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Euro the common currency – What are the requirements to have the Euro

  • If a EU member wants to take over the Euro as a currency it has to fulfil the Maastricht criteria.

    1. Price stability

    To guarantee steady price stability, the inflation rate isn't allowed over 1.5 percent above the rate of the three member states which had the most constant price stability the year before.

    1 Euro 

    Source:
    https://openclipart.org/
    detail/24319/apple
    Inflation 57%  
    1,57 Euro

    Source:
    https://openclipart.org/
    detail/24319/apple

    2. Financial situation of public authorities

    A financially acceptable situation is only possible for a long time, if the new net indebtedness of a country does not surmount more than 3 percent of the gross domestic product. Further, the state of public debts must not surmount more than 60 percent of the gross domestic product.

    • Net indebtedness: Debts of a company or public household after deduction of the available finances.
    • Gross domestic product: The gross domestic product is the whole value of products and services achieved in one year. It should help to describe the prosperity and the productivity of a country.

    3. Exchange rate

    If you want to belong to the European Union, your country must have a stable exchange rate. If your country does not have a stable exchange rate it cannot belong to the European Union, but what exactly is an exchange rate? Exchange rates express the value of one country’s currency in relation to another country’s currency. For example: Swiss wants to join the European Union, the Franc (the currency they use in Switzerland) has to be stable compared to the Euro. The rates have an important role in economics because they affect the balance of trade between nations. If a country wants to take over the Euro as a currency they must be a member for at least two years. In this period they cannot lose too much value, if they lose too much they are not allowed to introduce the Euro

    4. Long-term interest rate

    Government debt-to-GDP ratio: decent public finances:

    Before having the Euro as an official currency in countries, there are one or two years when it is tested whether it can be used without decreasing the value of the money (inflation). If 60% of the currency is successfully integrated they can introduce the Euro. If it's not acceptable enough, they have to improve their level to satisfactory.

    On the map you can see the countries of the EU, that have introduced the Euro and the year, when they have entered the Eurozone.

    Source:
    stated in source, Blank map of Europe cropped, colouríng von Werner Müller, CC BY-SA 2.5

    Source: