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Convergence report reviews Member States’ progress towards joining the euro area

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The European Commission has published the 2020 convergence report in which it provides its assessment of the progress non-euro area Member States have made towards adopting the euro.

The report covers the seven non-euro area Member States that are legally committed to adopting the euro: Bulgaria, Czechia, Croatia, Hungary, Poland, Romania and Sweden.

Convergence reports have to be issued every two years, independently of potentially ongoing euro-area accessions.

Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said: “Today’s convergence report shows encouraging progress by some countries, although there are still several milestones to pass before they can join the euro area. As ever, the Commission is ready to support those Member States. One significant stepping-stone on this path is joining the ERM II, which Croatia and Bulgaria are currently preparing to do. We welcome the efforts of both countries towards it.”

Paolo Gentiloni Commissioner for Economy, said: “For the past few months, we have been focused on fighting economic divergence within the euro area and the broader single market, an effect of the uneven nature of the coronavirus recession. Today we take stock of convergence towards euro area membership for seven Member States. It’s a necessarily rigorous process because an enlarged euro area must also be a stronger euro area. It remains important that countries also work to ensure real convergence towards higher levels of productivity and prosperity – not least through the future-oriented reforms and investments we wish to support through Next Generation EU.”

Euro area accession is an open and rules-based process. The report is based on the convergence criteria, sometimes referred to as the ‘Maastricht criteria’, set out in article 140(1) of the Treaty on the Functioning of the European Union (TFEU). The convergence criteria include price stability, sound public finances, exchange rate stability and convergence in long-term interest rates. The compatibility of national legislation with the rules of the Economic and Monetary Union is also examined.

The report concludes that:

  • Croatia and Sweden fulfil the price stability criterion.
  • Bulgaria, Czechia, Croatia, Hungary, Poland and Sweden fulfil the criterion on public finances.
  • Bulgaria, Czechia, Croatia, Hungary, Poland and Sweden fulfil the long-term interest rate criterion.
  • None of the Member States fulfils the exchange rate criterion, as none of them is a member of the Exchange Rate Mechanism (ERM II): at least two years of participation in the mechanism without severe tensions is required before joining the euro area.

While Croatia and Sweden fulfil all of the economic convergence criteria, they do not meet the exchange rate criterion for the above reason.

In addition to the assessment of the formal conditions for joining the euro area, the report finds that national legislation in each of the Member States, with the exception of Croatia, is not fully compatible with the rules of the Economic and Monetary Union.

The Commission also examined additional factors referred to in the Treaty that should be taken into account in the assessment of the sustainability of convergence. This analysis found that the non-euro area Member States are overall well integrated economically and financially in the EU. Nevertheless, some of them show macroeconomic vulnerabilities and/or face challenges related to their business environment and institutional framework.

The impact of the coronavirus pandemic on the results of the report has been limited, as most of the historical data used in the report refer to the period before the outbreak of the crisis, as prescribed by the methodology strictly defined in the Treaty. The Commission provided an initial assessment of the implications of the pandemic in its Spring 2020 Economic Forecast and its subsequent proposal for country-specific recommendations to all Member States, both of which feed into the forward-looking elements of this report.

Background

The Convergence Report by the European Commission forms the basis for the Council of the EU’s decision on whether a Member State fulfils the conditions for joining the euro area.

The convergence report of the European Commission is separate to, but published in parallel with, the convergence report of the ECB.

Convergence reports are issued every two years, or when there is a specific request from a Member State to assess its readiness to join the euro area, e.g. Latvia in 2013.

All Member States, except Denmark, are legally committed to join the euro area. Denmark, which negotiated an opt-out arrangement in the Maastricht Treaty, is therefore not covered by the report.

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EU Politics

Conditions worsen for stranded migrants along Belarus-EU border

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At least eight people have died along the border between Belarus and the European Union, where multiple groups of asylum-seekers, refugees and migrants have been stranded for weeks in increasingly dire conditions. 

The UN Refugee Agency, UNHCRappealed for urgent action on Friday, to save lives and prevent further suffering at the border with Latvia, Lithuania, and Poland. The latest casualty was reported within the past few days. 

UNHCR warned that the situation will further and rapidly deteriorate as winter approaches, putting more lives in danger. 

For the Agency’s Regional Director for Europe, Pascale Moreau, “when fundamental human rights are not protected, lives are at stake.” 

“It is unacceptable that people have died, and the lives of others are precariously hanging in the balance. They are held hostage by a political stalemate which needs to be solved now,” he said. 

According to media reports, the EU regards the increase in asylum seekers at the border, a direct result of Belarus, in effect, weaponizing migrants, in retaliation for sanctions placed on the Government over the suppression of the protest movement following last year’s disputed re-election of President Lukashenko.  

International group 

Among those stranded are 32 Afghan women, men and children. They have been left in limbo between Poland and Belarus since mid-August, unable to access asylum and any form of assistance. They do not have proper shelter and no secure source of food or water. 

A group of 16 Afghans tried to cross into Poland this week, but they were apprehended and not allowed to apply for asylum. They were also denied access to legal assistance. Within a few hours, they were pushed back across the border to Belarus. 

So far, UNHCR has not been granted access to meet with the group from the Polish side, despite repeated requests, and only met them a few times from the Belarusian side to deliver life-saving aid. 

International law 

The Agency has been advocating for the group to be granted asylum, since the Afghans have expressed their wish to settle either in Belarus or in Poland. 

The request has been ignored by both sides. For UNHCR, that is “a clear violation of international refugee law and international human rights law.” 

“We urge Belarus and Poland, as signatories to the 1951 Refugee Convention, to abide by their international legal obligations and provide access to asylum for those seeking it at their borders.  

“Pushbacks, that deny access to territory and asylum, violate human rights in breach of international law”, said Mr. Moreau. 

UNHCR urges the authorities to determine and address humanitarian and international protection needs, and find viable solutions. The agency also stands ready to support refugees, together with other relevant stakeholders. 

“People must be able to exercise their rights where they are, be it in Belarus or in Poland or other EU States where they may be located. This must include the possibility to seek asylum, access to legal aid, information and appropriate accommodation”, Mr. Moreau concluded. 

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Focus on the recovery from the pandemic at the 19th EU Regions Week

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The annual European Week of Regions and Cities has shown how the EU and national and regional governments can support European citizens and their local communities with public policies aimed at investing in a fairer, greener and more digital future for recovery. Under the theme ‘Together for Recovery’, more than 300 sessions, including debates with high-profile officials, regional and local representatives, an inspiring Citizens’ Dialogue, various workshops as well as an Award for outstanding young journalists, celebrated the EU values of cohesion and solidarity.

Taking place in a hybrid format, with sessions both physical and virtual, the 19th EU Regions Week had one main mission: highlighting the role of EU investments in the recovery from the pandemic and in facing common challenges. The event kicked off with a press conference with Apostolos Tzitzikostas, President of the European Committee of the Regions (CoR) and Elisa Ferreira, Commissioner for Cohesion and Reforms, who underlined that “Cohesion Policy was one of the first responders in the emergency phase of the COVID-19 pandemic, driven by the core value of EU solidarity”.

The second annual local and regional barometer was presented by Apostolos Tzitzikostas, followed by a debate with members of the European Committee of the Regions. The report confirmed that the pandemic related measures put at risk regional and local finances, resulting in a 180 billion budget cut for local and regional authorities across Europe. At the same time, 1 in 3 local and regional politicians want regions and cities to become more influential in EU policy-making on health issues.

Unless we measure the state of our regions and cities, we cannot understand the state of our Union” said Apostolos Tzitzikostas, President of the European Committee of the Regions. “Only by taking the pulse of our communities, we can decide how effective the EU has been on the ground, and what the EU needs to do to help its people”.

Further taking stock of the EU cohesion policy response to the coronavirus pandemic as well as informing the general public, various workshops touched upon life before and after the pandemic, including explanations regarding the role of regions and cities for a Green Transition, the Cohesion Policy 2021-2027 and NextGenerationEU, as well as the CRII, CRII+, React-EU support packages for regional and local healthcare services and equipment.

Young journalists were also invited to take part in the EU Regions Week 2021, getting the opportunity to debate with Elisa Ferreira at the Citizens’ Dialogue. In the Youth4Regions programme for aspiring journalists, Irene Barahona Fernandez from Spain and Jack Ryan from Ireland won the 2021 Megalizzi-Niedzielski prize for aspiring journalists.

About the event

The European Week of Regions and Cities (#EURegionsWeek) is the largest EU-wide event on regional development. It is co-organised by the European Commission and the European Committee of the Regions.

In total, more than 12 000 participants and 900 speakers joined the 4-day event either physically or online, showing engagement in all corners of EU society – from our vibrant youth to our high-profile officials, local and regional representatives, academic experts and professional specialists, displaying a common readiness to tackle what the future holds, together.

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EU Politics

EU and Qatar sign landmark aviation agreement

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The European Union and the State of Qatar today signed a comprehensive air transport agreement, upgrading rules and standards for flights between Qatar and the EU. The agreement sets a new global benchmark by committing both sides to fair competition, and by including social and environmental protection. The signing means new opportunities for consumers, airlines and airports in Qatar and the EU.

Qatar is an increasingly important aviation partner for the EU. It was the 15th largest extra-EU market in 2019 with 6.3 million passengers travelling between the EU and Qatar. Ensuring open and fair competition for air services between both is therefore crucial, also for routes between the EU and Asia.

Adina Vălean, Commissioner for mobility and transport, said: “This agreement, the first one between the EU and the Gulf region, is a global benchmark for forward-looking aviation agreements. It is testimony to our shared commitment to economically, socially and environmentally sustainable aviation, based on a modern framework covering fair competition and closer cooperation on social and environmental matters. This agreement will bring new opportunities, more choice and higher standards for passengers, industry and aviation workers.”

Today’s agreement creates a level playing field that is expected to result in new air transport opportunities and economic benefits for both sides:

  • All EU airlines will be able to operate direct flights from any airport in the EU to Qatar and vice versa for Qatari airlines.
  • EU airports in Germany, France, Italy, Belgium and the Netherlands will be subject to a gradual build-up of capacity until 2024. For more details on this, see the Q&A.
  • Strong provisions on open and fair competition will guarantee a level playing field.
  • The parties recognised the importance of social matters, agreed to cooperate on these and to improve their respective social and labour laws and policies as per their international commitments.

The agreement will facilitate people-to-people contacts and expand commercial opportunities and trade. Going beyond traffic rights, the EU-Qatar agreement will provide a single set of rules, high standards and a platform for future cooperation on a wide range of aviation issues.

Background

Qatar is a close aviation partner for the European Union; more than 6 million passengers travelled between the EU and Qatar per year under the existing 26 bilateral air transport agreements with EU Member States prior to the pandemic. While direct flights between most EU Member States and Qatar have already been liberalised by those bilateral agreements, none of them include provisions on fair competition, or social and environmental issues, which the Commission considers essential for a modern aviation agreement.

In 2016, the European Commission obtained authorisation from the Council to negotiate an EU-level aviation agreement with Qatar, which started on 4 March 2019. While the agreement still needs to be ratified by the parties before formally entering into force, it will start being applied from today’s signature.

Similar EU comprehensive air transport agreements have been signed with other partner countries, namely the United States, Canada, the Western Balkans, Morocco, Georgia, Jordan, Moldova, Israel and Ukraine. Further air transport agreements with Armenia and Tunisia are expected to be signed in the coming weeks.

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