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Maastricht Criteria

Maastricht Criteria are the rules that determine whether a country is ready to adopt the euro as its national currency.

The Maastricht criteria include targets or rules for inflation, limits for budget deficits, national debt, interest rates, and exchange rates.

Maastricht criteria for price stability. Per the Maastricht criteria, the inflation rate should be no more than 1.5 % above the rate for the three EU member states with the lowest inflation over the previous year.

Maastricht criteria for budget deficit. Budget deficit must generally be below 3% of gross domestic product (GDP).

Maastricht Criteria Debt is also closely watched by the Maastricht criteria. The national debt should not exceed 60% of GDP. However, a country with a higher level of debt can still adopt the euro provided its debt level is steadily decreasing.

Interest rates are mentioned in the Maastricht criteria as well. The Maastricht criteria says that the long-term rate should be no more than 2 % above the rate in the three EU countries with the lowest inflation over the previous year.

And lastly, the Maastricht criteria governs also the exchange rate stability. Per the Maastricht criteria, the applicant country must be a member of the Exchange-Rate Mechanism (ERM II) under the European Monetary System (EMS) for 2 consecutive years. The national currency's exchange rate should not have devaluated its currency during the period.

Maastricht Criteria

The Maastricht criteria are also called the convergence criteria.

Maastricht Criteria Convergence The exchange-rate stability Maastricht criteria were chosen to demonstrate that a member state can manage its economy without recourse to excessive currency fluctuations. This is a test to assess whether a country can withstand the conditions when the country joins the euro area or eurozone and its control of monetary policy goes to the hands of the European Central Bank (ECB).

This Maastricht criteria test also provides an indication of the appropriate conversion rate that should be applied when the country qualifies and its currency is irrevocably fixed.
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