Commission welcomes Bulgaria and Croatia’s entry into the Exchange Rate Mechanism II

Neformalni sastanak ministara vanjskih poslova država Europske unije

From left to right: Mr Andrej PLENKOVIC, Croatian Prime Minister; Mr Gordan GRLIĆ-RADMAN, Croatian Minister of Foreign and European Affairs. Copyright: European Union

This article is brought to you in association with the European Commission.

The Commission welcomes the decision to include the Bulgarian lev and the Croatian kuna in the Exchange Rate Mechanism II (ERM II). It also welcomes the ECB Governing Council’s decision on close cooperation with both countries, marking their entry into the Banking Union.

The decision of the ERM II parties represents an important milestone in Bulgaria and Croatia’s efforts to join the euro area. Both Member States must now participate in the mechanism without severe tensions and, in particular, without devaluing their currency central rate against the euro on their own initiative, for at least two years before they can qualify to adopt the euro. The Commission will continue to encourage and support the efforts of the Bulgarian and Croatian authorities to complete the process of joining the euro area.

Ursula von der Leyen, President of the European Commission said: “The euro is a tangible symbol of European unity, prosperity and solidarity. This decision recognises the important economic reforms already undertaken by Bulgaria and Croatia while confirming the continued attractiveness of Europe’s single currency. We will continue to stand with both countries as they take their next and final steps towards joining the euro area.”

Valdis Dombrovskis, Executive Vice-President for an Economy that works for People, said: “I am delighted to welcome Bulgaria and Croatia as members of the Exchange Rate Mechanism II, an important milestone on the road to adopting the euro as their national currency. Both countries have worked hard to get to this point, even in the middle of the coronavirus pandemic. It is a testament to the attractiveness of our common currency – still relatively young but highly successful globally. Good news for Bulgaria, Croatia and for the entire euro area.”

Paolo Gentiloni, Commissioner for the Economy, said: “Bulgaria and Croatia have made huge efforts to prepare for entry into ERM II and the Banking Union. Today, those efforts have paid off. In a time of crisis and uncertainty, this decision sends a message of confidence in the euro and clarity that Bulgaria and Croatia will be the next countries to join. As they take this key step towards our common currency, we as Europeans take a new step towards ever closer Union.”

Participation in ERM II will help to strengthen the resilience of Bulgaria and Croatia’s economies. It will help both countries to focus their policies on stability, foster their convergence and eventually support them in their efforts to adopt the euro.

The Commission also welcomes the fact that Bulgaria and Croatia are committed to maintaining the reform momentum and to achieving sustainable economic convergence towards the adoption of euro. To that end, they have each committed to implement further reforms during their participation in ERM II in accordance with the stability-oriented purpose of the mechanism.

Bulgaria and Croatia each undertook a number of policy commitments designed to ensure a smooth transition to, and participation in, the ERM II. The ERM II parties tasked the Commission and the European Central Bank (ECB) to monitor the effective implementation of these commitments within their respective areas of competence. These assessments provided the basis for the ERM II parties to include the Bulgarian lev and the Croatian kuna in the ERM II.


The Commission monitored the implementation of Bulgaria’s commitments in the following policy areas:

  • the supervision of the non-banking financial sector,
  • the insolvency framework,
  • the anti-money laundering framework,
  • the governance of state-owned enterprises.

The Commission’s assessment deemed that those four commitments have been effectively fulfilled by the Bulgarian authorities and it has presented this positive assessment to the ERM II parties.


The Commission monitored the implementation of Croatia’s commitments in the following policy areas:

  • the anti-money laundering framework;
  • the collection, production and dissemination of statistics;
  • public sector governance;
  • the financial and administrative burden on enterprises.

The Commission’s assessment deemed that those four commitments have been effectively fulfilled by the Croatian authorities and has presented this positive assessment to the ERM II parties.


ERM II was set up on 1 January 1999 as a successor to the original ERM to ensure that exchange rate fluctuations between the euro and other EU currencies do not disrupt economic stability within the single market, and to help non euro-area countries prepare for participation in the euro area.

In ERM II, a central exchange rate of a non-euro area Member State’s currency is set against the euro and the currency is only allowed to fluctuate around this rate within set limits.

Bulgaria and Croatia announced in July 2018 and July 2019 respectively, their intention to join ERM II and committed to implement a number of measures aimed at ensuring a smooth participation in ERM II before joining ERM II. The ERM II parties asked the ECB and the Commission to monitor the fulfilment of these prior commitments. Both institutions have now produced positive assessments of the prior-commitments in their respective areas of competence.

The entry into ERM II of Bulgaria and Croatia was decided by mutual agreement of all ERM II parties. The ERM II parties consists of the ministers of the euro area Member States, the President of the European Central Bank and the minister and the central bank governor of Denmark, as the only non-euro area Member State currently participating in the mechanism.

In order to adopt the euro, a Member State must have achieved a high level of sustainable economic convergence, which is examined by reference to the convergence criteria (price stability, sound public finances, long-term interest rates and exchange rate stability).

The convergence criterion on exchange rate stability requires participation in the ERM II. A Member State must participate in the mechanism without severe tensions for at least two years before it can qualify to adopt the euro.

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