The European Commission has issued its 2010 Converge Report. It assesses progress with convergence in countries with derogation from euro area membership. The nine Member States with a so-called 'derogation' have made uneven progress on the road to the single currency, and eight of them do not yet meet all the conditions for euro adoption. However, Estonia stands out from the group, fulfilling the criteria cleary, as a result of determined and efficient efforts by the Estonian government and Estonian people. Therefore, the Commission concluded that Estonia meets the criteria for adopting the euro and made a proposal to the Council to this effect.

The Council of EU finance ministers (ECOFIN) will take the final decision on the adoption of the euro in Estonia in July, after the Parliament has given its opinion and the EU Heads of State and Government have discussed the subject at their summit meeting in June.

The nine EU countries covered by the Report are Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania and Sweden. According to the Treaty, the Commission reports every two years on the subject. The criteria for euro adoption consist of four stability-oriented economic conditions regarding the government budgetary position, price stability, exchange rate stability and convergence of long-term interest rates, which need to be fulfilled in a sustainable manner. The national legislation on monetary affairs must also be in line with the EU Treaty.

Assessment of Estonia

The average inflation rate in Estonia during the 12 months to March 2010 was -0.7%, well below the reference value of 1.0% for the same month, and likely to remain below the reference value in the period ahead. The deficit and debt are well within the acceptable limits for the convergence assessment: the deficit was 1.7% of GDP in 2009 despite an unprecedented 15% decline in nominal GDP. Finally, Estonia's legislation in the monetary field is compatible with the EU legislation.

Based on this assessment, and on the European Central Bank's own Convergence report, the Commission proposes that Estonia adopts the euro in 2011. None of the other eight countries assessed in the report is found to meet all the convergence criteria for adopting the euro.