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On May 1, 2004, Hungary became a member of the EU. As a result, the focus of economists and politicians shifted to the next step in the integration process, the adoption of the Euro. For Hungary, and the other nine new EU members, membership means eventually joining the European Monetary Union, or currency union, as the EMU is part of the acquis. EU members who have not or could not adopt the Euro, in "eurospeak," are in the "second stage of adopting the euro." Three "old" EU members states - the UK, Denmark and Sweden - are called "outs," as they have opted out of the EMU; while the ten new members are called the "pre-ins," as they have to join EMU, but have not yet met the convergence criteria. In order to join the EMU, economic and fiscal guidelines were set forth by the 1992 Maastricht Treaty.1 The duration of the derogation and the timeline for adopting the euro is open ended.
The Maastricht Treaty criteria for joining the EMU are:
1. The inflation rate is to be not more than 1.5% points above the : average inflation rate of the three best performing member states of the Euro system.
2. Long-term interest rates are to be not more than 2% points above the corresponding level in those three countries.
3. The public sector deficit must not exceed 3% of the GDP and the level of public debt must not be higher than 60% of the GDP.
4. The country must have participated, for at least two years, in the European Exchange Rate Mechanism 2 (ERM2) within the normal fluctuation margins, without any devaluation being required.
To evaluate the progress of each nation in meeting the Maastricht criteria, each country must submit an annual report to the Economic and Financial Committee. The committee is composed of two member from each member state, two members from the Commission and two members from the European Central Bank (Council Decision of 21 December 1998, 2003/476/EC)2 and is charged with evaluating how well those member states who are in the "second stage as regards their monetary and financial situation and general payments system" have progressed in meeting the Maastricht criteria.
Economists believe that countries wanting to join a...