The European Commission (EC) said on Wednesday that Bulgaria, Croatia, and Romania are performing worse than most euro-area member states in terms of select indicators relating to the business environment, and are not ready to enter the euro area.
In the light of its assessment on legal compatibility and on the fulfillment of the convergence criteria, and taking into account additional relevant factors, the Commission considers that Bulgaria, Croatia, and Romania do not fulfill the conditions for the adoption of the euro, the Commission said in its Convergence Report 2014.
While Bulgaria and Romania fulfill the criterion on the convergence of long-term interest rates and on public finances, they do not fulfill the exchange rates criterion and their the legislation is not fully compatible with the compliance duty under Article 131 of the Treaty on the Functioning of the European Union (TFEU), according to the Commission.
Bulgaria fulfills the criterion for price stability while Romania does not, the Commission said.
The legislation in Croatia is fully compatible with the compliance duty under Article 131 of the TFEU, and it fulfills the criterion on price stability and the convergence of long-term interest rates. However, the country does not fulfill public finances and exchange rate criteria.
Additional factors have also been examined, including balance of payments developments and integration of labour, product and financial markets.
The external balance, i.e. the combined current and capital account, improved markedly during the global crisis in Romania and recorded a significant surplus in Bulgaria last year. Croatia’s external balance improved considerably in recent years, turning into a surplus of 1.2% of gross domestic product in 2013, mainly on account of import compression.
The economies of the three countries are well integrated to the euro area through trade and investment linkages, even though links to global supply chains have remained weak in Croatia, the Commission also said. Romania's financial sector is also well integrated into the EU financial system as confirmed by the substantial share of foreign-owned banks.
The Commission's report covered eight countries, as Lithuania is the only one which meets the conditions for the adoption of the euro.
Bulgaria and Romania joined the European Union in 2007. Croatia is the EU's youngest member, acceding to the bloc in 2013.
Another country in Southeast Europe, Slovenia, joined the EU in 2004 and entered the euro area in 2007.