two - year reference period the bulgarian lev did not exhibit any deviation from its central rate due to its currency board arrangement, while the croatian kuna displayed a low degree of volatility and traded close to its central rate. third, all countries, with the exception of croatia, need to adjust their legal framework to comply with the requirements under union law. they must address issues relating to central bank independence and the prohibition on monetary financing. moreover, let me reiterate what i said here in 2020 when i presented our previous ecb convergence report. in the interest of the euro area as a whole and of each euro area accession country, convergence has to be reached on a lasting basis, and not just at a given point in time. this requires ongoing attention, also through our economic governance mechanisms and sound financial sector supervision. in order to achieve a high level of sustainable convergence, our convergence report emphasises the need for lasting policy adjustments in many of the countries under review. specifically, we emphasise that the next generation eu ( ngeu ) package represents a unique opportunity to accelerate the process of euro area convergence, with swift and effective implementation being crucial for its success. the state of economic and legal convergence in croatia let me now focus on croatia, which is the only country that fulfils all economic and legal requirements for adopting the euro and has expressed the wish to do so on 1 january 2023. with regard to price stability, the 12 - month average rate of hicp inflation in croatia was 4. 7 %, which is below the reference value of 4. 9 %. in terms of fiscal sustainability, croatia ’ s general government budget balance was just below the 3 % deficit reference value in 2021, while its debt ratio was above the 60 % reference value but on a downward trajectory. since the inclusion of the croatian kuna in erm ii, its deviations from the agreed central rate have been significantly smaller than the standard fluctuation band of erm ii. long - term interest rates stood at 0. 8 % on average and thus remained below the 2. 6 % reference value for the interest rate convergence criterion. from a legal perspective, croatian law is compatible with the treaties and the statute of the european system of central banks and of the european central bank. what is key is the amendment to the law on croatia ’ s central bank, which prohibits the croatian government from seeking to influence the members of its decision - making bodies. with the entry into force of the close cooperation

the elements that could potentially counter the boom - bust tendencies. let me give two examples of what is being done : • as regard prudential supervision, i would only mention the fantastic work which has been achieved by the basel committee under the leadership of bill mcdonough, the president of the federal reserve bank of new york, in the field of banking supervision. i trust that the new accord will permit a better and more appropriate handling of this extremely important domain as regards financial stability. i am also happy that the concept of “ dynamic provisioning ”, which is anticyclical by nature, has been recognised by the basel committee as a useful concept. • as regards accounting standards, it seems to me that we should also inject in the present meditations in the us, in europe and at a global level the concern for financial stability. let us beware of changes that would increase the procyclicality of accounting rules. let us favour changes that would simultaneously help fair accounting and diminish procyclicality. in that regard, it seems important to me to design accounting practices which would try to take into account of the time horizon of institutions and market participants. otherwise, we would take the risk of driving all financial institutions and market participants to shorten their time horizon down to a day - to - day basis. this could be a recipe to favour inappropriate market functioning and foster herd instinct in time of excessive volatility. 2. the need for an enhanced framework for crisis prevention and management i do not need to remind you of the long list of financial crises emerging market economies have gone through in the last two decades. against this background, the international community must, on the one hand, enhance crisis prevention and, on the other hand, design and implement better procedures for crisis resolution. 2. 1. authorities must reflect, in conjunction with the financial industry, on building up a suitable system of surveillance and crisis prevention. the objective of strengthening crisis prevention is shared by the private sector and by official community given the magnitude of potential losses ; indeed, in some cases, restructuring costs for banking crises have reached more than 40 % of gdp. building on international standards and codes is instrumental in establishing an appropriate institutional, supervisory and regulatory framework in the financial sectors of all market economies. the value of international standards is now widely recognised, insofar as they contribute to spreading international best practices and codes of good conduct, very closely linked to the globalisation process and the expansion of