bank (ECB) to report to the Council at least once every  two years, or at the 
request of a Member State with a derogation1, on the progress that Member States with a derogation 
have  made  in  fulfilling  their  obligations  to  achieve  economic  and  monetary  union.  The  latest 
Commission and ECB regular convergence reports were adopted in June 2024.  

On 25 February 2025, Bulgaria submitted a request for an ad hoc convergence assessment. Following 
the  preparation  of  a  Convergence  Report  on  Bulgaria  and  on  the  basis  of  a  proposal  by  the 
Commission,  the  Council  decided  in  July  2025  that  Bulgaria  fulfilled  the  necessary  conditions  for 
adopting the euro on 1 January 20262.  

This  2026  Convergence  Report  covers  the  following  five  Member  States  with  a  derogation:  Czechia, 
Hungary,  Poland,  Romania  and  Sweden3.  The  staff  working  document  accompanying  this  report 
provides a more detailed assessment of the state of convergence in these Member States4. 

Article  140(1)  TFEU  requires  the  reports  to  include  an  examination  of  the  compatibility  of  national 
legislation,  including  the  statutes of  national  central  banks,  with  Articles 130  and  131  TFEU  and  the 
Statute  of  the  European  System  of  Central  Banks  and  of  the  European  Central  Bank  (‘the  ESCB/ECB 
Statute’). The reports must also examine whether a high degree of sustainable convergence has been 
achieved  in  the  Member  State  concerned  (i)  by  referring  to  the  fulfilment  of  the  four  convergence 
criteria (price stability, public finances, exchange rate stability and long-term interest rates); and (ii) by 
taking  account  of  other  factors  relevant  to  economic  integration  and  convergence  mentioned  in  the 
final  subparagraph  of  Article  140(1)  TFEU.  The  four  convergence  criteria  are  developed  further  in  a 
protocol annexed to the Treaties (Protocol No 13 on the convergence criteria). 

The  convergence  assessment  in  this  report  is  presented  against  the  backdrop  of  several  major 
economic  and  policy  developments  over  the  course  of  2025  and  the  first  half  of  2026.  In  2025, 
volatility  in  US  trade  policy  and  the  increase  in  the  US  trade  tariffs,  although  lower  than  originally 
announced, disrupted global trade flows and led to heightened policy uncertainty. However, despite this 
challenging  external  environment,  the  EU  economy  showed  resilience  and  continued  to  grow  at  a 
steady  pace.  Following  moderate  economic  growth  of  1.0%  in  2024,  the  EU  economy  gained 
momentum  in  2025,  with  GDP  consequently  growing  by  1.4%.  This  growth  was  underpinned  by  a 
strong labour market, easing inflationary pressures, and favourable financial conditions. Following its 
peak in 2022-23, annual consumer price inflation  fell to 2.6% in 2024 and 2.5% in  2025. Driven by 
lower energy prices and falling services inflation, it continued to fall across the EU during the first half 
of 2025, before stabilising at around 2% during the second half of the year and the first two months 
of 2026.  

However,  the  outbreak  of  the  war  in  the  Middle  East  on  28  February  2026  materially  changed  this 
picture, by creating the most significant  global  energy supply  disruption in  recent history. The  Middle 
East conflict was followed by the virtual closure of the Strait of Hormuz, which reduced seaborne flows 
of oil and LNG and led to a surge in energy prices. Between the outbreak of the Middle East conflict 

1   The  Member  States  that  have  not  yet  fulfilled  the  necessary  conditions  for  the  adoption  of  the  euro  are  referred  to  as  ’Member 
States with a derogation’. Denmark negotiated an opt-out before the adoption of the Maastricht Treaty and does not participate in 
the third stage of economic and monetary union. 

2   Council Decision (EU) 2025/1407 of 8 July 2025 on the adoption by Bulgaria of the euro on 1 January 2026 (OJ L 1407, 14.7.2025, 

pp. 1-4). 

3   By virtue of Protocol No 16 to the Treaties on certain provisions relating to Denmark, Denmark has an exception as regards the single 
currency and the procedure referred to in Article 140 TFEU can only be initiated at its request.  Denmark has not made that request 
and is therefore not covered by the assessment. 

4   The  cut-off  date  for  the  data  used  in  this  report  is  17  June  2026.  The  convergence  assessment  is  based on  a  range  of  monthly 

convergence indicators calculated up to May 2026. 

1 

 
 
 
and  29  April  -  the  cut-off  date  for  the  technical  assumptions  of  the  Commission’s  Spring  2026 
Economic Forecast, which is the basis for the sustainability assessment in this Convergence Report - oil 
and  gas  prices  increased  by  65%  and  50%  respectively,  leading  to  a  strong  acceleration  of  energy 
inflation.  Price  pressures  are  set  to  broaden  progressively,  as  rising  energy  costs  feed  through  the 
production  chain  and  are  partially  passed  through  to  consumers.  The  external  assumptions  of  the 
Commission’s Spring 2026 Economic Forecast take into account the path of futures prices for energy 
commodities  at  the  time  of  the  cut-off  date  of  the  forecast.  These  energy  commodity  assumptions 
suggest  a  relatively  swift,  albeit  partial,  normalisation  of  supply  conditions,  with  oil  and  gas  prices 
expected to stabilise at around 20% above pre-war levels by 2027. 

In  parallel,  Russia’s  continued  war  of  aggression  against  Ukraine  implies  a  significant  threat  to 
European security and requires spending to be increased on defence for the foreseeable future. As part 
of  this,  the  Commission  presented  a  defence  package  in  March  2025  under  the  ReArm  Europe 
Plan/Readiness 2030 initiative. Under this plan, the Commission invited Member States to request the 
activation  of  the  National  Escape  Clause  of  the  Stability  and  Growth  Pact,  which  provides  them 
additional budgetary space to transition to a durably higher level of defence expenditure, within the EU 
fiscal rules. The amount of the planned deviation  from the recommended net expenditure path under 
the escape clause is capped at 1.5% of GDP, available for a period of four years. In addition, the new 
Security Action for Europe (SAFE) package provides loans of up to EUR 150 billion to help EU Member 
States quickly and substantially increase investments in Europe’s defence capabilities. 

Faster implementation of the national recovery and resilience plans (RRPs), ahead of the closure of the 
Recovery and Resilience Facility (RRF) at the end of the year, along with progress in the implementation 
of 2021-2027 cohesion policy programmes are expected to partly offset the negative consequences of 
the  current  geopolitical  instability  and  contribute  to  the  convergence  process  of  non-euro  area  EU 
Member  States.  Besides  contributing  to  higher  growth  and  improved  public  finances,  the  RRF  and 
cohesion policy programmes strengthen Member States’ long-term growth and resilience by supporting 
major  reforms  and  investments  that  help  address  both  long-standing  and  new  challenges,  such  as 
diversifying energy supplies.  By the end of  May 2026, RRF disbursements reached  EUR 405.9 billion, 
which  is  around  70%  of  the  total  amount  of  support  committed  under  the  RRF.  For  the  2021-2027 
period,  the  EU  will  provide  cohesion  policy  funding  of  EUR  420  billion  to  Member  States.  Cohesion 
policy  is  concentrated  on  fields  that  are  critical  for  promoting  convergence  and  competitiveness.  It 
supports  long-term  investment  in  line  with  EU  priorities,  encourages  EU  GDP  growth,  and  has  a 
particularly  high  impact  on  the  Member  States  and  regions  that  are  the  main  beneficiaries  of  the 
policy.  The  mid-term  review  of  cohesion  policy,  which  was  concluded  in  autumn  2025,  provided 
Member  States  with  greater  flexibility  and  incentives  to  deploy  existing  resources  more  rapidly  and 
accelerate programme implementation and better align funding with key EU priorities.  

On  22  April  2026,  the  Commission  adopted  the  ‘AccelerateEU’  Communication,  which  presented  a 
comprehensive  set  of  actions  and  measures  to  address  rising  energy  costs  and  further  reduce 
dependency  on  volatile  fossil  fuel  markets,  while  putting  Europe  on  a  steady  pathway  to  energy 
independence. The plan aims to provide relief to consumers facing energy price spikes and accelerate 
the  transition  to  clean,  secure  and affordable  energy.  Many  Member  States have  adopted  budgetary 
policy measures to mitigate the social and economic impact of high energy prices on households and 
businesses. According to the Commission’s 2026 Spring Economic Forecast, the total budgetary cost of 
such  measures  is  EUR  14.6  billion,  or  0.07%  of  EU  GDP  in  2026,  with  large  differences  between 
Member States.  

On 3 June 2026, the Commission published its 2026 European Semester Spring Package. The package 
includes  the  Commission’s  assessment  of  Member  States’  compliance  with  the  relevant  Council 
recommendations  on  fiscal  policy.  For  the  10  Member  States  currently  under  excessive  deficit 
procedure (EDP), including Hungary, Poland and Romania, the Commission assessed the action taken in 
response to the Council recommendations under the EDP. For the other Member States (not currently in 
EDP),  including  Czechia  and  Sweden,  the  Commission  assessed  progress  with  the  implementation  of 
the  medium-term  plans  and  compliance  with  the  relevant  Council  recommendations.  For  Member 
States that  benefit  from  a  fiscal  adjustment  period  of  seven  instead  of  four years  in  the  context  of 
their medium-term plans, including Romania, the Commission also assessed the implementation of the 
key  steps  of  reform  and  investment  commitments  underpinning  the  extension.  The  Commission  also 
announced that Member States that take action to strengthen Europe's energy security and accelerate 
the  transition  away  from fossil  fuels may  request  limited  fiscal  flexibility  under  the  current  National 

2 

 
Escape Clause for defence spending. Upon request by the Member State, the scope of the clause can 
be  expanded  to  include  measures  undertaken  since  February  2026  that  reduce  the  dependence  on 
imported fossil fuels, subject to a dedicated annual cap for the period 2026-2028 (0.3% of GDP) and a 
cumulative cap (0.6% of GDP).  

Convergence criteria 

The  examination  of  the  compatibility  of  national  legislation,  including  the  statutes  of  national 
central banks of Member States with a derogation, together with Article 130 TFEU and the compliance 
duty  under  Article  131  TFEU,  includes  an  assessment  of  observance  of  the  prohibition  of  monetary 
financing  (Article  123  TFEU)  and  the  prohibition  of  privileged  access  to  financial  institutions  (Article 
124 TFEU); the consistency with the ESCB’s objectives (Article 127(1) TFEU) and tasks (Article 127(2) 
TFEU); and other aspects relating to the integration of national central banks into the Eurosystem5.  

The first indent of Article 140(1) TFEU defines the price stability criterion as ‘the achievement of a 
high degree of price stability; this will be apparent from a rate of inflation which is close to that of, at 
most, the three best performing Member States in terms of price stability’. 

Article 1 of the Protocol on the convergence criteria further provides that ‘the criterion on price stability 
[…] shall mean that a Member State 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 1.5 percentage points that of, at most, the three best-performing Member States in terms of price 
stability.  Inflation  shall  be  measured  by  means  of  the  consumer  price  index  on  a  comparable  basis, 
taking into account differences in national definitions’6. 

The sustainability requirement implies that the satisfactory inflation performance must be attributed 
to  the  behaviour  of  input  costs  and  other  factors  that  influence  price  developments  in  a  structural 
manner,  rather  than  the  influence  of  temporary  factors.  Therefore,  the  convergence  examination 
includes  an  assessment  of  the  factors  that  affect  the  inflation  outlook  and  is  complemented  by  a 
reference to the most recent Commission inflation forecast7.  

The inflation reference value was calculated as 2.7% in May 2026, with Cyprus, France and Denmark 
being the three ‘best-performing Member States’8. 

No  Member  States  were  identified  as  outliers  in  terms  of  inflation  performance  for  calculating  the 
reference value, as none of their inflation rates deviated by a wide margin from the euro area average 
due to country-specific circumstances. 

The  second  indent  of  Article  140(1)  TFEU  defines  the  convergence  criterion  dealing  with  public 
finances as ‘the sustainability of the government financial position; this will be apparent from having 
achieved  a  government  budgetary  position  without  a  deficit  that  is  excessive  as  determined  in 
accordance with Article 126(6)’.  

Furthermore, Article 2 of the Protocol on the convergence criteria states that this criterion means that 
‘at the time of the examination the Member State is not the subject of a Council decision under Article 
126(6) of the said Treaty that an excessive deficit exists’. 

The  TFEU  refers  to  the  exchange  rate  criterion  in  the  third  indent  of  Article  140(1)  as  ‘the 
observance  of  the  normal  fluctuation  margins  provided  for  by  the  exchange-rate  mechanism  of  the 
European Monetary System, for at least two years, without devaluing against the euro’. 

Article 3 of the Protocol on the convergence criteria provides that:  ‘The criterion on participation in the 
exchange rate mechanism of the European Monetary System […] shall mean that a Member State has 
respected  the  normal  fluctuation  margins  provided  for  by  the  exchange-rate  mechanism  of  the 
European  Monetary  System  without  severe  tensions  for  at  least  the  last  two  years  before  the 

5   The examination of the compatibility of national legislation is based on the legislation in force by the end of April 2026. 
6   For the purpose of the price stability criterion, inflation is measured by the Harmonised Index of Consumer Prices (HICP) defined in 

Regulation (EU) 2016/792. 

7   All forecasts for inflation and other variables in this report are from the Commission’s Spring 2026 Economic Forecast. The forecasts 
are  based  on  a  set  of  common  assumptions  for  external  variables  and  on  a  ‘no  policy  change’  assumption,  but  also  take  into 
consideration measures that are known in sufficient detail. 

8   The respective 12-month average inflation rates were 0.9%, 1.2% and 1.6%. 

3 

 
 
examination.  In  particular,  the  Member  State  shall  not  have  devalued  its  currency’s  bilateral  central 
rate against the euro on its own initiative for the same period’9. 

The  relevant  two-year  period  for  assessing  exchange  rate  stability  in  this  report  ran  from  18  June 
2024 to 17 June 2026. In its assessment of the exchange rate stability criterion, the Commission takes 
into account developments in auxiliary indicators such as foreign reserve developments and short-term 
interest  rates.  It  also  takes  into  account  the  role  of  policy  measures  (including  foreign  exchange 
interventions) and international financial assistance (wherever relevant) in maintaining exchange rate 
stability.  

The  fourth  indent  of  Article  140(1)  TFEU  requires  ‘the  durability  of  convergence  achieved  by  the 
Member  State  with  a  derogation  and  of  its  participation  in  the  exchange  rate  mechanism’  to  be 
‘reflected in the long-term interest rate levels’. 

Article  4  of  the  Protocol  on  the  convergence  criteria  further  states  that  ‘the  criterion  on  the 
convergence  of  interest  rates  […]  shall  mean  that,  observed  over  a  period  of  one  year  before  the 
examination, a Member State has had an average nominal long-term interest rate that does not exceed 
by more than 2 percentage points that of, at most, the three best-performing Member States in terms 
of  price  stability.  Interest  rates  shall  be  measured  on  the  basis  of  long-term  government  bonds  or 
comparable securities, taking into account differences in national definitions’. 

The interest rate reference value was calculated as 5.1% in May 202610. 

Article 140(1) TFEU also requires the reports to take into account other factors relevant to economic 
integration and convergence. These include the integration of markets, the development of the balance 
of  payments  on  the  current  account  and  of  unit  labour  costs  and  other  price  indices.  The  additional 
factors to be considered are important indicators of whether a Member State would integrate into the 
euro area without difficulties. They also broaden the view on the  required high degree of sustainable 
convergence. 

The  assessment  of  the  degree  of  sustainable  convergence  for  the  Member  States with  a  derogation 
presented  in  this  report  draws  on  the  Commission’s  Spring  2026  Economic  Forecast  and  the  policy 
guidance provided under the 2026 European Semester Spring Package11. It is informed in particular by: 
the  Chapeau  Communication  for  the  Spring  package,  including  the  conclusions  on  (i)  the  fiscal 
surveillance  carried  out  under  the  Stability  and  Growth  Pact  and  (ii)  the  Macroeconomic  Imbalance 
Procedure.  The  assessment  also  refers  to  the  findings  in  the  2026  In-Depth  Reviews  and  the  2026 
Country  Reports.  The  assessment  also  reflects the  Commission’s  assessments  of  fiscal  sustainability 
risks  and  of  the  national  fiscal  framework,  as  well  as  the  implementation  of  the  RRP.  Labour  and 
product  market  performance,  labour  participation,  skills  availability,  wage  formation,  social  resilience 
and  territorial  cohesion  are  also  relevant,  as  they  contribute  to  shape  adjustment  capacity, 
competitiveness and the ability to participate smoothly in the euro area. 

2. 

CZECHIA 

In  the  light  of  its  assessment  on  legal  compatibility  and  on  the  fulfilment  of  the 
convergence  criteria,  and  taking  into  account  the  additional  relevant  factors,  the 
Commission considers that Czechia does not fulfil the conditions for adopting the euro. 

Legislation  in  Czechia,  in  particular  the  Czech  National  Council  Act  No  6/1993  Coll.  on  the  Česká 
národní  banka  (the  ČNB  Law),  is  not  fully  compatible  with  the  requirements  of  Article  131  TFEU. 
Incompatibilities concern the independence of the central bank, prohibition of monetary financing, and 
the  integration  of  the  central  bank  into  the  Eurosystem  with  regard  to  the  ČNB's  objectives  and  the 
ESCB/ECB  objectives  and  tasks laid  down  in  Article  127(1)  and  (2)  TFEU  and  Articles  2  and  3  of  the 
ESCB/ECB Statute. In addition, the ČNB Law also contains imperfections relating to ESCB/ECB tasks. 

9  

In assessing compliance with the exchange rate criterion, the Commission examines whether the exchange rate has remained close 
to the ERM  II central  rate.  Reasons for an appreciation  may  be taken  into account,  in accordance  with  the Common  Statement on 
Acceding Countries and ERM2 by the Informal ECOFIN Council held in Athens on 5 April 2003. 

10   The  reference  value  for May  2026 was calculated as  the  simple average  of  the  12-month average  of long-term interest  rates  of 

Cyprus (3.1%), France (3.5%) and Denmark (2.6%), plus two percentage points. 

11   COM(2026) 200 final, 3.6.2026. 

4 

 
 
 
Czechia fulfils the criterion on price stability. The average inflation rate in Czechia during the 12 
months to May 2026 was 1.9%, below the reference value of 2.7%. It is projected to increase by the 
end of 2026 and decrease in the second half of 2027, but should stay below the reference value in 
both years.  

Following a period of high inflation in 2021-2023, which started with the post-COVID recovery and was 
aggravated  by the energy price shock following Russia’s full-scale invasion of Ukraine, HICP inflation 
started to moderate in 2024 (2.7%) and 2025 (2.3%). The decline in headline inflation was driven by a 
slowdown  in  food  prices  in  2024  and  energy  prices  in  2025.  Services  inflation,  which  typically  is 
relatively  persistent  and  driven  by  wages,  cooled  off  during  that  period  but  remained  well  above 
headline  inflation.  Annual  inflation  slowed  down  further  in  the  first  two  months  of  2026,  before 
increasing in the subsequent months and reaching 1.8% in May 2026, driven by services inflation and 
a spike in energy inflation due to the conflict in the Middle East. Annual HICP inflation rates in Czechia 
in 2024 and 2025 were on average slightly higher than those for the euro area as a whole.   

The  Commission’s  Spring  2026  Economic  Forecast  projects  that  average  annual  HICP  inflation  will 
increase to 2.7% in 2026 and 2.8% in  2027. The  projected increase is attributed  to spikes in energy 
prices, only partially balanced out by slower growth in services and food prices. The level of consumer 
prices  in  Czechia  was  about  88%  of  the  euro  area  average  in  2024,  suggesting  that  there  is  still 
potential for further price level convergence in the long term. 

Czechia fulfils the criterion on public finances. Czechia is not the subject of a Council Decision on 
the existence of an excessive deficit.  The  general government deficit  increased from  2.0% of GDP in 
2024  to  2.1%  in  2025,  reflecting  higher  public  wages  and  increased  government  subsidies  for 
renewable  energy  sources,  despite  higher  GDP  growth.  The  Commission’s  Spring  2026  Economic 
Forecast expects the general government deficit to reach  2.8% of GDP in 2026  due to, among other 
things,  the  full  phase-out  of  the  windfall  tax  on  energy  company  profits  and  taking  over  from 
electricity consumers the payment of the renewable energy levy. In 2027, the government deficit ratio 
is forecast to be 2.9%.  

On 21 January 2025, the Council adopted a recommendation endorsing Czechia’s medium-term fiscal-
structural  plan.  The  plan  sets  out  a  fiscal  adjustment  path  over  four  years,  with  maximum  net 
expenditure growth of 4.5% in 2025, 2.5% in 2026, 2.6% in 2027 and 2.9% in 2028. In July 2025, the 
Council  activated  the  national  escape  clause  for  increases  in  defence  spending  for  Czechia,  allowing 
Czechia  to  deviate  from,  and  exceed,  the  net  expenditure  path  of  the  medium-term  fiscal-structural 
plan.  On  3  June  2026,  the  Commission  concluded  that  net  expenditure  in  Czechia  grew  by  4.9%  in 
2025  and  6.0%  cumulatively  over  2024  and  2025.  Net  expenditure  growth  in  2025  was  above  the 
recommended  maximum  growth  rate,  corresponding  to  a  deviation  of  0.2%  of  GDP  in  annual  terms. 
When considering 2024 and 2025 together, the cumulative growth rate of net expenditure is below the 
recommended  maximum  growth  rate.  As  Czechia  benefits  from  flexibility  under  the  national  escape 
clause, the assessment of compliance focusses on the latter comparison. 

5 

 
 
Net expenditure is projected to grow by 6.4% in 2026, above the recommended growth of 2.5%. The 
deviation above the recommended maximum is equivalent to an annual deviation of 1.5% of GDP and 
a cumulative deviation of 0.1% of GDP when considering 2024, 2025 and 2026 together. Taking the 
flexibility under the national escape clause into account, the projected deviation for 2026 is within the 
flexibility of the national escape clause based on current projections for defence spending.  

The government debt-to-GDP ratio increased from 43.3% in 2024 to 44.3% in 2025 and is forecast to 
increase to 45.8% in 2026 and then to 47.2% in 2027. This is driven by a negative primary balance, 
the interest expenditure and, to a lesser extent, the debt-increasing stock-flow adjustment, but is partly 
offset  by nominal GDP growth. Debt  sustainability risks appear medium over the  medium term,  with 
government debt projected to increase from around 44% of GDP in 2025 to around 56% in 2036. The 
Czech  national  fiscal  framework  is  performing  well,  but  is  facing  growing  challenges  due  to,  among 
other things,  a  strong  increase  in  general  government  debt  since  the  pandemic,  compliance  with  the 
structural balance rule requiring additional consolidation measures before 2028, and  the exclusion of 
defence spending above 2% of GDP from the national expenditure framework. 

Czechia does not fulfil the exchange rate criterion. The Czech koruna does not participate in the 
Exchange  Rate  Mechanism  II.  Since  the  late  1990s,  the  ČNB  has  been  operating  an  explicit  inflation 
targeting  framework  combined  with  a  floating  exchange  rate  regime,  which  allows  for  foreign 
exchange market interventions by the central bank. Between April 2024 and January 2025, the Czech 
koruna was trading at around 25.2 CZK per euro. By the end of 2025 the Czech koruna had appreciated 
to around 24.3 and fluctuated around that level till mid-2026. In May 2026, the koruna was about 2% 
stronger  against  the  euro  compared  with  two  years  earlier.  The  monetary  policy  easing  cycle  of  the 
ČNB between December 2023 and May 2025 led to a large, steady decrease in the Czech three-month 
PRIBOR and, accordingly, in the spread vis-à-vis the euro area, which dropped below 100 basis points 
in the second half of 2024. From September 2024, the spread began to widen slightly until mid-2025. 
Thereafter, the spread stabilised at around 150 basis points, reaching 133 basis points in May 2026. 

Czechia fulfils the criterion on the convergence of long-term interest rates. The average long-
term  interest  rate  in  the  year to  May  2026  was  4.5%, below  the  reference  value  of  5.1%.  Czechia’s 
long-term interest rate decreased in the second half of 2024, reaching 3.8% in September that year. It 
then increased gradually to 4.7% in December 2025 in line with rising inflationary pressures. The long-
term  interest  rate  reached  4.9%  in  May  2026,  with  the  spread  versus  the  German  benchmark  bond 
reaching 184 basis points. 

The Commission has also examined additional factors, including balance of payments developments, 
the  integration  of  markets  and  the  institutional  environment.  Czechia’s  external  balance  (i.e.  the 
combined  current  and  capital  account)  recorded  a  surplus  amounting  to  2.2%  of  GDP  in  2025.  The 
Czech economy is highly integrated with the euro area through trade and investment linkages. Selected 
indicators related to the institutional environment show that Czechia ranks higher than the average for 
euro area Member States in this regard. The financial sector in Czechia is smaller and less developed 
than in the euro area. Market-based financing is less developed, as reflected in the very small markets 
for  equity  and  private  sector  debt.  The  Czech  banking  sector  is  highly  integrated  into  the  euro  area 
financial system, in particular through a high degree of foreign ownership of banks.  In the context of 

6 

 
 
the Macroeconomic Imbalance Procedure, the Commission concluded in its Alert Mechanism Report for 
2026 that it was not necessary to carry out an In-Depth Review analysis for Czechia.  

Czechia’s  recovery  and  resilience  plan  (RRP)  includes  measures  to  address  a  series  of  structural 
challenges,  in  synergy  with  other  EU  funds,  including  cohesion  policy  funds,  to  boost  its 
competitiveness  and  stimulate  sustainable  growth,  and  reduce  the  country’s  territorial  and  social 
disparities.  The  RRF  funding  provides  Czechia  with  EUR 8.4  billion  in  grants  and  EUR  343  million  in 
loans  over  the  2021-2026  period.  Czechia  has  submitted  six  payment  requests,  five  of  which  have 
already  been  assessed  resulting  in  a  total  disbursement  of  EUR  6.8  billion  by  the  end of  May  2026. 
Moreover, it has fulfilled approximately 71% of the milestones and targets of its RRP. Key reforms in 
Czechia’s RRP include those in the areas of renewable energy, zero-emission mobility, long-term care, 
affordable  housing,  and  conflict  of  interest  and  lobbying  rules.  In  addition,  cohesion  policy  provides 
Czechia with EUR 24.2 billion for the 2021-2027 period. Cohesion policy financing aims particularly to 
further support Czechia’s competitiveness, by helping research and innovation, SMEs competitiveness, 
energy efficiency improvements, modernisation of public employment services, skills development and 
lifelong learning, as well as work-life balance and equal opportunities.  

3. 

HUNGARY 

In  the  light  of  its  assessment  on  legal  compatibility  and  on  the  fulfilment  of  the 
convergence  criteria,  and  taking  into  account  the  additional  relevant  factors,  the 
Commission considers that Hungary does not fulfil the conditions for adopting the euro. 

Legislation  in  Hungary,  in  particular  the  Law  on  the  Magyar  Nemzeti  Bank  (MNB),  is  not  fully 
compatible  with  the  requirements  of  Article  131  TFEU.  Incompatibilities  notably  concern  the 
independence  of  the  MNB,  prohibition  of  monetary  financing  and  the  integration  of  the  central  bank 
into the Eurosystem with regard to the ESCB/ECB tasks laid down in Article 127(1) and (2) TFEU and 
Articles  2  and  3  of  the  ESCB/ECB  Statute.  In  addition,  the  Law  on  the  MNB  contains  imperfections 
relating to the MNB’s independence and its integration into the Eurosystem. 

Hungary  does  not  fulfil  the  criterion  on  price  stability.  The  average  inflation  rate  in  Hungary 
during the 12 months to May 2026 was 3.3%, above the reference value of 2.7%. Inflation is projected 
to decrease and to fall below the reference value by the end of 2026. It is expected to rise above the 
reference value in the first half of 2027, but to fall back below it by the end of 2027. 

Annual  HICP  inflation  in  Hungary  slowed  in  2024  but  picked  up  again  in  2025,  averaging  3.7%  and 
4.4%  respectively.  Annual  HICP  inflation  increased  from  3.9%  in  May  2024  to  5.7%  in  January  and 
February  2025.  The  increase  in  inflation  in  2024  and  early  2025  was  mostly  driven  by  elevated 
services inflation fuelled by strong consumer demand, high wage growth and sector-specific tax hikes, 
even  though  administered  prices  had  a  dampening  effect  in  2024.  Headline  inflation  subsequently 
slowed, reaching 3.3% in December 2025, mainly due to lower energy inflation. It further declined at 

7 

 
 
 
the beginning of 2026, bottoming at 1.6% in February, before increasing gradually in the subsequent 
months.  HICP  inflation  stood  at  2.3%  in  May  2026,  owing  to  a  decline  in  food  inflation,  modest 
repricing of services and the regulation of fuel prices to limit the impact of rising oil prices due to the 
conflict in the Middle East. Annual HICP inflation rates in Hungary in 2024 and 2025 were on average 
higher than in the euro area as a whole. 

The Commission’s Spring 2026 Economic Forecast  projects that annual HICP inflation will decrease to 
3.2% in 2026 and to 3.1% in 2027, with the currency appreciation in 2026 set to moderate inflation. 
The level of consumer prices in Hungary was about 70% of the euro area average in 2024, suggesting 
that there is still potential for further price level convergence in the long term.  

Hungary  does  not  fulfil  the  criterion  on  public  finances.  Hungary  is  the  subject  of  a  Council 
decision on the existence of an excessive deficit. Since 2020, Hungary’s general government deficit has 
remained above the 3% of GDP Treaty reference value. The general government deficit decreased from 
5.1% of GDP in 2024 to 4.7% of GDP in 2025, but still remained above the 3% of GDP reference value. 
The decrease in 2025 was due to revenue increasing faster than expenditure, mainly because of strong 
VAT  revenue  growth  driven  by  robust  consumption,  strong  wage  increases  leading  to  an  increase  in 
social security contributions as well as large cuts to public investment.  The Commission’s Spring 2026 
Economic Forecast expects the general government deficit to increase to 6.2% of GDP in 2026 due to, 
among  other  things,  personal  income  tax  reductions,  public  sector  wage  growth,  and  bonuses  and 
expenditure overruns. In 2027, the government deficit ratio is forecast to decrease to 5.8%. 

On 18 February 2025, the Council endorsed Hungary’s national medium-term fiscal-structural plan. The 
plan sets out a fiscal adjustment path over four years, with maximum net expenditure growth of 4.3% 
in 2025, 4.0% in 2026, 3.9% in 2027 and 3.7% in 2028. The Council also adopted a recommendation 
with a view to bringing an end to the situation of an excessive deficit. The recommended maximum net 
expenditure growth rates under the excessive deficit procedure (EDP) were in line with those set out in 
the  medium-term  fiscal-structural  plan.  These  are  consistent  with  a  minimum  annual  structural 
adjustment of at least 0.5% of GDP as a benchmark required under an excessive deficit procedure. The 
EDP  correction  deadline  is 2026,  at  which  point  the  plan  envisages a  deficit  of  2.5%  of  GDP.  In  July 
2025, the Council activated the national escape clause for increases in defence spending for Hungary, 
allowing  Hungary  to  deviate  from,  and  exceed,  the  correction  path  under  the  EDP  and  the  net 
expenditure path of the medium-term fiscal-structural plan.  

Net expenditure is projected to grow by  9.7% in 2026, above the recommended growth rate of 4.0%. 
The deviation above the recommended maximum is equivalent to an annual deviation of 2.3% of GDP 
and  a  cumulative  deviation  of  3.0%  of  GDP.  On  3  June  2026,  the  Commission  concluded  that,  after 
considering the flexibility provided by the national escape clause, Hungary is assessed to be compliant 
with the recommended maximum growth rate of net expenditure in 2025, whereas it is projected to be 
at  risk  of  material  non-compliance  in  2026.  At  this  stage,  the  Commission  nonetheless  assesses 
Hungary as having taken effective action in 2025. As a result, the EDP is held in abeyance.  

The  government  debt-to-GDP  ratio  rose  from  73.5%  in  2024  to  74.6%  in  2025.  It  is  forecast  to 
increase to 75.1% in 2026 and to 76.8% in 2027, driven by a high primary deficit and elevated interest 
expenditure.  Debt  sustainability  risks  for  Hungary  appear  high  in  the  medium  term,  with  government 
debt  projected  to  increase  from  around  75%  in  2025  to  around  103%  of  GDP  in  2036.  While  the 
country’s fiscal framework has gradually been brought more into line with EU legal requirements, it has 
not  fostered  transparency  and  a  prudent  fiscal  stance.  Establishing  a  realistic  and  stable  national 
medium-term  budgetary  framework  would  enhance  the  credibility  and  effectiveness  of  the  country’s 
fiscal policy. Moreover, the role and the independence of the Fiscal Council could be strengthened. 

8 

 
Hungary does not fulfil the exchange rate criterion. The Hungarian forint does not participate in 
the Exchange Rate Mechanism II. Hungary operates a floating exchange rate regime,  which allows for 
foreign exchange market interventions by the central bank.  The forint depreciated against the euro in 
2024  but  appreciated  over  the  course  of  2025  up  to  the  end  of  February  2026.  This  reflected  the 
differences between the monetary policies of the MNB and the ECB, differences in inflation rate paths 
and heightened uncertainty throughout the period. In March 2026, uncertainty due to the Middle East 
conflict caused the forint to temporarily depreciate. However, with inflation converging to the euro area 
average and following the results of April’s national elections, the forint appreciated once again. In May 
2026, the forint was about 8% stronger against the euro compared with two years earlier. Short-term 
interest rate differentials vis-à-vis the euro area declined in 2024 to a minimum of 299 basis points in 
August, with the MNB reducing its  policy rate much faster than the ECB. The  short-term spread then 
rose in 2025 with the MNB keeping its rate unchanged and the ECB easing its policy further. The short-
term spread declined slightly again in 2026, reaching 390 basis points in May, with the MNB lowering 
its policy rate in February 2026 while the ECB left rates unchanged. Short-term interest rates also fell 
following the elections in April.  

Hungary  does  not  fulfil  the  criterion  on  the  convergence  of  long-term  interest  rates.  The 
average long-term interest rate in the year to May 2026 was 6.7%, well above the reference value of 
5.1%. Hungary’s long-term interest rate has been relatively stable since the previous report, with only 
small  changes  in  the  policy  rate  and  fairly  stable  inflation.  The  policy  rate  cut  in  February  and  the 
sharp decline in inflation in early 2026 caused Hungary’s long-term interest rate to decrease. However, 
heightened risks due to the war in the Middle East temporarily raised it to 7.1% in March, the highest 
level  since  2023.  The  results  of  April’s  elections  caused  the  long-term  interest  rate  to  return  to  a 
declining path, reaching 5.7% in May 2026. The long-term interest rate spread vis-à-vis Germany was 
relatively stable in 2025, and then fell in 2026 following the decrease in the long-term interest rate. 
The long-term spread versus the German benchmark bond was 260 basis points in May 2026. 

The Commission has also examined additional factors, including balance of payments developments, 
the  integration  of  markets  and  the  institutional  environment.  Hungary’s  external  balance  (i.e.  the 
combined  current  and  capital  account)  improved  to  2.2%  of  GDP  in  2024  mainly  due  to  an 
improvement in the trade balance. It remained at 2.2% of GDP in 2025 with its widening trade deficit 
in  goods  and  trade  surplus  in  services  cancelling  each  other  out.  The  Hungarian  economy  is  highly 
integrated with the euro area through trade and investment linkages. Selected indicators relating to the 
institutional environment show that Hungary performs worse  than many euro area Member States in 
this regard. Hungary faces challenges in areas such as  regulatory quality and control of corruption. It 
also performs worse than the euro area average in terms of government effectiveness and rule of law. 
Hungary’s  financial  system  is  characterised  by  a  large  presence  of  foreign  holdings  that  perform  no 
financial intermediation in the domestic economy. Excluding these, Hungary’s financial system is less 
developed  than  the  euro  area  average.  Hungary's  banking  sector  has  a  large  and  relatively  stable 
weight  in  the  financial  sector  and  is  well  integrated  into  the  euro  area  financial  system  due  to  a 
relatively large share of foreign ownership. The equity and debt markets are small and relatively less 
developed. In the context of the Macroeconomic Imbalance Procedure, the Commission concluded in its 
Alert Mechanism Report for 2026 that an In-Depth Review (IDR) was warranted for Hungary. The IDR 

9 

 
 
concluded  that  Hungary  is  experiencing  vulnerabilities  related  to  its  high  government  debt  and 
government  financing  needs,  cost  competitiveness  and  house  prices.  Taking  into  account  this 
assessment in the IDR, the Commission, in its Communication on the 2026 European Semester Spring 
Package, considers that Hungary continues to experience macroeconomic imbalances. 

Hungary’s  recovery  and  resilience  plan  (RRP)  includes  measures  to  address  a  series  of  structural 
challenges,  in  synergy  with  other  EU  funds,  including  cohesion  policy  funds,  to  boost  its 
competitiveness  and  stimulate  sustainable  growth  and  reduce  the  country’s  territorial  and  social 
disparities.  The  RRF  funding  provides  Hungary  with  EUR  10  billion  over  the  2021-2026  period.  Key 
reforms  in  Hungary’s  RRP  include  those  in  the  areas  of  Rule  of  Law  (e.g.  the  judicial  system,  anti-
corruption,  public  procurement),  sustainable  transport,  energy,  water  management  and  circular 
economy,taxation  and  the  fiscal  framework.  In  addition,  cohesion  policy  provides  Hungary  with  EUR 
23.7  billion  for  the  2021-2027  period.  Cohesion  policy  financing  aims  to  further  support  Hungary’s 
competitiveness,  including  through  innovation  and  the  uptake  of  advanced  technologies,  the  green 
transition, and upward social convergence, by addressing, among other things, poverty and developing 
education  systems  and  skills.  While  Hungary  has  made  progress  in  implementing  cohesion  policy, 
challenges remain and significant social and regional disparities persist. 

4. 

POLAND  

In light of  its assessment on legal compatibility and on the fulfilment of the convergence 
criteria, and taking into account the additional relevant factors, the Commission considers 
that Poland does not fulfil the conditions for adopting the euro. 

Legislation  in  Poland,  in  particular  the  Act  on  the  Narodowy  Bank  Polski  (the  NBP  Act)  and  the 
Constitution of the Republic of Poland, is not fully compatible with the requirements of Article 131 
TFEU. Incompatibilities concern the independence of the central bank, prohibition of monetary financing 
and  the  integration  of  the  central  bank  into  the  Eurosystem.  In  addition,  the  NBP  Act  also  contains 
some  imperfections  relating  to  the  NBP’s  central  bank  independence  and  its  integration  into  the 
Eurosystem with regard to the ESCB/ECB tasks laid  down in Article 127(2) TFEU and Article 3 of the 
ESCB/ECB Statute. 

Poland does not fulfil the criterion on price stability. The average inflation rate in Poland during 
the 12 months to May 2026 was 2.9%, slightly above the reference value of  2.7%. It is projected to 
increase and remain above the reference value until the end of 2026. It is, however, expected to fall 
for most of 2027 and to pass below the reference value by the end of 2027.   

Headline inflation fell substantially from 10.8% in 2023 to an average of 3.7% in 2024 and 3.3% in 
2025. Most inflation components, except for services and processed food, contributed to this reduction. 
Food  prices  were  impacted  by  the  phasing  out  of  the  temporary  zero  rate  of  VAT  on  basic  food 
products at the end of  March 2024. In 2025, the freeze  on gas  and electricity  prices  for households 

10 

 
 
 
also came to an end. After moderating to 2.5% in January and February 2026, HICP inflation increased 
in the subsequent three months, reaching 3.3% in May 2026, driven by rising global commodity prices 
as a result of the conflict in the Middle East but mitigated by a temporary reduction in fuel taxes and a 
daily price cap introduced at the end of March 2026. In 2024 and 2025, annual HICP inflation rate in 
Poland was on average higher than in the euro area as a whole. 

Looking  ahead,  inflation  is  expected  to  increase  in  2026  but  then  to  fall  in  2027,  while  remaining 
above the euro area average in both years. The Commission’s Spring 2026 Economic Forecast projects 
that annual HICP inflation will average 3.6% in 2026 and 2.9% in 2027. The inflation outlook remains 
uncertain  due  to  risks  related  to  global  commodity  prices  and  geopolitical  situation.  The  level  of 
consumer prices in Poland was about 69% of the euro area average in 2024, suggesting that there is 
still potential for further price level convergence in the long term. 

Poland does not fulfil the criterion on public finances. Poland is the subject of a Council decision 
on the existence of an excessive deficit. Since 2022, Poland’s general government deficit has remained 
above the 3% of GDP Treaty reference value, increasing from 3.4% of GDP in 2022 to 6.4% of GDP in 
2024 and 7.3% of  GDP in 2025. This  is  due to higher public spending  driven  by  substantial defence 
investments, increased social benefits (including pension indexation and also the new Active Parent and 
Widow  Pension  programmes),  rising  costs  of  servicing  public  debt,  increased  salaries  in  the  public 
sector and higher spending on healthcare. The Commission’s Spring 2026 Economic Forecast expects 
the  general  government  deficit  to  decrease  to  6.5%  of  GDP  in  2026,  due  to  restraint  in  nationally-
financed expenditure and the adopted discretionary revenue measures. In 2027, the government deficit 
ratio is forecast to be 6.3%.  

On  21  January  2025,  the  Council  adopted  a  recommendation  endorsing  Poland’s  national  medium-
term fiscal-structural plan. The plan sets out a fiscal adjustment path over four years, with maximum 
net expenditure growth of 6.3% in 2025, 4.4% in 2026, 4.0% in 2027 and 3.5% in 2028. The Council 
also adopted a recommendation with a view to bringing an end to the situation of an excessive deficit. 
The recommended maximum net expenditure growth rates under the EDP were in line with those set 
out in the medium-term fiscal-structural plan. These are consistent with a minimum annual structural 
adjustment of at least 0.5% GDP as a benchmark required under an EDP. The EDP correction deadline 
is 2028, at which point the plan envisages a deficit of 2.9% of GDP. In July 2025, the Council activated 
the  national  escape  clause  for  increases  in  defence  spending  for  Poland,  allowing  Poland  to  deviate 
from, and exceed, the correction path under the EDP and the net expenditure path of the medium-term 
fiscal-structural  plan.  On  3  June  2026,  the  Commission  concluded  that  based  on  the  assessment  of 
effective action, the excessive deficit procedure for Poland is held in abeyance. 

Net expenditure is projected to grow by 4.0% in 2026, below the recommended growth of 4.4%. The 
cumulative  deviation  from  the  recommended  maximum  is  equivalent  to  1.0%  of  GDP.  However,  the 
projected deviation is within the flexibility of the national escape clause based on current projections 
for defence spending.  

The government debt-to-GDP ratio increased from 54.8% in 2024 to 59.7% in 2025 and is projected 
to increase to 64.5% in 2026 and to 68.3% in 2027. This is driven by a high primary deficit, elevated 
interest expenditure and upward stock-flow adjustments. Poland’s debt sustainability risks appear high 
in the medium term, with government debt projected to increase steadily from around 60% in 2025 to 
around 107% of GDP in 2036. The fiscal framework in Poland was subject to two significant reforms in 
2024,  which  strengthened  Polish  fiscal  discipline  and  fiscal  sustainability  by  introducing  an  ex  ante 
correction  mechanism  into  the  national  expenditure  rule  to  ensure  consistency  with  EU  fiscal 
requirements and a comprehensive fiscal policy monitoring mandate for the Fiscal Council.   

11 

 
Poland  does  not  fulfil  the  exchange  rate  criterion.  The  Polish  zloty  does  not  participate  in  the 
Exchange  Rate  Mechanism  II.  Since  April  2000,  Poland  has  been  operating  a  free-floating  exchange 
rate  regime  that  allows  foreign  exchange  market  interventions  by  the  central  bank,  if  it  deems  this 
necessary,  in  order  to  achieve  the  inflation  target.  Throughout  2024  the  zloty  remained  relatively 
stable,  averaging  around  4.31  PLN/EUR.  Between  January  and  March  2025,  it  strengthened  slightly, 
from 4.25 to around 4.18. This was followed by rapid depreciation and then a period of relatively minor 
fluctuations  at  around  4.24  level.  Between  May  2025  and  the  end  of  the  year,  the  exchange  rate 
stayed close to 4.25 PLN/EUR. In May 2026, the zloty exchange rate against the euro averaged 4.25. It 
was about 1% stronger against the euro compared with two years earlier. 

The short-term interest rate differential with the euro area increased continuously over the course of 
2024 and the first three months of 2025, reaching 341 basis points in March 2025. During this period, 
in line with the easing of the ECB’s policy rate, the euro area short-term rate continued to fall, while 
the  Polish  three-month  rate  remained  stable.  From  May  2025  onwards,  the  NBP  embarked  on  an 
easing cycle that led to a substantial narrowing of the interest rate differential to  200 basis points in 
December. This trend continued into 2026, with the interest rate differential reaching 162 basis points 
in May. 

Poland  does  not  fulfil  the  criterion  on  the  convergence  of  long-term  interest  rates.  The 
average long-term interest rate in the 12 months to May 2026 was 5.4%, slightly above the reference 
value  of  5.1%.  Poland’s  long-term  interest  rate  initially  moved  slightly  upwards  in  2024,  peaking  at 
5.7%  in  June  2024,  in  a  context  of  restrictive  monetary  policy  and  a  high  fiscal  deficit.  Over  that 
period,  the  long-term  interest  rate  spread  vis-à-vis the  German  benchmark  bond  remained  relatively 
stable,  before  increasing  from  319  basis  points  in  July  2024  to  a  peak  of  355  basis  points  in 
December 2024. Since January 2025, the long-term interest rate has been gradually decreasing, albeit 
with some fluctuations as monetary policy has been eased, to reach 5.7% in May 2026. As a result, the 
long-term interest rate  spread versus the German benchmark bond narrowed steadily  to around 269 
basis points in the course of May 2026. 

The Commission has also examined additional factors, including balance of payments developments, 
the  integration  of  markets  and  the  institutional  environment.  Poland’s  external  balance  (i.e.  the 
combined current and capital account) deteriorated in both 2024 and 2025, largely driven by a decline 
in the current account, as export prices fell faster than import prices. The external balance moved from 
a  surplus  in  2024  (0.6%  of  GDP)  to  a  neutral  position  in  2025.  Poland’s  economy  is  well-integrated 
with the euro area, through both trade and investment linkages.  Based on selected indicators relating 
to the institutional environment, Poland ranks below the average  for euro area Member States in this 
regard.  The  financial  sector  in  Poland  is  smaller  and  less  developed  than  in  the  euro  area.  It  is 
dominated  by  banks,  which  are  well-integrated  into  the  euro  area’s  financial  system  through  a  high 
level of foreign ownership. Market-based financing is less developed than in the euro area, as reflected 
in  the  very  small  markets  for  equity  and  private  sector  debt.  In  the  context  of  the  Macroeconomic 
Imbalance  Procedure,  the  Commission  concluded  in  its  Alert  Mechanism  Report  for  2026  that  no  In-
Depth Review was warranted for Poland. 

12 

 
 
Poland’s  recovery  and  resilience  plan  (RRP)  includes  measures  to  address  a  series  of  structural 
challenges,  in  synergy  with  other  EU  funds,  including  cohesion  policy  funds,  to  boost  its 
competitiveness  and  stimulate  sustainable  growth  and  reduce  the  country’s  territorial  and  social 
disparities. The RRF funding provides Poland with EUR 54.7 billion in grants and loans over the 2021-
2026 period. The implementation of Poland’s RRP is ongoing, with a total disbursement of EUR 34.15 
billion (or 62.4% of the total amount) at the end of  June 2026. Key reforms in Poland’s RRP include 
those in the areas of decarbonisation of the Polish economy, facilitating the development of network 
infrastructure to ensure universal access to the internet, reforming the health sector and labour market 
institutions.  In  addition,  cohesion  policy  provides  Poland  with  EUR  80.6  billion  for  the  2021-2027 
period.  Cohesion  policy  financing  aims  particularly  to  further  support  Poland’s  competitiveness, 
environmental sustainability  as well as skills and  social fairness. While Poland has made progress in 
implementing cohesion policy, challenges remain, with regional disparities between eastern regions and 
the rest of the country continue to widen. 

5. 

ROMANIA 

In  the  light  of  its  assessment  on  legal  compatibility  and  on  the  fulfilment  of  the 
convergence  criteria,  and  taking  into  account  the  additional  relevant  factors,  the 
Commission considers that Romania does not fulfil the conditions for adopting the euro. 

Legislation in Romania, in particular Law No. 312 on the Statute of the National Bank of Romania of 
28  June  2004  (the  BNR  Law),  is  not  fully  compatible  with  the  requirements  of  Article  131  TFEU. 
Incompatibilities concern the independence of the central bank, prohibition of monetary financing and 
the  integration  of  the  central  bank  into  the  Eurosystem.  In  addition,  the  BNR  Law  contains 
imperfections relating to the BNR’s independence and its integration in the Eurosystem with regard to 
the ESCB/ECB tasks laid down in Article 127(2) TFEU and Article 3 of the ESCB/ECB Statute. 

Romania  does  not  fulfil  the  criterion  on  price  stability.  The  average  inflation  rate  in  Romania 
during the 12 months to May 2026 was 8.4%, well above the reference value of 2.7%. It is projected 
to decrease in the second half of 2026, but remain well above the reference value by the end of 2026. 
It is projected to continue decreasing in 2027, but remain above the reference value through to the end 
of 2027.  

Annual  HICP  inflation  in  Romania  rose  to  6.8%  in  2025,  from  5.8%  in  2024.  Disinflation,  which 
followed the energy price shock in 2022, stalled and subsequently reversed in mid-2025. The year-on-
year  headline  HICP  inflation  rate  fell  from  7.3%  in  January  2024  to  4.9%  in  April  2025,  before 
increasing  steadily  and  significantly  to  8.6%  in  September  and  remaining  at  that  level  in  December 
2025. Surging food and energy prices were the main contributors to the rise in headline inflation. The 
rise  in  inflation  in  the  second  half  of  2025  was  largely  the  effect  of  the  removal  of  the  household 
electricity  price  cap  in  July  2025,  combined  with  hikes  in  the  VAT  rate  and  excise  duties.  Prices  of 
unprocessed  food  rose  as  a  result  of  the  impact  of  adverse  weather conditions  on  agriculture,  while 
services  inflation  remained  persistently  high,  due  to  strong,  but  moderating  wage  growth  in  2025 
following a public-sector wage freeze. The increase in energy prices following the conflict in the Middle 
East caused headline inflation to increase to 9.7% in May 2026 from 8.3% in February 2026. Annual 
HICP inflation rates in Romania in 2024 and 2025 were higher than in the euro area as a whole.  

The  Commission’s  Spring  2026  Economic  Forecast  projects  that  the  annual  average  rate  of  inflation 
will  increase  slightly  to  7.0%  in  2026  and then  ease  to  3.7%  in  2027.  Disinflation  over the  forecast 
period is expected to be supported by strong moderation in wage growth while a hike in energy prices 
will  slow  it  down.  The  relatively  low  price  level  in  Romania,  which  was  about  61%  of  the  euro  area 
average in 2024, suggests potential for price level convergence in the long term. 

13 

 
 
Romania  does  not  fulfil  the  criterion  on  public  finances.  Romania  is  the  subject  of  a  Council 
decision on the existence of an excessive deficit. The general government deficit improved from 9.3% 
of GDP in 2024 to 7.9% in 2025, but remained well above the 3% of GDP Treaty reference value. This 
improvement was due to stronger tax collection and two major fiscal consolidation packages in 2025, 
with a combined estimated revenue-increasing and expenditure-reducing yield of about 3.7 percentage 
points  of  GDP.  The  Commission’s  Spring  2026  Economic  Forecast  expects  the  general  government 
deficit  to  decrease  to  6.2%  of  GDP  in  2026,  reflecting  the  full-year  effect  of  the  2025  fiscal 
adjustment packages as well as additional revenue in 2026,  through higher VAT and excise duties, a 
higher  dividend  tax,  property  tax  changes,  and  the  broadening  of  the  health  contribution  base, 
alongside tighter controls on current expenditure. In 2027, the government deficit ratio is forecast  to 
be 5.8%. 

On 20 June 2025, the Council adopted  a decision under  Article 126(8) of the TFEU establishing that 
Romania  had  not  taken  effective  action  to  correct  its  excessive  deficit.  On  8  July  2025,  the  Council 
then  revised  Romania’s  EDP  fiscal  adjustment  path,  under  which  Romania  must  keep  nominal  net 
expenditure growth below 2.8% in  2025, 2.6% in 2026,  4.6% in 2027, 4.4% in 2028, 4.2% in  2029 
and 4.0% in 2030. These maximum net expenditure growth rates equate to an annual adjustment of 
about 2 percentage points per year in 2025 and 2026 and about 1 percentage point thereafter, above 
the minimum annual structural adjustment of at least 0.5% of GDP as a benchmark required under an 
EDP. The EDP correction deadline is 2030 at which point the July 2025 revised recommendation under 
Article  126(7)  TFEU  envisages  a  deficit  of  2.8%  of  GDP.  The  revised  recommendation  of  July  2025 
replaced  the  original  net  expenditure  path  of  Romania’s  medium-term  fiscal-structural  plan  as  the 
operative benchmark for EDP monitoring, while the reforms and investments underpinning the  plan’s 
extended  adjustment  period  remain  in  force  and  continue  to  be  monitored  by  the  Commission.  On  3 
June  2026,  the  Commission  concluded  that  Romania  had  taken  effective  action  in  response  to  the 
Council  recommendation  and  the  excessive  deficit  procedure  was  therefore  held  in  abeyance.  Net 
expenditure in 2026 is projected to increase by 1.8%, which is below the ceiling recommended by the 
Council of 2.6% for 2026, and the cumulative net expenditure growth by 2026 is projected to  remain 
within the recommended cumulative ceiling of 5.5%.  

The  government  debt-to-GDP  ratio  increased  from  54.8%  of  GDP  in  2024  to  59.3%  in  2025  and  is 
expected to increase further to 61.6% in 2026 and to 63.4% in 2027, driven by a high primary deficit 
and rising interest payments. Romania’s debt sustainability risks appear high in the medium term, with 
government  debt  projected  to  increase  rapidly  to  around  90%  of  GDP  in  2036.  Regarding  Romania’s 
fiscal  framework,  severe  weaknesses  remain  in  relation  to  recruitment  to  the  Fiscal  Council  and  the 
management of public investments.  

14 

 
 
Romania does not fulfil the exchange rate criterion. The Romanian leu does not participate in the 
Exchange Rate Mechanism II. Romania operates a  ‘crawl-like’ exchange rate arrangement that allows 
for foreign exchange market interventions by the central bank.  Exchange rate stability has been used 
by the BNR as an important mechanism to ensure financial stability and anchor inflation expectations. 
The leu was relatively stable against the euro in 2024 and depreciated in 2025. In May 2025, capital 
outflow  pressures  in  the  context  of  increased  political  uncertainty  triggered  a  strong  depreciation 
episode, with losses against the euro of 2% compared to the previous month. This was followed by a 
period of moderate volatility in the second half of the year. In May 2026, the leu was about 5% weaker 
against  the  euro  compared  with  two  years  earlier.  The  short-term  interest  rate  spread  vis-à-vis  the 
euro area increased substantially (by around 300 basis points) between August 2024 and June 2025, 
reflecting the pause in the BNR’s key policy rate as of mid-2024 and the monetary policy easing cycle 
in the euro area. The spread widened further amid stress on Romania’s money market in late spring, 
peaking at around 515 basis points in June 2025. It then decreased steadily during the second half of 
2025  and  in  early  2026,  reflecting  improved  liquidity  conditions  on  Romania’s  money  market.  It 
reached 362 basis points in May 2026.  

Romania  does  not  fulfil  the  criterion  on  the  convergence  of  long-term  interest  rates.  The 
average  long-term  interest  rate  in  the  12  months  to  May  2026  was  6.7%,  well  above  the  reference 
value of 5.1%. Romania’s long-term interest rate increased gradually throughout 2024, rising to 7.1% 
in January 2025. After decreasing slightly during the first few months of 2025, it began to climb again 
in April, fuelled by increased market risk aversion amid a widening fiscal deficit and investors’ concerns 
over the outlook for fiscal consolidation. The long-term interest rate then decreased steadily during the 
second half of 2025, following the government’s adoption of fiscal consolidation measures. During the 
first five months of 2026, Romania’s long-term interest rate was broadly stable, standing at 6.2% in 
May  2026.  The  long-term  spread  versus  the  German  benchmark  bond  was  312  basis  points  in  May 
2026, down from its peak of 485 basis points in June 2025. 

The Commission has also examined additional factors, including balance of payments developments, 
the  integration  of  markets  and  the  institutional  environment.  Romania’s  external  balance  (i.e.  the 
combined current and capital account) improved slightly from -6.7% of GDP in 2024 to -6.0% in 2025, 
mainly  due  to  an  increase  in  the  capital  account  surplus  thanks  to  better  absorption  of  EU  funds. 
Romania’s current account deficit remained considerable, at 7.9% of GDP in 2025, despite a marginal 
decrease in the second half of  the year amid fiscal consolidation and weaker domestic demand. The 
Romanian  economy  is  well-integrated  with  the  euro  area  through  trade  and  investment  linkages. 
Selected indicators relating to the  institutional environment show that Romania performs worse than 
many euro area Member States in this regard. Romania faces challenges in areas such as control of 
corruption.  The  financial  sector  in  Romania  is  smaller  and  less  developed  than  in  the  euro  area. 
Romania's banking sector is well-integrated into the euro area’s financial system, in particular through 
a  high  level  of  foreign  ownership  in  its  banking  system.  However,  market-based  financing  is  less 
developed than in the euro area, as reflected in the very small markets for equity and private sector 
debt. In the context of the Macroeconomic Imbalance Procedure, the Commission concluded in its Alert 
Mechanism  Report  for  2026  that  an  In-Depth  Review  (IDR)  was  warranted  for  Romania.  The  IDR 
concluded  that  Romania  continues to  face  vulnerabilities related  to  large  fiscal  and  external  deficits, 

15 

 
 
despite improvements since the second half of 2025. At the same time, wage and cost pressures have 
moderated,  with  a  potential  positive  impact  on  cost  competitiveness.  Romania’s  high  government 
deficit has been a key driver of the large external deficits and borrowing needs. The fiscal consolidation 
process initiated in 2025 helps reducing Romania’s vulnerabilities and  is expected to continue. Taking 
into account this assessment in the IDR, the Commission, in its Communication on the  2026 European 
Semester  Spring  Package,  considers  that  Romania  continues  to  experience  excessive  macroeconomic 
imbalances. 

Romania’s  recovery  and  resilience  plan  (RRP)  includes  measures  to  address  a  series  of  structural 
challenges,  in  synergy  with  other  EU  funds,  including  cohesion  policy  funds,  to  boost  its 
competitiveness  and  stimulate  sustainable  growth  and  reduce  the  country’s  territorial  and  social 
disparities. Following the 2025 revision of its RRP, Romania’s RRF envelope amounts to about EUR 21.4 
billion for 2021-2026, including EUR 13.5 billion in grants and EUR 7.8 billion in loans. The revised plan 
substantially  reduced  the  loan  component  from  EUR  14.9  billion  to  EUR  7.8  billion,  due  to 
implementation  delays  and  the  scaling  back  of  measures  considered  no  longer  fully  achievable. 
Romania had submitted four payment requests by the end of 2025. By June 2026, total disbursements 
amounted  to  around  60%  of  the  total  envelope.  Key  reforms  in  Romania’s  RRP  concern  pensions, 
decarbonisation/phase-out  of  coal  and  lignite  energy  production,  state-owned  enterprises,  tax 
administration and tax reform, and social and healthcare. In addition, cohesion policy provides Romania 
with  EUR 33.7  billion for  the  2021-2027  period.  Cohesion  policy  financing  aims  to  further  support 
Romania’s competitiveness and upward social convergence, including through investments in research, 
innovation,  and  SMEs  competitiveness,  the  green  and  just  transition,  the  modernisation  of  labour 
market institutions, the development of skills and increased quality and inclusiveness of education and 
training,  as  well  as  poverty  reduction.  While  Romania  has  made  progress  in  implementing  cohesion 
policy, challenges remain, with significant territorial disparities in terms of investment and employment 
between the capital region and other regions, as well as between urban and non-urban areas.  

6. 

SWEDEN 

In  the  light  of  its  assessment  on  legal  compatibility  and  on  the  fulfilment  of  the 
convergence  criteria,  and  taking  into  account  the  additional  relevant  factors,  the 
Commission considers that Sweden does not fulfil the conditions for adopting the euro.  

Legislation in Sweden, particularly the Riksbank Act, is not fully compatible with the requirements 
of Article 131 TFEU. Incompatibilities and imperfections persist in the fields of the independence of the 
central  bank,  prohibition  of  monetary  financing  and  the  integration  of  the  central  bank  into  the 
Eurosystem with regard to the Riksbank’s objectives and the ESCB/ECB tasks laid down in Article 127(1) 
and (2) TFEU and Articles 2 and 3 of the ESCB/ECB Statute. 

Sweden  fulfils  the criterion  on  price  stability.  The  average  HICP  inflation  rate  in  Sweden  during 
the 12 months to May 2026 was 2.2%, below the reference value of 2.7%. It is projected to decrease 
by the end of 2026 before increasing slightly in 2027, but should remain below the reference value in 
both years. 

16 

 
 
 
 
   
Sweden’s  annual  HICP  inflation  rate  averaged  2.0%  in  2024  and  increased  to  2.6%  in  2025.  These 
inflation rates were broadly in line with those for the euro area. Lower energy prices, base effects and 
moderate wage growth on the back of moderate multiannual wage agreements  helped disinflation in 
both years. Strong deceleration of food prices in  2024 and a  pronounced easing of  price  rises in the 
non-energy  industrial  goods  in  both  years  also  contributed  to  lower  headline  inflation,  while  services 
inflation  remained  elevated  but  declined  from  4.9%  in  2024  to  3.8%  in  2025.  In  2025,  somewhat 
stronger  food  and  energy  prices  accounted  for  the  rebound  in  headline  inflation.  The  lagged  impact 
from the stronger krona effective exchange rate in 2024 helped dampen price increases for imported 
goods and services.  HICP inflation decelerated in the first  few months of 2026, as the effects of the 
Middle East conflict were outweighed as from April by substantial decreases in indirect taxes on food 
and fuels, combined with weak underlying inflation. 

The Commission’s Spring 2026 Economic Forecast projects that average annual inflation will decrease 
to  around  1.5%  in  2026  before  increasing  slightly  to  1.8%  in  2027.  Inflation  developments  in  2026 
mirror the impact of higher import prices, particularly for oil products, partly offset by VAT and excise 
cuts, moderate wage increases, and the lagged impact from the stronger krona, with special factors set 
to fade in 2027. The price level in Sweden is relatively high, at about 110% of the euro area average in 
2024. 

Sweden fulfils the criterion on public finances. Sweden is not the subject of a Council Decision on 
the existence of an excessive deficit.  The general government  deficit improved slightly from 1.5% of 
GDP  in  2024  to  1.3%  of  GDP  in  2025,  reflecting  sluggish  economic  growth.  According  to  the 
Commission’s  Spring  2026  Economic  Forecast,  the  general  government  deficit  is  expected  to  reach 
2.8%  of  GDP  in  2026  due  to  weakening  total  revenues.  In  2027,  the  government  deficit  ratio  is 
forecast to be 2.5%. 

On  21  January  2025,  the  Council  adopted  a  recommendation  endorsing  Sweden’s  national  medium-
term  fiscal-structural  plan.  The  plan  covers  the  period  2025-2028  and  sets  an  upper  limit  for  net 
expenditure  growth  over  the  four  years,  with  maximum  growth  rates  of  net  expenditure  of  4.0%  in 
2025, 4.4%  in  2026,  4.4% in  2027,  and  4.6%  in  2028.  On  3  June  2026,  the  Commission  concluded 
that net expenditure is projected to grow by 6.5% in 2026, above the recommended growth of 4.4%. 
The deviation above the recommended maximum is equivalent to an annual deviation of 1.0% of GDP. 
However, when  considering  2024, 2025  and  2026  together,  the  projected  cumulative  growth  rate  of 
net  expenditure  is  below  the  recommended  maximum  growth  rate.  Net  expenditure  in  2026  is 
projected  to  increase  by  6.5%,  which  is  above  the  ceiling  recommended  by  the  Council  of  4.4%  for 
2026,  and  the  cumulative  net  expenditure  growth  by  2026  is  projected  to  remain  within  the 
recommended cumulative ceiling of 15.5%.  

The government debt-to-GDP ratio increased from 34.1% in 2024 to 35.1% in 2025 and is expected to 
increase  further  to  36.5%  of  GDP  in  2026  and  then  to  37.7%  of  GDP  in  2027,  driven  by  a  higher 

17 

 
 
 
 
 
 
primary  deficit.  Sweden’s  debt  sustainability  risks  appear  low  over  the  medium  term,  even  though 
government debt is projected to increase to around 44% of GDP by 2036. Sweden has a robust fiscal 
framework with clear rules and a medium-term focus, which maintains the debt anchor at 35% of GDP. 

Sweden does not fulfil the exchange rate criterion. The Swedish krona does not participate in the 
Exchange  Rate  Mechanism  II.  Sweden  operates  a  free-floating  exchange  rate  regime,  that  allows 
foreign exchange market interventions by the central bank. After the krona experienced a long period of 
depreciation  against  the  euro,  weakening  from  8.3  SEK/EUR  in  August  2012  to  11.8  SEK/EUR  in 
September  2023,  it  recovered  somewhat  in  2024  and  2025,  reaching  10.6  SEK  to  EUR  in  February 
2026, before weakening again slightly. The three-month STIBOR-Euribor spread has been volatile over 
the last few years. After a short but strong increase in 2022, it  subsequently fell, turning negative in 
the second half of 2024. Since then, it has fluctuated between -20 and 20 basis points, i.e. significantly 
below  the  years  before  2022  (around  50  basis  points).  In  May  2026,  the  spread  stood  at  -21  basis 
points and the exchange rate was 10.9 SEK/EUR, i.e. 7% stronger against the euro compared with two 
years earlier.  

Sweden fulfils the criterion on the convergence of long-term interest rates. The average long-
term interest rate in Sweden in the 12 months to May 2026 was 2.6%, well below the reference value 
of 5.1%. After increasing considerably in 2022 and 2023, Sweden’s long-term interest rates decreased 
in 2024 before returning  to 2023 levels in 2025. Since the beginning of 2024, the long-term interest 
rate  has  been  fluctuating  between  2.2%  and  2.8%.  The  spread  versus  the  German  benchmark  bond 
remained relatively small with some volatility in 2024 and 2025. In general, the spread has decreased 
in  recent  years  and  turned  slightly  negative  in  2024,  reaching  -34  basis  points  in  July  2024.  It  then  
increased slightly until January 2026, before decreasing gradually to -31 basis points in May 2026. 

The Commission has also examined additional factors, including balance of payments developments, 
the  integration  of  markets  and  the  institutional  environment.  Sweden’s  external  balance  (i.e.  the 
combined current and capital account) remained in surplus, at 7.0% of GDP in 2024 and 6.2% in 2025. 
Sweden’s  economy  is  well-integrated  with  the  euro  area  through  trade  and  investment  linkages. 
Selected  indicators  relating  to  the  institutional  environment  show  that  Sweden  performs  better  than 
most euro area Member States in this regard. The financial sector in Sweden is highly developed and 
well-integrated into the euro area’s financial system. Banking dominates the financial sector, although 
the insurance and pension funds also account for a sizeable part of it. Moreover, Sweden has one of 
the most advanced credit and equity markets in the EU, and the level of market financing is among the 
highest  in  the  EU.  In  the  context  of  the  Macroeconomic  Imbalance  Procedure,  the  Commission 
concluded in its Alert Mechanism Report for 2026 that an In-Depth Review was warranted for Sweden. 
The  IDR  concluded  that  Sweden  faces  vulnerabilities  that  relate  to  its  real  estate  market  and  high 
private  debt.  While  house  prices  have  moderated  somewhat  from  their  2022  and  2023  levels, 
household  leverage  remains  high  and  is  expected  to  increase  further.  While  the  financial  sector  is 
highly  exposed  to  real  estate,  it  is  profitable  with  sizeable  capital  buffers  against  adverse 
developments. Rigidities in housing supply remain, the rental market has seen limited reform, leading 
to long waiting lists and a low vacancy rate compared to other EU countries. Taking into account this 

18 

 
 
 
 
 
 
assessment in the IDR, the Commission, in its Communication on the 2026 European Semester Spring 
Package, considers that Sweden no longer experiences macroeconomic imbalances. 

Sweden’s  recovery  and  resilience  plan  (RRP)  includes  measures  to  address  a  series  of  structural 
challenges,  in  synergy  with  other  EU  funds,  including  cohesion  policy  funds,  aimed  at  reducing  the 
country’s territorial and social disparities. The RRF funding provides Sweden with EUR  3.4 billion over 
the  2021-2026  period.  Sweden  submitted  its  second  payment  request  in  January  2026.  Key 
investments and reforms in  Sweden’s RRP include those in the areas  of financing of  greenhouse gas 
emissions-saving  technologies  and  infrastructure,  insulation  of  housing,  training  for  elderly  care  and 
broadband  roll-out  in  sparsely  populated  areas.  A  first  RRF  reimbursement  took  place  in  July  2025, 
with the remaining payments under assessment for 2026. In addition, cohesion policy provides Sweden 
with  EUR 2.4  billion for  the  2021-2027  period.  Cohesion  policy  financing  aims  particularly  to  further 
improve  the  conditions  for  research  and  innovation,  create  opportunities  for  entrepreneurship  and 
industrial  transformation,  and  support  digitalisation,  internationalisation  and  competitiveness.  While 
Sweden  has  made  progress  in  implementing  cohesion  policy,  challenges  remain,  with  persistent 
disparities between the capital region and the rest of the country.  

19