Jürgen Stark: The adoption of the euro – principles, procedures and criteria Speech by Mr Jürgen Stark, Member of the Executive Board of the European Central Bank, at the Icelandic Chamber of Commerce, Reykjavik, 13 February 2008. *  *  *  I Ladies and gentlemen, It is a great pleasure for me to attend this conference, together with distinguished guests and speakers. In my remarks, I would first like to set out the European Union’s approach towards the adoption of our single currency, the euro. I will then spell out the EU’s and the ECB’s stance on unilateral euroisation. I will conclude my remarks with a brief overview of the potential economic costs and benefits of unilateral euroisation. The EU’s approach towards the adoption of the single currency The creation of the single currency has been a long and truly historic process. Sixty years ago, Europe was marred by political disarray and economic disorder. With the Treaties of Paris and Rome, Europe’s leaders started the construction of a united Europe on the ruins of the Second World War. Since then Europe has achieved a lot: •  One of the most important achievements is the Single Market, with the free flow of goods, services, capital and people across national borders. Consumers in Europe benefit from the larger supply of goods and services. The European companies benefit from the enlarged markets.
A country that has joined the EU has the obligation to eventually join the euro area. However, it does not adopt the euro immediately upon its accession to the EU. Instead, it becomes what is called in EU-term a “Member State with a derogation”. Countries in the derogation phase have a number of obligations. •  Upon accession of the EU, new Member States are required to treat their exchange rate policy as a matter of common concern and to pursue price stability as the primary objective of monetary policy. The Treaty foresees that at some point following accession, new Member States will join the Exchange Rate Mechanism II (ERM II). •  Moreover, they have to regard their economic policies as a matter of common concern. The economic policies of these Member States become subject to coordination and surveillance at the EU level. This is an essential preparation for the monetary union. Members that once adopted the single currency have to put more emphasis on coordinating economic policies because monetary policy is no longer under national responsibility. III  But policy coordination is not sufficient. To join the euro area, Member States must fulfil a number of legal and economic convergence criteria. The legal convergence criteria oblige the euro area applicant countries to put in place the legal foundations for participation in the monetary union, of which central bank independence is a cornerstone.