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New columns

@CultureArchitect, Ambi Valent, Glentamara, and L.tak: Danish Expert and I have been discussing some modifications to this table at Talk:Enlargement_of_the_eurozone#How_to_reflect_the_4_exchange_rate_subcriteria_in_the_convergence_table_.3F. The proposed new header is below. The major changes are

  1. addition of one new exchange rate subcriteria: "Devaluation of central rate"
  2. drop the EDP column (not dropping it completely, but integrating it into being an overall part of the debt+deficit subcriteria)
  3. change the debt/deficit column data from "last fiscal year" to the maximum of the 3 year evaluation window
  4. drop the fluctation change data in the exchange rate column (changing the data-format only to be Yes/No/NA if a "severe tension" existed)
  5. add a "legal convergence" column

I endorse change #5, but we disagree on the others. With regards to points #1/3, my argument is that this table is supposed to be an overview, and trying to present every single caveat is making it incomprehensible to the average reader. The new exchange rate subcriteria are only evaluated for non-ERM states without an opt-out, so these new columns will be almost entirely empty (only Lithuania has values, and once they join the euro then it will be entirely empty.) Another option would be a separate "exchange rate criteria" table. For point #2, I think this is a fundamental part of the criteria, as it is what is written in the treaties. The debt/deficit limits are just guidelines on whether an EDP should be opened/closed. For point #4, since all of the other exchange rate criteria are not evaluated for non-ERM II states, this functions as an estimate of convergence for those states. These values are used by the EC/ECB in their summary table. Any outside input on this proposal would be much appreciated. TDL (talk) 00:37, 1 September 2014 (UTC)

As a first response, I need shortly to clarify the argumentation for why I proposed the above 5 changes. After recently reading through all EC convergence reports from 1996-2014, and using several working days to consider the best possible table design, I came up with the one proposed below. The design is entirely focused according to the argument, that each criteria/subcriteria being able to cause an overall convergence criteria disapproval, should be allowed existence of its own column data and a separate color. By adopting this approach, the table will closely reflect how the assessment process works in reality, making it more factual correct and providing casual readers to fully understand the major criteria being assessed as part of the assessment process.
  • About change nr.1: Yes, these data are only available for states with a fixed central rate. In 2014, data for this exist and can be sourced for Denmark+Bulgaria+Lithuania. However its still important, because failing this one alone will lead to NO compliance with the overall exchange rate criterion.
  • About change nr.2: My proposal was never to drop the EDP data, but on the contrary to integrate it into the yellow-color function for "approved values exceeding the reference limit", by using the yellow color legend "Criterion fulfilled by exemption" (decided by the official EDP decisions made by the Council within one month following the publication of the EC convergence report). The debt+deficit convergence criteria are two clearly defined and deciding subcriteria of the overall EDP criteria (solely deciding whether or not an EDP exist - unless the Commission find additional existence of "yellow exemptions" excusing a recorded breach), which is why its fully appropriate also to list them as two EDP subcriteria in the table. In case we keep having a separate EDP column, readers not familiar with EDP, would accidentally believe it to be a separate extra stand alone criteria, which is why I recommend we instead implement my proposed "integrated approach".
  • About change nr.3: In order to be fully transparent, and reflect the data the Commission+Council consider when evaluating whether or not an EDP shall be initiated/abrogated, I then proposed we should only display the worst maximum value for debts and deficits recorded in the 3yr assesment period (which included last fiscal year and the two forecast years). Data for this can easily be extracted and referenced from the frequently published "EC economic forecast reports". Data from the same reports are by the way directly used, for the Commission+Council's very own decision whether or not an EDP exist. So doing it this way, would 100% accurately reflect the same convergence assessment method as they actually use. Hence, this is the main argument, that we should do it the exact same way.
  • About change nr.4: Again the main argument is, that "lowest currency fluctuations" in no way can be considered to be a criteria, but solely function as a very bad convergence indicator to answer the question whether or not a "severe tension" existed. We should avoid a display of "lowest fluctuation values", as they are not a singular deciding factor in the "severe tension" assessment (but only a supplementing indicator among many other indicators). In the EC convergence reports, it was only the first early editions who emphasized the "lowest fluctation value", and for how many days it had been below a -2.25% limit from the central rate. However, this last detail (time length of a breach) is important to keep in mind, as we had Italy in 1998 with its lowest fluctuation values being recorded to -8.5%, accompanied by a 6 month long breach of the -2.25%, but still this negative scenario resulted in the finding that "no severe tension had existed" (as it had not breached the -2.25% for the majority of the 2yr period). At the opposite end of the scale, we had Latvia in 2010, where their lowest fluctuation value was -0.9% (and their highest +0.9%), with 0 days breaching the -2.25% limit, and yet the Commission still concluded a "severe tension had existed" because they had received a "balance of payments" bailout-loan having helped artificially to protect their currency exchange rate. Moreover, it is also a clear fact, that the volatility of exchange rates is directly linked to how big the "short-term interest rate differentials" are in the concerned state. If they are high (due to its central bank offering very high money interest rates), then for sure its much easier for the currency exchange rate not to deteriorate, even in situations with "severe tensions". So the "lowest fluctuation value" can never be assessed alone, and can never be interpreted as an indicator for "true convergence", as it can be affected upwards/downwards by multiple other parameters. This is why it is so bad to include this data in our convergence table. It is much much better, simply to note a N/A for all states not being assessed for this (all non-ERM2 states + Denmark). I acknowledge this mean we only have a "Yes" input data for Lithuania in 2014, with all other states getting the value N/A. However, this is more true to how the assessment was actually carried out, and finally it is also very important to display it in exact this way, so that we can reflect the historic convergence assessment by a table being fully accurate (telling the truth for all deciding standalone criteria+subcriteria). The plan is to compile a convergence table for each time an official assessment report was published (meaning in 1998+2000+2002+2004+May 2006+Dec.2006+May 2007+2008+2010+2012+2013+2014). For a historical context, we have lots of relevant data to list.
The above list of reasons explains why I proposed each of the changes. Each proposed change make very good sense, if we want our convergence table to reflect which deciding convergence data are assessed, and how they were assed for the aspiring euro adoption states in the past. This is why I now ask for your approval, that we implement the changes in the way I have proposed, so that the table is an exact summary mirror of the conducted "convergence assesment" by the European Commission. Danish Expert (talk) 09:33, 1 September 2014 (UTC)

New version of the convergence criteria table:

Convergence criteria
Country HICP inflation rate[1][nb 1] Excessive deficit procedure[2] Exchange rate Long-term interest rate[3][nb 2] Legal compliance of
law and statutes
Budget deficit to GDP[4] Debt-to-GDP ratio ERM II member[5] Devaluation of
central rate 		Severe tensions[nb 3]
Reference values max. 1.7%[nb 4][nb 5]
(May 2013-April 2014) 		max. 3.0%
(in 2013+2014+2015)[nb 6] 		max. 60%
(in 2013+2014+2015)[nb 6] 		min. 2 years
(as of 1 January 2015) 		No
(May 2013-April 2014) 		No
(May 2013-April 2014) 		max. 6.2%[6][nb 4][nb 7]
(May 2013-April 2014) 		Yes
(as of July 2014)
 Lithuania 0.6% 2.1% 39.4% 10 years, 8 months No No 3.60% Yes
  Criterion fulfilled by exemption: If the budget deficit exceeds the 3% limit, but is "close" to this value (the European Commission has deemed 3.5% to be close by in the past),[8] then the criteria can still potentially be fulfilled if either the deficits in the previous two years are significantly declining towards the 3% limit, or if the excessive deficit is the result of exceptional circumstances which are temporary in nature (i.e. one-off expenditures triggered by a significant economic downturn, or by the implementation of economic reforms that are expected to deliver a significant positive impact on the government's future fiscal budgets).[9][10] In addition debt-to-GDP ratios exceeding 60% can also be exempted, if the ratio either have a declining trend as per the new "debt benchmark reduction" rule or alternatively solely has been caused by certain exceptional debt rising circumstances.[11] As it is only the European Commission who can recommend the Council to rule "exemptions to exist" as part of their official EDP decisions, these yellow exemption colors can not be known/predicted for state's not being part of the European Union (whereas all colors consequently will be colored red for them, if they exceed the limits).
0
Notes
  1. ^ The 12-months average for the annual HICP inflation rate must be no more than 1.5% larger than the unweighted arithmetic average of the similar HICP inflation rates in the 3 EU member states with the lowest HICP inflation. If any of these 3 states have a HICP rate significantly below the similarly averaged HICP rate for the eurozone (which according to ECB practice means more than 2% below), and if this low HICP rate has been primarily caused by exceptional circumstances (i.e. severe wage cuts or a strong recession), then such a state is not included in the calculation of the reference value and is replaced by the EU state with the fourth lowest HICP rate.
  2. ^ The annual average for the yield of 10-year government bonds must be no more than 2.0% larger than the unweighted arithmetic average of the bond yields in the 3 EU member states with the lowest HICP inflation. If any of these states have bond yields which are significantly larger than the similarly averaged yield for the eurozone (which according to previous ECB reports means more than 2% above) and at the same time does not have complete funding access to financial markets (which is the case for as long as a government receives bailout funds), then such a state is not be included in the calculation of the reference value.
  3. ^ Compliance with absence of severe tensions, is something the European Commission test for, based on a complex evaluation of a wide range of data values. No objective single data can predict the outcome of this assessment. The assessment is only conducted for states, that already fulfill the first ERM2 membership subcriteria, while no conclusions are noted for all other states.
  4. ^ a b The reference values for HICP inflation and long-term interest rates are calculated based on the "calculation principle" outlined in the 2014 EC Convergence Report,[6] with the input of forecasted data for the sliding assessment year 1 May 2013 - 30 April 2014.
  5. ^ The 3 best performing countries in regards to HICP inflation were Latvia (0.1%), Portugal (0.3%) and Ireland (0.3%).The inflation rates of Greece, Bulgaria and Cyprus (-1.2%, -0.8% and -0.4%, respectively) have been excluded from the calculation of the reference value.
  6. ^ a b The value displayed in the table is the worst value during the 3-year assessment window, which comprise the last recorded fiscal year and forecast data for the upcoming two years. All data has been extracted from the European Commission's Spring 2014 Economic Forecast report.[7]
  7. ^ The three best performing countries in terms of price stability were subject to an interest rate of 3.3% (Latvia), 3.5% (Ireland) and 5.8% (Portugal).
0
Well, my opinion is that:
  • The EDP is not a procedure that is based only on exact economic criteria, but also on criteria having to do with the current economic circumstances, and that is why it is decided by the Council and the Commission. In general, in economics it is very important to keep a degree of flexibility that goes a bit beyond the exact numbers, and that is why sometimes when certain figures are close to the nominal criteria, they are accepted as conforming to them, even if they don't exactly do so. Therefore, by merging the EDP into exact criteria over the budget deficit and debt-to-GDP ratio, although we do conform with the criteria set for an EDP, we limit the scope set by the EU legislation which provides that the Council and the Commission have to decide when the criteria are (not) met and open an EDP, by effectively deciding on our own. (points 2 and 3)
  • It may however make some sense to link the EDP header to some article or section explaining the criteria behind it and how the procedure is opened and closed.
  • The devaluation of the central exchange rate is an implicit criterion defined by the ERM II membership. In general, the real criterion is the membership in ERM II or not. The fluctuation just provides an indication of convergence, rather than an actual criterion, as the ERM II also provides the limits for fluctuation (which can temporarily be even higher than 15%, exactly in instances of severe tensions). So, actually small devaluations of the central exchange rate are permitted, or even have happened, as it can be seen here: European Exchange Rate Mechanism#Historical reference. Again, keeping the nominal to actual fluctuation band seems as a more optimal solution.(points 1 and 4)
  • For the legal convergence, it's a rather technical criterion, as essentially it could only be used to stall the euro introduction rather than block it, as the member state would be obliged to join the euro once it fulfilled all the economic criteria and failing to pass adequate laws to do so would contravene this legal obligation. I would call it "loophole 2.0", with the original loophole being joining the ERM II which Sweden has already been using. I am neutral towards its introduction to the convergence criteria table, as it is usually really checked upon when a state is about to join, and not otherwise. (point 5) Heracletus (talk) 09:38, 3 September 2014 (UTC)
Thanks for your input Heracletus. I concur with everything you've said. I've created a redirect from Excessive deficit procedure->Stability and Growth Pact and linked it in the header, though the subject probably could due with an article of its own eventually. TDL (talk) 18:37, 3 September 2014 (UTC)
  • About your EDP concern: Yes, the EDP is not completely a mechanical criteria. However, my proposal for an integrated approach also fully address this concern by introducing the "yellow exemption" legend color, and explaining to readers that we do not ourselves judge if exemptions exist but that this is the sole responsibility for the commission+council to do. So, the way I see it, my proposed "integrated approach" already addressed all your concerns. The point here is, that Debt-related breach of the EDP criteria and/or a deficit-related breach of the EDP criteria is sharply mechanically defined. Only whether or not room for an "exemption approval" exist is not sharply defined, and hence we leave this event to something being solely sourced and decided by the subsequent Commission+Council decision (following one month after the publication of the convergence report). The proposed method is 1:1 identical, compared to presenting the same main data the Commission consider when deciding whether or not they should rule existence of an EDP criteria compliance. Again this is why I propose we should design the table to reflect how the actually assessment is carried out. My proposal is a perfect design for this purpose.
  • About devaluation thoughts: No, being an ERM-member does not automatically mean that no devaluation of the central rate will happen. We have 2 precedent examples (Portugal+Spain in 1995) who within ERM decided to devaluate their central rate, meaning they did not leave ERM or breached the at this time applying ERM fluctuation limit. They just upon ERM's approval had their arguments approved that a devaluation of the central rate was needed by fundamentally changed macroeconomic circumstances. So this 2nd subcriteria "no devaluation of central rate" is very different compared to the 1st subcriteria "ERM-membership for min.2yr". This mean, that Portugal+Spain upon the assessment of compliance with the exchange rate criterion in 1996 overall failed. They complied with the 1st subcriteria "ERM-membership for more than 2yr", but failed on the 2nd subcriteria "no devaluation of central rate".
  • About reluctancy to show "severe tension" data: As explained in my previous reply, the EC assessment of Latvia in 2010, is a clear case, where the EC explicitly ruled it had compliance with the 1st+2nd subcriteria but not the 3rd (because a "severe tension" had existed in need to be countered by EU paying them a "balance of payment" loan); hence Latvia was ruled not to have complied with the overall "exchange rate criterion". Based on a clear assessment procedure pointing out existence of all these 3 singular deciding subcriteria of the exchange rate criteria, I maintain we on this point also need to list columns for all the singular deciding subcriteria in our convergence table.
  • About inclusion of legal convergence: Reason why we want it added, is because it is being assessed as a separate stand alone criteria in all EC convergence assessment reports. Your observation is correct, that in most cases the states delay to fix their legal compliance issues only shortly ahead of "euro adoption approval". Nevertheless, as it is a singular criteria which in case of no compliance at the assessment time would lead to "no approval for euro adoption", its existence in the table is both needed and justified.
After now having narrowly read through all EC convergence reports in 1996-2014, including their criteria interpretation chapters and the supplementing ECB criteria interpretation documents, it is clear that we in total have 8 singular deciding criteria/subcriteria, which my proposal took care to integrate into our table as shown above. If we want the table to be as accurate as possible, for the purpose of displaying complete data for all the singular deciding criteria in each of the historical conducted convergence assessments, it should be approved without hesitation. All other data (short term interest rate differentials, foreign exchange reserve, "balance of payments saldo", and "lowest recorded exchange rate fluctuation", etc.), are only additional indicators and not singular deciding criteria - which is why I argue none of these should be included by our historical convergence assessment tables. Danish Expert (talk) 18:39, 3 September 2014 (UTC)
The problem is, many of the conclusions that you draw above are unsupported by sources, and are just patterns that you have personally observed in the convergence reports. Patterns don't make rules, rules make rules. Presenting patterns as rules is extremely misleading to readers. As we have discussed extensively, there is no evidence to support your theory that 2 years as an ERM member "as of 1 January 2015" is required, as you are attempting to claim in the table. Yes the fluctuations are not a hard and fast rule, and states can be exempt if they breach the rule, but the rule is quite clear in the treaty: "the observance of the normal fluctuation margins provided for by the exchange-rate mechanism of the European Monetary System, for at least two years, without devaluing against the euro". Just because exemptions to the rule are allowed, doesn't mean it isn't the rule. All of the criteria allow for some exemptions and there is no evidence that no devaluation against the central rate is a hard and fast rule either. As far as I can tell your argument is that there have been no exemptions to date, therefore it is a rule, but since there have been exemptions to the fluctuations rule it isn't a rule. The point is that these criteria are guidelines, not black and white rules. Looking for correlations and claiming that they imply causation is not a compelling argument.
Also, in the future please do not WP:CANVASS support for your proposal as you did here. There is nothing wrong with inviting people to join a discussion on their talk page, but you need to do so in a neutral way rather than campaigning for support. Messages worded in a way to try to sell your proposal ("I hope you ... can endorse my proposal") are not appropriate. TDL (talk) 01:51, 4 September 2014 (UTC)
Apparently you did not listen (or remember) what I already replied to you about these issues, in our debate over at the other talkpage. So let me now repeat the entire argumentation in full:
  1. After a long debate if the ERM reference value should stand as "2yr ahead of assessment day" or "2yr ahead of euro adoption day", I told you I was ready, if you still insisted the latter had not been proofed to a satisfactory degree (beside of all the secondary sources pointing to this), to instead change it back to "2yr ahead of assessment day" (as you had called for) and then we could implement this in my proposed "new integrated design" simply be extending the "yellow legend" also to be used for the display of the EC ruled "ERM-membership-length approved exemptions (coming close to 2yr ahead of assesment time)".
  2. "No devaluation of central rate", has been listed as a singular deciding criteria in my proposed new table design, not only because it is explicitly mentioned by the treaty+protocol (see my linked references in the below point three), but also because of the 2003 ECB criteria interpretation note: All participating members in the ERM-II mechanism, including the ECB, have the right to initiate a confidential procedure aimed at reconsidering central rates. Such realignments may be necessary, for example, if equilibrium exchange rates evolve over time, as shown by the past experience of current Member States. (...). Further progress towards sustainable convergence of economic fundamentals, structural reforms and progress in the catching-up of income levels could result in changes to the equilibrium real exchange rate that may be more difficult to accomplish through domestic price changes alone. In such a scenario, it would be necessary to remain in ERM II for a longer period and to realign the central rate, if necessary, before locking in the exchange rate permanently and adopting the euro.. In past history, we have 3 precedent examples of a state having revalued its central rate without leaving the ERM-II (Greece in Jan.2000, Slovakia in Mar.2007, Slovakia in May 2008), and not surprisingly each of these cases were concluded not to cause any dis-compliance with the overall exchange rate criterion. These 3 cases in addition to the ECB criteria interpretation note, together proof, that its fully possible to adjust your central rate without being forced to leave ERM2. Its however a particular circumstance, that this "no devaluation of central rate subcriteria" has only been breached one time in 1995 (at the time of the 1996 assessment for Portugal+Spain), and at this particular time the EC+ECB unfortunately refrained to do any exchange rate criteria assessments (because they were not yet ready to present such assessment this early in their criteria development phase). So this is why we have no sourced precedent case, where a state solely on non-compliance with this "no devaluation of central rate" subcriteria was deemed not to have complied with the overall "exchange rate criterion". Meaning that for this 2nd subcriteria, we actually have no pattern to proof what I claim. However, my claim here, that it is a singular deciding subcriteria, is on the other hand solidly backed up by the treaty+protocol text + the EC criteria interpretation chapters. With all these sources also noted as additional documentation bullet-points in the below point 3.
  3. For the "lowest fluctuation value" vs. "absence of severe tension" debate, your link to the formulated treaty text is misleading, as the convergence criteria protocol attached to the same treaty has clarified explicitly what the treaty words actually meant. Hence, we should for a start only look at the protocol text and not the treaty text, when searching for the truth what this criteria is all about. Article 3 of the Protocol on the convergence criteria stipulates The criterion on participation in the exchange rate mechanism of the European Monetary System (…) shall mean that a Member State has respected the normal fluctuation margins provided for by the exchange-rate mechanism of the European Monetary System without severe tensions for at least the last two years before the examination. In particular, the Member State shall not have devalued its currency’s bilateral central rate against the euro on its own initiative for the same period. I think this protocol formulation by itself is sufficient to proof that we have existence of the two additional subcriteria "absence of severe tensions" and "no devaluation of central rate", in addition to the existence of the ERM2-membership-length subcriteria (which we already agreed upon). Please note Article 6 of the same protocol say: "The Council shall, acting unanimously on a proposal from the Commission, adopt appropriate provisions to lay down the details of the convergence criteria referred to in Article 140(1) of the said Treaty, which shall then replace this Protocol." This Article 6 mean, that EC has been granted the "interpretation competence", and hence their interpretations (which were later adopted by the Council, and is now reflected by the "interpretation chapters" in the EC convergence reports), is now the dejure applying criteria (which has been clarified a few times in the past). This is why we need, when reporting what theses criteria actually mean, need to pay attention of the additional clarification paragraphs written in the official EC convergence reports. On this subject, we shall therefor listen carefully to the presented interpretations by the below list of primary sources:
If we adjust the yellow legend to meet your continued ERM resistance, so that its usage now is extended also to cover "granted ERM-membership-length exemptions", for the rare cases where EC granted approvals for states found at the assessment time to have a "close to compliance with the 2yr ERM-membership criteria", would you then be willing to accept we keep all of my other proposed design updates, as per the presented extensive argumentation above? Danish Expert (talk) 12:16, 4 September 2014 (UTC)
Both of you again are escalating this disagreement, or so it seems to me, and I do not wish to take part again in the same kind of discussions all over again. I personally do not think I was notified of this discussion to take a particular side, but to express my opinion, which I did and which is in disagreement with the person who notified me about this discussion. Therefore, in these circumstances, accusing this person of canvassing support does not seem proper to me. We are discussing something, and this "Oh, by the way, you also broke 2 wikipedia policies and 1 wikipedia suggestion" is highly irritating, especially when it is not an indisputable position and it keeps being said. On the other hand, I also cannot really communicate with the other party, because we read the same sources and understand what is written completely differently. As I have made both of these remarks again in the past, I do not wish to participate in your disagreement under these terms.
On the topic, I stand by my previous comment. The EDP process belongs to its own article, along with its own criteria table, and here only its final result of being open, closed or non-existent needs to be used as one of the criteria. The legal convergence is indeed a criterion, but is more of a technical nature. Since the ECB reports also more than mention it, I would include it. And, for the exchange rates, I only took time to read about ERM II, and the resolution and agreements that created it do not provide for unilateral devaluations (i.e. they are not legal under this Mechanism). They provide for bilateral devaluations and bilaterally shortening officially the fluctuation band. The fluctuation band can also unofficially be decreased by the central bank of the member state on its own.
(This happened with Latvia and led in the 2010 Convergence Report noting that Latvia's fluctuation reached close that year to Latvia's unilaterally (and unofficially) adopted fluctuation band of +/- 1%. Of course, this means that it was far far far from breaching the official band of +/- 15% and it was compliant with the ERM II and the exchange rate criterion for economic convergence. I looked in that document and did not find somewhere a conclusion that Latvia did not comply with the exchange rate criterion, or that it did not do so because of severe tensions.
Furthermore, there's a mix-up of cases, with some falling in ERM (I) by being before 1997, others being in ERM II but having a fluctuation band of +/- 2.25% and the new member states which have a fluctuation band of +/- 15%.
And a passage was mis-interpreted, reading that if the equilibrium real exchange rate changes and it cannot be accomplished through domestic price changes (an internal re-valuation), the relevant state would have to stay in ERM II more time and IF NECESSARY realign the ERM II central rate between its internal currency and the euro, which means that if a country has a real exchange rate with the euro different than the one it has inside ERM II and it cannot address this change internally (by domestic price changes), then it will have to stay in ERM II and, if needed, change the agreed central rate (in agreement with ECB, as mentioned in the relevant documents). What does this mean? If a country has an agreed central rate x.xx and its real rate is consistently around x.xx + y.y % (or x.xx - y.y %), it will have to address this by staying in the mechanism and/or changing its agreed central rate to reflect reality. It is obvious that this y.y % would have to be beyond some agreed boundaries. Which I would think are called fluctuation band. (Also this document is from 2003.)
And although the fluctuation band compliance criterion is essential, it could again even be completely omitted as the ERM II documents provide for keeping within the agreed fluctuation band, and therefore the criterion of "at least 2-year membership in ERM II and compliance with its rules" would cover the fluctuation band criterion, too. And, this is why in its reports the ECB breaks the exchange rate criterion into membership in ERM II, fluctuation band compliance and no unilateral central rate devaluation (which are the ERM II rules) when the country participates in the ERM II, and otherwise only states the fluctuation band compliance, as the country is not bound by any ERM II rules, along with the current central exchange rate - and not being an ERM II member, it also does not have an agreed central rate that has to be stable.) Heracletus (talk) 20:14, 4 September 2014 (UTC)
@Heracletus:
About the 2010 Latvian assessment case proof of existence of the "severe tension" subcriteria: The 2010 ECB convergence report indeed refrained to assess the 3rd "severe tension" subcriteria. We already touched on this issue in the previous debate (but its my mistake I forgot to mention it in my summary here). The main finding (after I have been reading through all ECB+EC convergence report) was, that the ECB convergence reports leave the complicated final exchange rate criteria judgement for the European Commission to handle in their convergence reports (the ECB reports only observe and present the data - and leave the final compliance conclusion for the Commission). The entire list of EC Convergence reports made note for all ERM-members whether or not they A) Had been members for 2yr, B) Had "no devaluation of central rate", C) Had "absence of severe tension", and then finally concluded if the "exchange rate criterion" had been complied with. For this reason, I have also recommended we now only source our historic convergence tables by "EC convergence reports" and no longer by "ECB convergence reports". In my above reply, I linked to the 2010 EC convergence report, and if you read their assessment about Latvia, then you find proof for my comment that they indeed were deemed not to comply with the "exchange rate criteria" solely because they had existence of "severe tension" during the past 2yr reference period. To conclude, the reason why I concluded this is a singular standalone subcriteria, is not solely because we observed this to be the case for Latvia in 2010, but because Appendix D of both the 2000+2002 EC convergence report (which is the published guideline for how EC evaluates this "exchange rate criterion") actually list it as one of the 3 subcriteria that need to be respected.

About "equilibrium real exchange rate" and "unilateral vs bilateral devaluations": Just to clarify, the 2003 ECB interpretation note is 100% still valid (despite being from 2003). They however did not speak of the "equilibrium nominal exchange rate" but of the inflation-adjusted "equilibrium real exchange rate". These are two very different things. Main point however is, that you are correct that no unilateral devaluation of the central rate is allowed within ERM/ERM2 - it needs to be done bilaterally. If I understood you correct, you then pointed to the fact, that the Protocol stated "shall not have devalued its currency’s bilateral central rate against the euro on its own initiative for the same period" (+ the data appendix for the ECB report also listed yes/no to this phrase). However, my point here is that the subsequent EC exchange rate criterion notes published as appendix D in the 2000+2002 EC convergence reports has interpreted this protocol text to mean "No downward realignment of the central parity either in the ERM or in the ERM II within the two-year examination period". Plus, due to Article 6 of the protocol, its the adopted EC interpretation which define how the criteria finally shall be interpreted, meaning this is dejure now the written criteria. So unless the EC, did a publication mistake (which they repeated 2yrs later), they will also judge bilaterally approved devaluations within ERM2 as leading to discompliance with the overall exchange rate criterion. In addition, unilateral devaluations were also prohibited in ERM (pre 1999), and we have several other sources from the 90s pointing out it was unclear what was meant by the word "own initiative", stating that a mutual agreement reached in ERM could very well be interpreted as something taking place by the states "own initiative" (despite being a multilateral agreement rather than a unilateral agreement). To further back up that we indeed have a singular deciding "no central rate devaluation" subcriteria, I want to highlight that all EC convergence reports published throughout 1998-2006, took note for all ERM-members whether or not they had experienced a "devaluation of their central rate in the past 2yr assessment period" - before concluding if the state complied with the exchange rate criterion. Why should they do this, if they understood it as only "unilateral central rate devaluations" are not allowed - which is being an automatically complied with part of being an ERM/ERM2-member?
  • UPDATE: However, as a curiosity, it should be noted the EC stopped making these notices for the reports during 2006-14, while the ECB convergence reports continued to note it throughout 1998-2014. Not sure if this perhaps (upon this new closer inspection) might indicate a possible EC interpretation change? As we have no precedent "breach rulings" for this - they in theory could have deleted this extra subcriteria in 2006, without breaching their "equal treatment principle", as none of the previously assessed states had been found in discompliance with the more strict "old interpretation" in play from 1998 to July 2006 (meaning the subsequent interpretation change could also be applied retroactively without reaching any different assessment conclusions, and hence it was OK). Although I can not rule out this speculative "interpretation change" theory to be potentially true, I firmly believe this "no devaluation of central rate" still exists as a subcriteria after July 2006, as per the argument it is explicitly mentioned as a separate requirement by the Protocol text. Despite the evidence that EC since December 2006 started not explicitly to mention whether or not ERM-members had a "no devaluation of central rate", this data can still also be easily found and extracted from their reports (in particular from table 9 of the ECB convergence reports), hypothesizing that EC just for the sake of simplicity started out in Decembe 2006, to integrate this separate requirement about "no devaluation of central rate" to become a part of the "no severe tension" subcriteria. So despite after July 2006 being a part of the "no severe tension criteria", it still exist as a separate requirement, where a discompliance in all circumstances will result in the finding that the state did not comply with the overall exchange rate criterion. In short words, I think we can assume all requirements and 3 subcriteria are still the same after July 2006, and that the only change after July 2006 was that EC stopped reporting explicit notes for the 2nd subcriteria compliance (with this data however still being implicitly observed - and with our clear expectation that EC in the future would explicitly highlight any discompliance with the 2nd subcriteria, which per definition would lead to the conclusion that "severe tension" had existed with no room for exemptions and hereby also render discompliance with the overall exchange rate criterion).
About fluctuation bands and their influence on the criteria: The agreed fluctuation bands in ERM/ERM2 has absolutely no influence on the criteria interpretation. ECB has confirmed this in their 2003 interpretation note: "The width of the fluctuation band within ERM II shall not prejudice the assessment of the exchange rate stability criterion". Finally, again it is Appendix D of the 2000 EC convergence report which is our best and most superior source, as it has listed the in depth explanation of how the exchange rate criteria assessment should be understood. When reading through this Appendix D, plus observing how all European Commission convergence reports evaluated this exchange rate criterion throughout 1998-2014, there is really no doubt, that they check for compliance with all of the 3 singular deciding subcriteria that I noted above (while the "lowest fluctuation value" just is one indicator among many - as part of the assessment to find out whether or not "severe tension" existed). Danish Expert (talk) 09:54, 5 September 2014 (UTC)
Danish Expert, I opened the 2010 EC (not ECB) report, looked for the string "compl*", where * is the wildcard character for any number of characters. Did not find a non compliance note for Latvia in exchange rates this way. Then, read the exchange rates passage for Latvia. Again, I missed the "did not comply" sentence. Then, I also performed a string search for "central rate". Found results only in Estonia, Latvia and Lithuania which at the time all were in ERM II. At this point, you lost me and I kinda stopped reading.
I'm sorry if you or TDL consider what I wrote above as bad, but seriously, I don't want to participate in the same kind of discussion again. I seriously don't mean any offence to either of you, as you both add valuable content most of the times. But I wrote my opinion on the issue under discussion, so there's no point in circling around this, after all I am just one person, perhaps others agree with you. I'm also sorry I gave in and made personal comments but this is what I see in this discussion again. If you disagree with them, disregard them. Heracletus (talk) 00:11, 6 September 2014 (UTC)
@Heracletus: I appreciated your response. Its a very difficult topic, so the more opinions and eyes the better. Just needed to rectify some of your incorrect observations. Basically all 3 of us agree, that it is only the "EC convergence reports" who rule the final conclusion whether or not the overall "exchange rate criterion" is complied with (while ECB only observe data without concluding). The EC assessment method is (as you also observed), that first they check whether or not you have been an ERM2-member for 2 years (subcriteria 1). If subcriteria 1 is failed, they do not judge (but only present un-judged data for) whether or not you comply with subcriteria 2+3 - because these in reality depend on that you first and foremost fulfill subcriteria 1 (in particular because they need existence of a fixed central rate, before being able to perform firm conclusions for the second part of the evaluation). Throughout all reports in 1998-2014, the EC did these "exchange rate criterion" assessments in the exact same way, ending their subcriteria check by concluding whether or not the state after having observed the outcome of the subcriteria check: "fulfil the exchange rate criterion".
The only noticed deviation, in the string of all historic EC convergence report's assessments of "exchange rate criterion" compliance, was that they stopped concluding whether or not an ERM-member (with more than 2yr membership) fulfilled the 2nd subcriteria (no devaluation of central rate) as of December 2006. Upon my second inspection (which you forced me to do), I found out the EC convergence report published in May 2006 was actually the last one explicitly noting whether or not there was "no devaluation of central rate" for ERM-members. This mean that, either: 1) They changed assessment practice (because of realizing the very same "own initiative" argument you presented above), or 2) They just integrated the "no devaluation of central rate" requirement as being part of the "no severe tension" evaluation. What I can report to you+TDL (also noted in our debate at the other talkpage) as a certain fact, is that I closely mapped all previous 29 ERM-member exchange rate criterion assessments made by the European Commission throughout the past history, and while 29 out of 29 were found to have met the requirement for "no devaluation of central rate" either by an explicit or implicit note (as the 3 cases you earlier linked to all were "appreciation of central rate towards euro" and not depreciations), there were only 28 out of 29 in compliance with the subcriteria of having "no severe tension". Latvia in 2010, was the particular state who did not comply with this 3rd subcriteria, and hence for this sole reason failed to comply with the overall exchange rate criterion (as noted at page 15+16 of the 2010 EC convergence report).
Based on all this above sourced argumentation (in particular the exchange rate criterion interpretation appendix D published in the 2000 EC convergence report), do you then agree with me we indeed have a singular deciding "no severe tension" subcriteria relevant for our convergence table to display (with a No/yes/NA value as input data)? Plus do you agree with my finding (as reported above), that the "lowest fluctuation value" is just an indicator among many other indicators, as part of the assessment to judge whether or not a "severe tension" existed for the ERM-member being judged, and hence its far more appropriate our convergence criteria table have a column entitled "no severe tension", while we at the same time should stop listing the "lowest fluctuation value" (because this is just one out of many indicators and not a criteria by-itself)? Danish Expert (talk) 09:30, 6 September 2014 (UTC)

Layout dispute in a broader context

TDL implemented a new convergence table design on 5 July 2014, introducing two major changes. First change was to introduce a separate EDP column (beside of the already existing debt+deficit columns), showing yes/no/NA whether an EDP existed upon the approval-meeting of the council. Second change was to introduce a separate "average fluctuation of exchange rate" column, showing how it had changed relative to euro when dividing the 2013-average with the 2012-average. These changes proposed by TDL, were most likely inspired by his read of Table 1 in the latest ECB convergence report (page 55). I have now opposed both of these changes, for the arguments and reasons posted in the above debates. The main problem by doing more or less a copy of the data-format of ECB's "Table 1", is that their table is a "Overview table of economic indicators of convergence", and this is slightly different from our convergence criteria table's here in the Wikipedia space - as they focus more strictly on the results of convergence criteria assessments. For this reason, I have maintained my opinion, that we should keep a format for our Wikipedia table, that closely mimic how the criteria assessments have been done by the European Commission, and consequently shall list all singular deciding criteria and subcriteria in our table (which resulted in my counter proposed new layout discussed in the debate above). The initial layout concept of our table here at Wikipedia, was that once a state could show off an entire green row (without red cells) this would be equal to the fact they had met all criteria for euro adoption. When looking at the historic country-specific data tables we even decided to map their historic progress this way, where the colored cells helps to establish a nice quick overview on how well they complied with all of the criteria during their historic preparation phase.

If we suddenly start to mix the "criteria columns" with addition of certain "indicator columns" (like the average fluctuation of last year over the preceding year), this completely destroy the initial layout idea, because these indicators are just used among many other indicators to decide whether or not a singular deciding criteria was reached - and hence they could both render false positives and false negatives. I noticed, that TDL implemented his own invented reference limit being +-15%. As my sourced and argued replies revealed, this however is not a singular deciding reference limit or criteria in the assessment process. The +-15% is strictly speaking just the band borders of ERM2, which if being close to being breached always will lead to ECB intervention for protection of the central rate (and/or decision to realign the central rate). So it has nothing to do with the assessment criteria itself. In example, an ERM-country which in the 2yr assessment period is allowed by ERM to realign their central rate equal to a 20% appreciation, would still pass all singular deciding convergence criteria for euro adoption. On the contrary, an ERM-country which in their 2yr assessment period implement a negative realignment of their central rate equal to a 1% depreciation would fail the 2nd subcriteria ("no devaluation of central rate"). In my first example, we would get a red cell actually being approved for euro adoption. In my second example, we would get a green cell actually being disapproved. This is why it is so important, that we stick to the concept of only letting our Wikipedia table display the strict singular deciding convergence criteria (while we should avoid mixing it up with non-singular deciding indicators). Latvia's assessment in 2010, is a real historic example, illustrating why we need to let our table focus solely on all singular deciding criteria. In 2010 they failed the overall exchange rate criterion, despite complying with the 1st subcriteria (erm-member for more than 2yr) and 2nd subcriteria (no devaluation of central rate); simply because they were found to have no compliance with the 3rd subcriteria (no severe tensions). Latvia in this 2yr assessment period stretching from Apr 2008 to May 2010, only experienced daily fluctuations within +-1% of their central rate, while their average for 2009 over 2008 equaled a deviation of -0.4%. So the "fluctuation cell" in TDL's currently implemented indicator layout, would be falsely colored green, despite the fact that Latvia failed to comply with the "exchange rate criterion". This explains why the "indicator design" is such a bad approach, and why we should stick strictly to keep our Wikipedia convergence criteria table solely to obey the initial "criteria design", where we list the data outcome for all singular deciding criteria (and avoid mixing it up with non-singular deciding indicator data).

Based on these above considerations of the broader context of our layout-dispute, can you then approve we stick with the tables original concept of only showing data for all singular deciding euro convergence criteria, for the purpose that an entire green row in the table (only potentially disturbed by yellow exemption colors) should signal the state has met all criteria for euro adoption? If yes, there can -as I see it- be no doubt we now as minimum shall replace the "fluctuation column" added to the table in July 2014 (due to being one of many indicators and not a criteria), with the "no severe tension" column (the true criteria) - as proposed at the very top of this long debate. Let me know, if we at least can start to agree on this. Danish Expert (talk) 05:59, 7 September 2014 (UTC)

Most of the above is an extremely warped presentation of my position. This is not a dispute between "the truth" and the "invented" as you are trying very hard to make it into, it is a dispute over presentation. As I've said several times now, I support the incorporating of "severe tensions" and "no devaluation" into the table, I just disagree with you that an entire separate column dedicated to each of them is warranted. There have been exactly zero devaluations of the central rate within ERMII. Devoting an entire column to something that is almost always not defined, and in the remaining cases has never actually happened is a waste of space. We are here to inform readers, not be pedantic. Of course if you compare your proposal to the current table, which does not incorporate tensions/devaluations, rather than what I am actually proposing, it won't pick up these factors, but that should not come as a shock to anyone.
I've suggested including these factors as a note in the fluctuations column, which would be coloured red if there were deemed to be severe tensions/devaluation. Thus there would be no "false positives" or "false negatives" as you claim based on your misunderstanding of my argument. The colour would be correct in every scenario. I'd also support reducing the limit from 15% to 2.25%, only colouring the cell red for devaluation breaches, listing the lowest recorded fluctuations rather than annual fluctuations, or other possible improvements. Yes the fluctuations are only part of the assessment, but they are an important part. Just like debt/deficit are the key indicators to the EDP criteria being met, which is why we list them. It is much more informative to tell readers that the fluctuation rate was "x.xx%" rather than "yes".
You are also playing a semantics game. What do you suppose those "indicators of convergence" are indicating if not convergence to the criteria? And you have developed a quite elaborate theory to justify your argument with concepts like "singular deciding criteria", when no such things exist. And then you apply these theories in an inconsistent way. You call the fluctuations "indicators of convergence", and the "no tensions" the "true criteria". But likewise, the "true criteria" is no EDP. Debt/deficit figures are merely an "indication of convergence". And yet you insist on using these "indicators" rather than the "true criteria". For another example, the "true criteria" for HICP is "price performance that is sustainable". The rate of inflation is but one indicator of sustainability: "The requirement of sustainability implies that the satisfactory inflation performance must essentially be attributable to the behaviour of input costs and other factors influencing price developments in a structural manner, rather than the influence of temporary factors. Therefore, the convergence examination includes an assessment of the factors that have an impact on the inflation outlook and is complemented by a reference to the most recent Commission services' forecast of inflation." So by analogy to your argument above, we should turn the HICP rate column into a yes/no "sustainable" column. The tables have always been an "indication of convergence" since each and every criteria is evaluated with flexibility. TDL (talk) 09:30, 7 September 2014 (UTC)
I really wanted to stop commenting, but I now disagree with both of you. :P You cannot lower the fluctuation band limit from 15% to 2.25%, when it is legally set to 15%.
Common sense (and law) says that the EU wants a new euro member to have a pretty stable exchange rate with the euro before it joins it. This is defined as being in the ERM II for at least two years, which means that it will have a set central exchange rate with the euro and it will be allowed to flow around it within some specific limits (the fluctuation band). Being a member of ERM II also means no unilateral devaluations are allowed for (and this has been established in the history of the original ERM where the UK had to leave to unilaterally devaluate its currency) and no fluctuations beyond a set point (15% for new members, 2.25% for old ones) are either allowed. Therefore, even just being a member in ERM II for 2 years would be the complete criterion on its own and the fluctuations are just there to demonstrate HOW MUCH (HOW GOOD) convergence there is rather than IF there is convergence.
Actually, it must be noted here that the limit in fluctuation bands is the cause for the potential need for devaluations, as the only way to legally fluctuate outside the limits of central rate +/- 15% is to set a different central rate. As the central rate and the fluctuation bands need to set under bilateral agreement, it follows that unilateral devaluations of the central rate are not compatible with being a member of ERM (II).
In this context, severe tensions refer to unilateral devaluation against the euro and effectively leaving the ERM II, and I would bet my old shoes they had in mind the UK leaving the original ERM due to really severe tensions, in what became known as Black Wednesday, when this was written. I base this on article 140 of TFEU (http://www.eudemocrats.org/fileadmin/user_upload/Documents/D-Reader_friendly_latest%20version.pdf) not even mentioning tensions and protocol 13 continuing after tensions are mentioned with a "In particular, the Member State shall not have devalued its currency's bilateral central rate against the euro on its own initiative for the same period.", which I would think provides the explanation on what exactly the mentioned tensions mean.
Additionally, annual fluctuations are listed, because temporary extreme fluctuations (exactly during short periods of intense tensions) would not provide a correct picture of the actual convergence.
No matter what was written in the 2010 report (which also is moot by now) a tension causing a fluctuation of 2% (-1% going to +1%) is not that severe, when the legal limit is from -15% to +15%, and the strictest one ever used is +/- 2.25%. It just approached or touched upon the unilaterally set limit of +/- 1%. To be straight about this, my original research would suggest that, after 10 years from the 2004 enlargement, the ECB is not happy with a fluctuation band of +/- 15% for potential euro candidates and although no one wants to really make it stricter in order to have the new member states joining the ERM II at some point, silently, it is suggested to probable euro candidates that their convergence to the set central exchange rate should be even higher, which culminates into unilaterally set shorter fluctuation bands. However, I wouldn't expect anyone to ever admit this. The "severity" of tensions in the 2010 report may reflect an intention of Latvia to change its central exchange rate to the euro in order to keep its currency within the self-imposed +/- 1% limit, which would make one wonder why it would not just increase the unilateral fluctuation limit, which inevitably leads to my previous conspiracy theory.
Also, indeed the only criterion on budget deficit is whether an EDP is open or not, and the debt/deficit columns are just indicating again HOW MUCH (HOW GOOD) convergence there is and not WHETHER there is convergence.
The rate of inflation IS the criterion for price stability, but the explanation and clarification about it that are included in the reports, are there because certain countries define it differently than the ECB, as it can be seen in the past convergence reports in their legal convergence section, and as protocol 13 says: "Inflation shall be measured by means of the consumer price index on a comparable basis taking into account differences in national definitions." However, according to art. 140 inflation is the sole criterion on which price stability is judged.
I would suggest keeping the table as it is with the inclusion of legal convergence and perhaps also of any unilateral fluctuation bands. Heracletus (talk) 10:54, 8 September 2014 (UTC)
@Heracletus: I start to feel a little frustrated, that you apparently did not read my well elaborated and sourced replies above from "4 September" (explaining that we should not reflect the criteria as per the "Protocol formulation" but according to how the EC has clarified what the criteria mean in the interpretation chapters of their EC convergence reports, in particular Appendix D of the 2000 EC convergence report) and "5 September" (having sourced why "own initiative" does not mean "unilateral", and having both an EC+ECB source explicitly stating that "The width of the fluctuation band within ERM II shall not prejudice the assessment of the exchange rate stability criterion", while also highlighting that Appendix D of the 2000 EC convergence report clarified they will assess worse than -2.25% fluctuations as part of their "severe tension assessment" and explicitly explained this would be equal to how they approached their assessments in the past towards "old EU members"). It is also explicitly noted by all published EC convergence reports during 1998-2014, that being an ERM-member for 2 years is not enough to comply with the overall exchange rate criterion, as you also in addition need to have "exchange rate behavior" within the ERM that satisfies their call for "no severe tension". Your suggestion that just being an ERM-member automatically imply you will then also have satisfactory "exchange rate behavior" could not be more incorrect. Your proposal that we should note the unilateral fluctuation bands in the table is completely irrelevant, as both EC+ECB clarified these unilateral fluctuation bands have absolutely no impact on their "exchange rate behavior" assessment. I will really recommend, that you for a start read appendix D of the 2000 EC convergence report (or alternatively all my copied relevant extracts of it being posted above in my "4 September" reply) plus the introduction chapter (p.29-39) of the 2014 EC Convergence report. The source posted just below by TDL from the Czech central bank, is a secondary source basically just referring to how they interpreted the primary source, while the other two EC sources I linked to are the primary ones, outlining what the exact EC interpretation of the criteria is. Danish Expert (talk) 06:49, 13 September 2014 (UTC)
@Danish Expert:, you post a lot of text in a lot of different threads on the same topic and your links are also to large documents. I did not read all your reply, because I could not find what you were referring to and did not have the intention to spend a lot of time on this issue, because I consider it not to be a really important one, because it refers to perhaps one case out of a large number of examined countries which also happened quite some years ago. I explained why I did not read all of your reply and you could guide me to the sections which supported your point, instead of becoming frustrated. There is an essay on walls of text on wikipedia, but I will not link to it yet. However, although I am at fault for not considering all your arguments, do try to at least keep your replies together and following some order, so that it's easier to read them even if they are long. Also, it's not that I "apparently" did not read your reply. I clearly said I did not do so, because I could not find the sections that supported your arguments and it was quite long. As the thread is I even have trouble finding the place where I am currently writing.
Anyway, to address the issue, under a number of conditions, the +/- 2.25% fluctuation bands may indeed be part of the criterion for exchange rate stability instead of the +/- 15% ones. However, it is noted that they are not based on the actual laws, but rather on the need for better convergence criteria and that a number of exceptions exist. Heracletus (talk) 09:35, 13 September 2014 (UTC)
Sorry, my comment above wasn't very clear. I wasn't trying to suggest that we should make all those changes, just that they are things that I'd be willing to consider as a compromise with DE. I'd prefer to keep the average annual inflation changes as well, though I think there is a case to be made that while the ERMII limit is 15%, convergence requires a smaller band. See for instance: "fulfilment of the criterion requires the exchange rate to have been maintained within a fluctuation margin of ą2.25% (i.e. narrower than the standard band) around the central parity in ERM II". Since the band range changed after the treaty provisions were written, it could be argued that legally they still refer to the band as of when the treaty was written. This seems to be how the EC implements the criteria, based on the sources DE listed above. TDL (talk) 18:39, 8 September 2014 (UTC)
  • I am happy to learn that I misunderstood your position (TDL), which was not easy to digest from your first post in this debate. To be honest, I thought you had completely stepped back from your opinion in the previous debate, where you indeed accepted these data should be displayed in the table one way or another. It could have saved a lot of time and talkpage KB if your first post had been more keen to cut out on which points your standpoint deviated from mine. Reading your latest reply it is now very clear, which I welcome. On the subject itself, then your observation is correct that I presented a new word in our debate "singular deciding criteria", in order to differentiate them from "data indicators" only being part of a "singular deciding criteria". We both agree, it would have been preferable if the EC in their interpretation notes had chosen to present it the way I do (using the terms "subcriteria"/"singular deciding criteria"), as it then would have been sourced. However, the way I presented it in our debate is not incorrect, and was just a more clear formulation of how the EC in fact are doing their assessment, where I basically just operationalized their assessment approach based carefully on the EC's own interpretation notes in addition to the protocol text. In example, when they write "in addition there needs to be no devaluation of the central rate" it means this is a "singular deciding subcriteria of the overall exchange rate criterion" (existing next to the other exchange rate subcriteria about "ERM-membership length" + "no severe tension"). What I did here, is not so far out, as you seem to imply.
  • All this being said, I however agree with you, that we can always discuss if it for layout and comprehension reasons are better to let the table feature dedicated subcolumns with the additional data, or simply integrate it into one of the existing columns. In example, I admit that for the exchange rate criterion, all data indeed could be reflected by the two column proposal you support: 1 for ERM-membership length and 1 for "exchange rate behavior towards euro" (with data for "lowest fluctuation: X.X %" + "Devaluation: yes/no" + "Severe tension: yes/no". For such layout, I however had (and still have) 3 concerns. Firstly, the "lowest fluctuation value in percent of the central rate" is only calculated for illustrative purpose for the non-ERM2-members on basis of an artificially selected central rate being the average rate of the first month of the 2yr assessment period, which very well could be totally way of from the states equilibrium central rate (which we will only know the moment they enter ERM2). Secondly, as my extra dig into this field has revealed, the central rate deviation is always travelling along equally with how high the "interest rate differentials" are (and to some less degree also the amount of central bank interventions on money markets). So despite being an interesting data point it can never be observed alone, and as minimum should be observed along with the "interest rate differentials". Why do we have this intertwined relationship between the two data points? Well, this is because, that the moment the central bank elevates its borrowing/steering-rates to increased levels (thereby increasing the interest rate differentials"), this will automatically provide an equal counter-reaction upwards/downwards for the exchange rate value on the financial market. So they are basically two sides of the same coin, which best can be described as a simple balanced weight with a tipping point if you increase the weight at either the right or left basket, equal to a situation where movements downwards for the left basket (trading values in a downwards devaluation territory) can be countered and re-balanced by increasing the weight of the right basket (interest hikes implemented by the national central bank and/or reduction of the central bank's "foreign exchange reserve" when it support-buy in the market). Picking out one side of these data points for display in the table (i.e. the "lowest fluctuation value"), would only be equal to telling 50% of the story, corresponding to just one side of the "balanced weight". Thirdly, I fear that if we kick in the "lowest fluctuation value" as one of the data points in the "2nd merged column", the casual reader will be bewildered to believe, that this is one of the "singular deciding criteria" which needs to be either complied with or with the "EC to rule an exempted breach". This is not the case, as it is in fact only one of the many indicators being assessed, as part of the overall assessment to conclude whether or not "severe tension" existed for the ERM-member. If the EC had treated it differently in their assessment reports (with a different focus including a clearly defined criteria + reference value), then my opinion also would have changed accordingly (even if this meant their assessment approach would not make any sense from a real world economic viewpoint). My only quest here, is to let our table reflect how the EC assessment is done, and for the "severe tension analysis" it is in fact so complicated, with multiple indicators assessed, that it only make sense for us to report the conclusions "yes/no" if a "severe tension" was found.
  • After giving it a second thought, listening to your space saving arguments, and also paying attention to the above challenge that EC suddenly stopped explicitly to mention in their "exchange rate conclusions" whether or not "no central rate devaluation had been observed" after May 2006 (only subsequently noting it implicit), I am however now ready to accept your call for integration of this data point into being a parenthesis note in the "no severe tension" column. So that the cell first answer Yes/No/NA to the question if there was "absence of severe tension", and then a small parenthesis shall further reveal if their in addition was "no devaluation of central rate". Doing it this way, also make sense from the viewpoint that these two data points have this thing in common, that EC never conclude on these values for non-ERM-members (because of their lack of fixed central rates). Plus as you also argued, the difficulty of respecting this extra subcriteria is very easy, as it can be observed to be very rare that a member state in the past devalued its central rate (it only happened last time back in 1995, when Portugal+Spain did it). So I now conquer to your argument, that the historic values for this additional criteria, imply it is not super important to have a separate column for.
  • You also have a valid point, that the HICP quantitative criteria in principal also is subordinated to an additional sustainability evaluation, answering yes/no to the question: "Is the country likely to meet the HICP reference value in the months ahead?" This indeed annoys me to. Because it mean a state can not be certain to have qualified the hurdle for the "HICP criterion", just by observing if the backwards measured HICP value has respected the HICP reference value. For this particular problem, I suggest we follow the approach, that each HICP cell beside of the measured HICP figure, shall feature a small parenthesis noting if the measured value was found to be: Sustainable/Unsustainable/Not assessed. Meaning that we color-wise require the green color only to color the cell whenever both the HICP reference value has been respected and the measured value was assessed to be "sustainable". Any "unsustainable" findings shall of course color the cell red - no matter if the HICP reference value has been respected. Because of the fact that "forward-looking unsustainable HICP findings" for states with "backwards-looking measured HICP in compliance with the HICP reference value", only happen very rarely (I have not checked yet - but am almost certain that it never happened in the past), I will recommend that we also color all "not assessed for HICP sustainability" states (equal to all non EU-member states) which were found to have "backwards-looking measured HICP in compliance with the HICP reference value" with a green color - and we then just add a note to inform readers that: Their "HICP sustainability" was not assessed by the European Commission, and hence their is a risk it should have been red instead of green, in case unsustainable factors were responsible for causing that they upon assessment time had succeeded to meet the HICP reference value.
  • About my suggestion that we should implement an integrated approach for the EDP assessment, as outlined by my table example at the very top of this debate, this in no way contradicts the layout regime I argue for. Main point here is, that we both for the deficit+debt subcriteria have 2 specifically formulated "reference values" that the EC check compliance for, and then if breached, they can conditional on existence of exempting criteria be exempted still to have complied - despite their breach. If you read my formulation of the yellow exemption legend beneath the table, it explain how this is assessed by the EC and that the yellow color for these two criteria breaches equal a ruled exception. To be frank, I see absolutely no reason why we should dedicate a separate column to show "yes/no" to whether or not an EDP is open, as this by my integrated approach would already by directly reflected by looking at green+yellow colors for the two subcriteria (meaning no EDP is open) and red colors for the two subcriteria (meaning an EDP is still open). Moreover, it is specifically ruled by the EC EDP abrogation/initiation rulings whether or not they found "exempted compliance" both in respect to the "deficit criteria" and "debt criteria". So each of the yellow colors can always be strongly sourced. Based on this argumentation, I still maintain the best solution would be to implement my proposed "integrated solution", as this would more accurately reflect how this assessment is done (that EDP is the overall criterion, comprising the two underlying debt+deficit subcriteria, with the "debt assessment" being done for the last fiscal year (NB: Please note I now retracted my call for data change for the debt column as per my reply below to CultureArchitect), plus with the "deficit assessment" being done upon consideration of the worst figure in the 3yr assessment period - including the last fiscal year and the two forecast years, and that it is only the EC having the authority to rule existence of these yellow exemptions - meaning the potential for a yellow color is not assessed for states outside EU). By implementing my proposed "integrated EDP column design", we avoid the risk that casual readers - when looking at a standalone EDP-column - then by first catch of the eye would get the wrong impression, that the EDP criteria (yes/no) is different and feature additional requirements compared to the compliance with the "EDP debt criteria" and the "EDP deficit criteria", and in addition we save column space - as you have been so keen about. Based on all these reasons, I still think the proposed "integrated EDP design" is preferable compared a "standalone extra EDP column".

I look forward to learn your response to my above more in depth argumentation, and hope we can soon reach consensus for the final design. The moment we do, I am still ready to compile all the historic missing tables for the period 1998-2010. Best regards, Danish Expert (talk) 04:50, 9 September 2014 (UTC)

Well, reading the Czech National Bank's text, the thing that must be crystal clear is that "severe tensions" mean severe fluctuations noted around the set central rate. It says so:
"..."without severe tensions" (in other words, maintaining the exchange rate within the narrow margin of ..."
So, this is covered in the template as it currently stands. For the devaluation it says:
"No downward realignment of the central parity within the two-year examination period (upward realignment of the central parity is implicitly possible)."
But, what I have been reading so far talks about unilateral devaluation. (And based on the ERM II rules, no unilateral re-valuation/realignment even upwards is possible.)
And, for the 2.25% fluctuation bands, they base it on the 2000 convergence report which, of course, used the old fluctuation bands. I do not see anywhere (in the official EU documents) stated that there is a narrow central exchange rate band of +/-2.25% in order to join the euro, not to mention that the ECB considered severe tensions, i.e. severe fluctuation a +/- 1% in the case of Latvia as noted above. This leads me to restate my conclusion that there is wishful thinking from the ECB that a narrower band existed and it is silently imposed/accepted (probably in the form of unilaterally imposed by the candidates narrower bands), but this thing has not been stated, is not in the official rules, and in my opinion cannot ever be admitted publicly, because it will lead into any potential candidate currencies being pressured when about to join.
And, what I just noticed and is even more interesting is this final line:
"To conclude the definition of exchange rate stability it should be mentioned that as European economic integration is a political process, the vagueness of the economic criteria may also reflect an intentional decision to leave some leeway for political decision-making."
Heracletus (talk) 07:37, 11 September 2014 (UTC)
@Heracletus: Yes I think that last quote sums up the problem quite nicely.
@DE: Personally I'd only add a parenthetical note for "unsustainable" HICP, and for the rest it would be implied that it was either sustainable or not assessed since I suspect that you are right that it is only rarely unsustainable. I just think it would keep the table a bit cleaner, but isn't a big deal.
We must also keep in mind WP:COLOUR. Turning a cell yellow for an open EDP isn't sufficient for those that have vision impairments. There has to be some sort of text to indicate this. Perhaps we could somehow integrate the EDP info as a note in the debt/deficit column as CultureArchitect suggested? Maybe the best thing to do would be to divide each state's debt/deficit cells into two rows: the top halves merged and giving details about the EDP and the bottom halves giving the debt/deficit figures?
Other than that, after reading all of the above I still disagree with you about the deficit/sever tensions. At this point I think it would be more productive if we backed off and let others weigh in rather than going around in circles. TDL (talk) 05:24, 12 September 2014 (UTC)
@Danlaycock: Your argumentation about the EDP parenthesis layout sounds reasonable. I hereby accept your EDP compromise proposal, and implemented it as a visible example down at the Example chapter. As for the "HICP sustainability" parenthesis, I want to keep it in for all states (except those who did not meet the HICP reference limit), for the purpose (1) teach readers we also have this extra requirement if the HICP reference value is respected, and (2) for the sake of ensuring data completeness so that the template reflect all singular deciding criteria/subcriteria. So I insist to keep this "HICP sustainability" parenthesis visible for all cases. I will refrain to collect and post complete statistics for this parameter here in our debate (as I start to run out of precious time), but can reveal that I after having checked one convergence report already found the first example of: A state respecting the backwards-measured HICP reference value - while however being judged not to have complied with the HICP criteria due to their compliance being evaluated to be "unsustainable" (this state was Poland in 2008). My only reason for doing this check, was to be certain we had precedent cases, and this has now been confirmed. In regards of our remaining disagreement about the "severe tension" criteria, please continue to read my reply below. :-) Best regards, and thanks for your constructive responses, Danish Expert (talk) 16:11, 14 September 2014 (UTC)


@Heracletus and Danlaycock: I will be careful not to circle, and welcome all second opinions. Your replies above (particular the one from Heracletus), however call for me now to reply and clarify the situation. In regards of our "severe tension" disagreement, you apparently both assume this is solely decided by "adverse fluctuation of exchange rate values", which is not correct. A "severe tension" can materialize in all of the six ways listed below (of which a very low fluctuation value is just one of the ways). In fact, the six ways it can materialize, is better described as being 6 intertwined indicators, of which you can conclude nothing by observing only one of them in isolation, but where you need to observe all 6 of them in conjunction to solve the question if there was "absence of severe tension". The indicators - which are all equally relevant - are listed below, followed by a short description why they are so relevant to observe.
  1. Was the lowest fluctuation exchange rate value lower than -2.25% from the central rate? If yes, then for how long?
    In case a -10% fluctuation is observed only lasting shortly from 1-6 months, this will be ruled to be a temporary tension, and hence the state can be found even in this situation to have "no severe tension". The 1998 Italian assessment case is the real world example prooving this is the case, as they under such conditions were found to have "no severe tension" and was approved for euro adoption. However, observing this first indicator is not enough to rule "no severe tension", as it needs to be observed in conjunction with all of the additional 5 indicators listed below, in order to reach any conclusion whether or not there was existence of a "severe tension".
  2. Did the state devaluate its central rate during the assessment period?
    This question is very important, because any potential devaluation of the central rate will automatically remove a lot of tension from the exchange rate market. According to basic theory about money markets, a devaluation of the central rate will normally lead to the local currency either being adjusted to be "fairly valued" in the opinion of the market - or perhaps to a level where it is even regarded to be "undervalued". When such a situation happen, the FX-investors will be lurked back into the market, as they will be confident the exchange rate likely will no longer go down, but rather start to trade in a territory above its new central rate. Its a fact, that "exchange rate tensions" are heavily dependent on the exact position of the central rate, and that any devaluations will cause any previous tensions to disappear as it is obviously much easier to defend the currency at a weaker level. So this is why, this second indicator is very important also to observe.
  3. Did the exchange rate benefit from increased short-term-rate differentials? If yes, for how long, and was the differential declining/increasing towards the end of the assessment period?
    It is basic monetary policy knowledge, that if the central bank decides to elevate its steering+deposit rates significantly above the ECB official rates, these increased short-term-rate differentials will heavily support the traded exchange rate level on the financial market. Reason for this, is that foreign investors are granted a rate premium for placing their money in the local currency, which mean that suddenly the demand for the local currency will increase, and hence also the exchange rate price for the local currency. If the Commission observe the short-term-rate differentials are on a declining path towards the end of the assessment period, this is a positive sign that the tensions on the exchange rate market are on a declining path.
  4. Did the central bank intervene in the market to support buy the local currency? If yes, to what extend did this cause its foreign exchange reserve to shrink?
    Whenever a central bank intervenes on the market to support buy its own currency (by using its foreign exchange reserve), this will cause an increased demand for the local currency, thus helping it to trade at higher values compared to where it otherwise would be trading in absence of the central banks support buying operation in the market. If the central banks foreign exchange reserve is depleted with more than 25%, this would in most cases be assessed to equal a "severe tension". While a 1% depletion of the same reserve, on the other hand would not be sufficient evidence to conclude existence of a "severe tension".
  5. Did the exchange rate benefit from a tension relieving "balance of payment" support loan? If yes, to which extent?
    In a situation where FX-investors start to believe a state will need to default - or perhaps that its "balance of payment" is so adverse that investors start to fear the state soon will have no other option than counter this by a decision to devaluate its central rate, this starts to become a self-inforcing movement (panic), where the traded exchange rate heavily deteriorate with the build-up of "severe tensions". The moment a multi-billion support loan (and/or bailout loan) is granted by EU to the state, this however function as a solid guarantee towards the worried investors that there is no need to worry - because EU is backing up stability on the market by granting heavy support loans. As a result, these loans can remove "severe tensions", for as long as they exist, and provide the state with extended time to fix their underlying problems so that they 3 years ahead no longer need "financial support loans". In example, when Latvia received their support loan in 2009, the "severe tensions" being revealed at first only by indicator 3+4, completely disappeared. However, if the support loan had been cancelled in 2009, these "severe tensions" would again immediately have materialized as adverse developments for either indicator 1/2/3/4. From this fact alone, it can be concluded, that "support loans" does not remove the "severe tension", but just temporarily neutralize it. The neutralizing effect (and continued existence of "hidden severe tension) depends on a very complex analysis, where you need to assess a long range of other relevant factors.
  6. Did the currency exchange rate benefit from law implemented Capital Controls, restricting the free exchange of currencies?
    This is basically the nuke bomb, which is very rarely used as an exchange rate weapon. The only two European states having used it recently, are Cyprus and Island. In Cyprus, they had to freeze some of the big fat bank deposits owned by foreign investors, as part of avoiding bank runs to materialize, as all investors otherwise were considered being likely to start withdrawing their money out of the bank by a rapid pace (and out of the country), because they feared the bank holding their deposit would soon default. In Island, they were forced to enforce strict capital controls forbidding by law any exchange of ISK to foreign currency, when the Icelandic central bank ran out of foreign exchange reserve in October 2008 - while the ISK exchange rate deteriorated almost 100%. The capital controls created an artificial glass bubble around the ISK exchange rate, as all domestic selling of ISK suddenly was prohibited by law. So if you subsequently only observe indicator 1+2+3+4+5 for Island, they no longer indicate any existence of "severe tension". However, it is known by all investors that this is not true. If Island removed their capital controls from one day to the next, the "severe tension" would be visible again by adverse values being indicated by indicator 1/2/3/4/5 (and perhaps even all five of them would blink red).
Again I have to highlight the 2010 Latvian Assessment case, as the best example for my claim, that the "severe tension" is basically an umbrella term covering and depending on how all the six highlighted indicators behave in conjunction. In Latvia, indicator 1+2+6 were perfectly fine, while however indicator 3+4+5 together caused a ruling by the Commission, that a "severe tension" had existed. Below I have copied the relevant paragraph from their assessment on page 15+16, to illustrate this finding is true:
"The lats exchange rate did not deviate from its central rate by more than ±1%. However the exchange rate was subject to episodes of severe tensions, as reflected in the evolution of additional indicators such as developments in official reserves and short-term interest rates. The lats came under heavy pressures in autumn 2008 when, against a background of large and increasing macro-imbalances, markets grew increasingly concerned over the sustainability of the peg. The Latvian authorities' initial responses to stabilise the financial system failed to stem the capital outflows and the Bank of Latvia was forced to sell roughly one quarter of its international reserves in currency exchanges until year-end. In December 2008, an agreement to provide Latvia with a coordinated package of international financial assistance helped ease pressures on the exchange rate temporarily. The exchange rate peg came under renewed pressure in the first half of 2009 amid political instability and a sharply deteriorating economic outlook. Tensions culminated in June when short-term interbank market rates temporarily rose to above 30%, reflecting inter alia the system-wide lats liquidity shortage and mounting uncertainty about the authorities' capacity to sustain the exchange rate regime. Financial market conditions improved visibly during summer 2009, following the loan disbursements in the context of the coordinated international financial assistance package. Latvia does not fulfill the exchange rate criterion.".
In addition to the above assessment cite, both appendix D of the 2000 EC convergence report and the technical annex of the same 2010 convergence report (page 41), also support my argument that we have several intertwined indicators being looked at as part of the "severe tension" assessment:
"In its assessment of the exchange rate stability criterion, the Commission takes into account developments in auxiliary indicators such as foreign reserve developments and short-term interest rates, as well as the role of monetary policy measures, including foreign exchange interventions, in maintaining exchange rate stability. For the first time, some Member States have received international balance-of-payments assistance during the assessment period for this report. In order to determine whether this constitutes evidence that a country has faced severe tensions on its exchange rate, the Commission examines several factors, including the situation that led to the need for official external financing, the magnitude and financing profile of the assistance programme, the residual financing gap, the policy conditionality attached to it as well as developments in foreign exchange and financial markets. The possible impact of other, often precautionary, official financing arrangements (multilateral or bilateral) on exchange rate stability, financial market performance and risk perceptions is also taken into account. As in previous reports, the assessment of this criterion verifies the participation in ERM II and examines exchange rate behavior within the mechanism. The relevant period for assessing exchange rate stability in this Technical Annex is 24 April 2008 to 23 April 2010."
When reading both of the above cites, in addition to my own above explanation why they indeed all are important, there should be no doubt left, that it will be best and most accurate that we entitle our "exchange rate behavior column" to my proposed phrase "Absence of severe tension", and let the input-value be Yes/No/NA. The "lowest fluctuation values" is just one indicator among many equally important indicators in the "severe tension" assessment, and as it has no clear existence of a reference value concluding that lower fluctuations than -2.25% always will be considered to equal "severe tension" or cause overall incompliance, it is best not to show it at all. If we should show this "lowest exchange rate fluctuation" indicator, we would need also to show all of the other intertwined 5 indicators, and the table would be overloaded with info, which is why its best completely to omit this data from the table. In regards of the "no devaluation of central rate" info, this is however, beside of being an indicator revealing potential existence of "severe tension", at the same time also a singular clearly defined subcriteria, where the protocol text + interpretation note has clarified this parameter always needs to respond with a big loud "No", in order for a state to comply with the overall exchange rate criterion. Hence it is justified, that this observation value shall be added by its own little parenthesis in the "Absence of severe tensions" column.
  • About "unilateral devaluations": In my previous reply to Heracletus on 5 September, I agreed that "unilateral devaluations" are prohibited both in ERM and ERM2. However, I also explained that it was incorrect to interpret the "own initiative" phrase from the 1991 Protocol to mean "unilateral devaluations", and even posted a link to a 90s book which fully supported my point of view. In the linked 90s book, they concluded that the phrase "own initiative" could be interpreted in multiple ways, and in the context of the Spanish+Portuguese exchange rate devaluations in 1995, it was fully possible these multilaterally approved devaluations within ERM could be deemed to be something that took place at their "own initiative". Although it was noted for Portugal, that they perhaps could claim not to have devaluated by "own initiative", because of its economy being strongly interconnected to the Spanish economy, and hence their subsequent devaluation could also be seen more as something which Spain in principle forced them to do - when Spain first decided to devalue the Spanish currency. Another important observation for this debate is, that after the euro had been born in 1999, the EC published a new interpretation of the protocol text (Appendix D of the 2000 EC convergence report), where they basically decided to delete the old protocol text phrase "own initiative" from their interpretation note, while re-affirming they still checked that "no devaluation of the central rate" had happened in the 2yr assessment period, as part of their assessment. The decision to delete the "own initiative" phrase, can also be explained from a logic point of view, hidden in the fact, that the main reason for initial existence of this phrase, was that if any state decided to appreciate its central rate in the ERM (pre 1999) - this could at the same time be seen as all other currencies devaluating their central rate against the appreciated one. After the euro was born in 1999 this problem disappeared, as the exchange rate of applicant currencies now was measured directly against the euro (and not against all other member state currencies), meaning that the "own initiative" phrase was no longer needed. After the euro+ERM2 was born in 1999, the EC simply now consider all "bilateral devaluation of central rates towards the euro" (within ERM2), to be something which will always lead to discompliance with the overall exchange rate criterion. Its incorrect of you to assume, that the current EC-interpretation of "own initiative" means "unilateral". This is your very own WP:OR interpretation of the protocol text. The EC on the contrary decided to skip the phrase after the euro was born in 1999, as reflected by their 2000+2002 EC convergence reports. Based on this observation, it appear more likely the "own initiative" phrase, all along only was supposed to mean "own responsibility", which is also a viewpoint backed by the 90s book I previously linked to.
Based on all these in depth elaborations above, I will politely ask you now to reconsider my question, if you can approve we implement the proposed "absence of severe tension" column, with input-date no/yes/NA, and only supplemented by a small "no devaluation" parenthesis (without showing any of the lowest fluctuation values)? If you after having reconsidered, still have an opinion that deviates from mine on the subject of this proposed "absence of severe tension" column, then please explain why? Best regards, Danish Expert (talk) 22:53, 12 September 2014 (UTC)
@Danish Expert: On the severe tensions indicators, you seem to be right that both going outside the normal fluctuation limits and/or intervention taken to avoid this are indicators of severe tensions and as you now clearly referenced it may be decided based on these or similar indicators that the exchange rate criterion is not being fulfilled by a country. However, the exact indicators you select and the exact limits you give for them do not seem to be based somewhere. For example, you wrote:
"If the central banks foreign exchange reserve is depleted with more than 25%, this would in most cases be assessed to equal a "severe tension". While a 1% depletion of the same reserve, on the other hand would not be sufficient evidence to conclude existence of a "severe tension"."
And, I would guess you base this on Latvia in 2010, where however the EC convergence report reads:
"The Latvian authorities' initial responses to stabilise the financial system failed to stem the capital outflows and the Bank of Latvia was forced to sell roughly one quarter of its international reserves in currency exchanges until year-end."
and further below,
"While the peg was successfully defended, gross foreign assets were depleted by more than one third between end-February and end-June."
Therefore, can you explain to me why a severe tension is equal to the Central Bank's foreign exchange reserve being depleted by at least a quarter of it, and not equal to it being depleted by at least one third, or, for that matter, one fifth? Additionally, that EC report uses a number of indicators to conclude there were severe tensions, and not just one. Do you know if only a single indicator is enough to conclude there were severe tensions, or if at least two are needed, or four or 2 particular ones, or at least 1 particular one in conjunction with at least one of the others? Do you know all the auxiliary indicators you're referring to?
Additionally, why an instant decision taken at one's own initiative, you judge it not to be a unilateral one? And, since you judge also bilateral decisions on the matter of the central exchange rate to be potential indicators that the exchange rate convergence criterion has not been met, can you provide me with such an example? Because as far as I understand, in English, a unilateral decision is one taken at one's own initiative and not in accordance and consultation with the other parties, while a bilateral one is one taken after consultations and agreement between two parties. I have also provided bilateral decisions to establish a more representative central exchange rate, which have not led to a violation of the exchange rate convergence criterion, as the countries were deemed to be fulfilling it and joined the euro.
Going back to the original sources, TFEU art. 140 and protocol 13, only mention that convergence (on the exchange rate) exists if there is "observance of the normal fluctuation bands provided by ERM" (which in the present ERM II are acknowledged to be +/- 15%) "for at least two years, without devaluing against the euro". And that these fluctuation bands need to have been respected for at least two years "without severe tensions", "In particular, the Member State shall not have devalued its currency's bilateral central rate against the euro on its own initiative for the same period."
From the TFEU, it is obvious that the normal fluctuation bands (which are +/- 15%) need to have been respected, no unilateral devaluations of the bilateral exchange rate are allowed and no severe tensions should have taken place affecting this rate. Heracletus (talk) 10:50, 13 September 2014 (UTC)
@Heracletus: Nobody knows the "exact limits" for these additional indicators assessed as part of the "severe tension" assessment. This has exactly been my point all along. The one that I mentioned in my reply above (i.e. 25% foreign reserve depletion), were just listed to illustrate an example of which figures the EC might consider to be severe or not severe. The list of assessed "auxiliary indicators" might indeed even be longer than the six I mentioned above (which I however believe are all of the main important ones). My main point in this "severe tension" debate, was straight from the start, that this assessment is so complicated and involve so many additional indicators, that we should refrain to show any of them in the table, and only note Yes/No/NA input-values for the question "Did the EC find absence of severe tension?". Looking at them singularly without looking at all of them at the same time, would be a mistake, because of their intertwined nature. This is why I recommended not to show the "lowest fluctuation exchange rate" in the table. Among these two handful of indicators being assessed as part of the judgement if there was "absence of severe tension", the only one we can be certain -that if breached- in all cases will render dis-compliance with the overall exchange rate criterion, is the "no devaluation of central rate". Here we have a clear measurable reference limit being "No".
  • About the "Own initiative" vs. "unilateral" debate: You then again asked me to explain why "own initiative" does not mean "unilateral". I already explained this in my previous reply in full. To say it short, its fully possible (also in England) to start a process for something on your "own initiative" leading to a "bilateral/multilateral agreement". Just because you started out the process to impose a devaluation of your central rate "by own iniative", it does not automatically mean that you implemented this devaluation of the central rate as a "unilateral move". In my previous reply, I also explained that the protocol's "own initiative" phrase most likely had been crafted in the context of ERM being build in a different way (measuring central rate changes against all other member state currencies) compared to ERM2 (only measuring central rate changes against euro), which is likely why the attached the "own initiative" phrase simply meaning "own responsibility" and not "unilateral". The linked 90s book also proof that "own initiative" does not mean "unilateral", as they explicitly stated that the 1995 devaluation of the Spanish+Portuguese currencies being done through settlement of multilateral agreements within ERM - according to them would be considered being events which happened at the states "own initiative" (maybe not for Portugal - because their devaluation had been forced by the Spanish one, but certainly this "own initiative" ruling was expected to hit Spain). As I also outlined in my above "4 September" reply, neither EC nor ECB unfortunately came out to asses these 2 central rate devaluations in 1996 (which were the only devaluation events so far throughout the entire convergence report history) - as they had not yet at this point of time completed their interpretation of the exchange rate criterion. As explained in my above "6 September" reply, all 3 examples of exchange rate adjustments having taken place within ERM2, that you earlier linked to, were all appreciation adjustments, and not "devaluation adjustments" as you incorrectly believed from the start, and hence can not be used to conclude anything in this regard.
To sum up, we have no precedent rulings that proofs my claim, that this "no devaluation of central rate" is a singular deciding criteria. The main point however is, that in addition to the Protocol text, appendix D of the 2000 EC convergence report and all subsequently published interpretation chapters of the EC convergence reports, have been pretty explicit to state that "In addition, there shall be no negative realignment (devaluation) of central rate", which is the proof I refer to in support of my finding, that they still interpret this "no devaluation of central rate" to be a "singular deciding subcriteria" of the overall exchange rate criterion. Danish Expert (talk) 16:31, 13 September 2014 (UTC)
I'm sorry, but we understand English differently, including the term devaluation, which I had to look up again to be sure. If the set central rate of currency A is lowered against the euro then it A is devalued against the euro. Currency appreciation and depreciation says the equivalent for a free floating exchange rate would be depreciation, but the two terms are sometimes used interchangeably. Also, I insist that "the Member State shall not have devalued its currency's bilateral central rate against the euro on its own initiative" means that the Member State must not have devalued the bilateral central rate unilaterally.
Also, I already complained above for making this topic a mess with multiple sections and replies, and now, you not only split my reply here, but you have also edited it, for example making "{{ping|Danish Expert}}, on" into "{{ping|Danish Expert}} On".[1] Why are you doing this? Will this be the first time I will tell you not to mess with the comments of others on talk pages? Why do you edit my reply to reflect your style, since this is not even your own private user talk page and my style is not outside what may be regarded as appropriate? It may look better, it may look worse, but do NOT edit other people's comments. Heracletus (talk) 22:09, 14 September 2014 (UTC)
@Heracletus: Sorry but you have been wrong about this all along. You make the classical mistake to look at the Drachma/euro rate, while you instead should look at the euro/Drachma rate. When Greece changed their Drachma/euro rate from 353.1 to 340.8, this was equal to an appreciation of the euro/Drachma rate from 0.002832 (1/353.1) to 0.002934 (1/340.8). Suddenly Greeks needed less Drachma (340.8) to buy 1 euro, which is equal to the currency being stronger and having appreciated. Not only is this a fact claimed by me, but the 2000 EC convergence report also described the change of the central rate as a revaluation and not as devaluation. You can find the same proof repeated if you read the Slovak exchange rate assessment in the 2008 EC convergence report, which emphasize the Slovak currency revalued twice and never was subject to devaluation.
It is not a sound reasonable argument, that you insist on your own interpretation of a phrase without support of any sources. Right now it is really you who have the burden of proof. For my own record, I have posted a valid explanation why this "own initiative" phrase might have been crafted back in 1991, plus supplemented this by 2 relevant sources. The first is the 2000 EC convergence report which in their very detailed "exchange rate criterion interpretation" Appendix D, did not say they checked for "unilateral devaluations of central rate", but instead stated there should be: "No downward realignment of the central parity either in the ERM or in the ERM II within the two-year examination period." The second source, is again the 90s book, who explicit wrote what I referred to you in my previous post (that "own initiative" should not be interpreted as "unilateral devaluations" but rather was a question about who's economy was responsible for causing the exchange rate change). While I have these 2 strong sources to back up my opinion, you have so far listed no sources at all to back up your personal interpretation. As you apparently did not yet read the relevant cite from the 90s book I have used time to copy it and post it directly below (only for your convenience):
  • "A second matter for interpretation is the meaning of "a devaluation on its own initiative". Realignments in the ERM take place by definition by mutual agreement. The devaluation of the Spanish peseta and the Portuguese escudo on 22 November 1992 would have been a case in point. It was clear the Spanish autohorities had taken the initiative for a devaluation. Whether the same could be said of the Portuguese authorities is however not certain."
Finally, the minor layout changes added by me to some of our debate replies was really really minor, and helped improve the readability of the replies. Please cool down your jets. I did not severely change anything here, and all along have worked hard and constructively to structure the debate - kept all of my replies on a focused track without mixing in feelings - and helped moving the debate towards a constructive direction. I admit the structure could be better. But again it is a very complicated topic being opened here, where we discuss 5 issues at a time, and it was not me but TDL who opened the debate at this talkpage (where all issues were debated in a mix, rather than splitting it up into multiple debates from the start). Moreover, many of your replies in our debate are actually the sole reason for some of my repetitive replies (as you refused to read some of the first replies in this debate). So please stop throwing stones against me, and let's focus on the topic, instead of complaining about minor irrelevant debate structure issues. Danish Expert (talk) 20:22, 15 September 2014 (UTC)
@Danish Expert: You are right on the devaluation thing, they were revaluations. But, we still disagree on the unilateral thing, mostly because you interpret "initiative" very very literally, while the meaning is of one-sided action. Here are some sources.
You are also fully aware that you should not mess with other people's comments, per WP:TPO, so just stop doing it. For example, above, you have spelled "autohorities" instead of "authorities", but for some reason people refrain from editing your comments to their own style. Try to do the same. Heracletus (talk) 12:19, 16 September 2014 (UTC)
@Heracletus: Linking to a Google search is no valid source. The main point is, that my above found cite from the 90s book fully supported my argument, that "devaluation by own initiative" should not be interpreted strictly into what you claimed was equal to "unilateral devaluation leading to automatic exclusion of ERM/ERM2". Both Portugal+Spain did their November 1992 devaluations by mutual agreement within ERM, and both continued uninterrupted to be ERM-members after their devaluation. Yet the cite from my 90s book, still claim that Spain was likely to fail the "exchange rate criterion" because it could be argued to have "caused the devaluation by own initiative" - while the same however not was equally certain for Portugal. I think this 90s book is a pretty strong source, and unless you are able to post a source explicit evaluating on the meaning of the exchange rate criterion's "own initiative" phrase and ending up with a different conclusion than the 90s book, then I think there is no reason to replace this observation by your "personal interpretation" (which no sources so far have supported). The conclusion is, that "no devaluation of central rate by own initiative" is a different and separate subcriteria for states to respect in addition to the ERM/ERM2-membership length and "no severe tension" subcriteria (of which "no devaluation of central rate by own initiative" is a direct part). All EC convergence reports explicitly states, that first they check if the state has been an ERM2 member for 2yr - and for those states complying with this they additionally check for satisfactory "exchange rate behavior" (which encompass "no severe tension" and in particular "no central rate devaluation"). When the Council approved the first 12 eurozone members, respectively in 1998 and 2000, they also explicitly summarized if all these 3 subcriteria had been met. Why would they do this, if your initial claim was true, that being an ERM-member for 2 years would really be sufficient to qualify (with all other data just being irrelevant)? I think it has been proven beyond any point, that we beside existence of the "ERM-membership length" subcriteria also have the separately applied "absence of severe tension" subcriteria (of which "no central rate devaluation" is a direct part never to be exempted on). Danish Expert (talk) 14:15, 16 September 2014 (UTC)
@Danish Expert and Danlaycock: Therefore, although a valid case has been made for the rules being compliance to a +/- 2.25% band and the term severe tensions being interpreted differently and based on more indicators than just unilateral devaluations (because essentially what prot. 13 says is that unilateral devaluations are the indicator of severe tensions), it also does not take a lawyer to see that these subcriteria are not contained in the TFEU. Thus, I am not sure how this conflict of law and actual practice can be reconciled in our template.
But, I also do not understand why we disagree with each not only on the implementation but also on whether there are clear rules or there is a conflict of rules between the laws and the actual practice. Appendix D of the 2000 EC convergence report reads:
"A "standard" fluctuation band of ±15% has been established and this, in principle, corresponds to the "normal fluctuation margins" referred to in the Treaty."
and then goes on to establish its own criteria of converging within a +/- 2.25% fluctuation band, which simply do not adhere to the treaties giving EC and ECB the obligation to judge the degree of convergence. I understand and have explained the necessity of such an action as laying down stricter criteria, but that does not mean it is really legally sound. The same thing applies to basing the existence of severe tensions not only on the existence of a unilateral devaluation of the set central exchange rate, but also on potential large intervention to avoid a fluctuation that would cause such a devaluation. I am not a country and cannot complain to the EC or the ECB, but these rules are simply not in the treaties. Heracletus (talk) 10:50, 13 September 2014 (UTC)
About legal foundation for EC interpretations: According to Article 6 of the protocol (as explained by my above reply on 4 September), its the adopted EC interpretation which define how the criteria finally shall be understood, meaning this dejure now has defined the criteria. Article 6 stipulates: "The Council shall, acting unanimously on a proposal from the Commission, adopt appropriate provisions to lay down the details of the convergence criteria referred to in Article 140(1) of the said Treaty, which shall then replace this Protocol." This mean, that EC has been granted the "interpretation competence" (just like a ruling court, sometimes interpret and clarify law paragraphs), and hence the EC interpretations (which were later adopted by the Council, and is now reflected by the "interpretation chapters" in the EC convergence reports), is now the dejure applying criteria (which has been clarified a few times in the past). This is why, when reporting what these criteria actually mean, that we need to pay so close attention to the additional clarification paragraphs written in the official EC convergence reports. On top of this, both EC+ECB have multiple times confirmed they strictly subject their assessment criteria to an "equal treatment principle", which ensure that all assessments conducted throughout 1998-2014 were subjected to equally strict criteria. This mean, that each time the EC "adjust" their written interpretation, they need to make sure this adjustment also can be used retrospectively on all previously assessed cases, without rendering any different conclusions. As I have written earlier, the EC are entitled i.e. at a future point of time to publish a "clarification note" explaining, that "minimum 2yr ERM-membership ahead of assessment time" actually mean this "assessment time" should not be understood as the "publication date for the convergence report" but as the more lenient either: (A) "When the Ecofin council irrevocably fix the exchange rate and approve euro adoption" or (B) "Being the last day ahead of euro adoption, reflecting the principle that ECB in principle can cancel the euro adoption up until the last day of euro adoption - in case something very unexpected things happen". Both interpretation A+B would render the exact same results for all 29 previous ERM-membership length assessment cases, and are therefore possible at sometime in the future for the EC to print (if they like). Danish Expert (talk) 14:58, 13 September 2014 (UTC)
I'm sorry, but no. You refer to an article, which you chose to quote in small letters, and which describes a procedure: the Commission proposes, the European Parliament, the Economic and Financial Committee and the ECB are consulted, and if the Council decides, unanimously Protocol 13 is replaced with the new criteria proposed. Do you have any proof this has been done? Because I have the proof that I have not seen the text of Protocol 13 being replaced by any new criteria. Nor have I taken notice of the procedure described having been ever implemented. However, of course, if you find that it has happened so, I will accept it.
Then, you go on to say that this article gives the EC interpretation rights, much like a court has on a law. Excuse me, did you read the same article, the one that reads that others are consulted and finally the European Council has to decide unanimously? Reading such an article, I would think the real power of decision lies with the European Council... You make a hypothesis and then do not really prove it.
On the contrary, I take the realistic approach that the ECB and the EC made clarifications where needed, but on the exchange rate they have set stricter criteria on their own initiative which do not gain any justification from what the treaties say. Of course, you can find that the European Council has unanimously accepted these criteria and A. prove me wrong, B. prove that europa.eu has not taken notice of this change to protocol 13 (which has to be replaced with the new criteria) and, C. find exactly what the current legally binding criteria/rules are. Heracletus (talk) 22:40, 14 September 2014 (UTC)
@Heracletus: This will be my last reply about legality. Of course the EC is not a court. In my reply above, I just mentioned the EC interpretations in this field are identical "to when a court has interpretation power to figure out the meaning of a loose formulated law. Something which might be related to "Article 6" is the following exchange rate criterion note written in all EC convergence reports since 2004.
  • "In assessing compliance with the exchange rate criterion, the Commission examines whether the exchange rate has remained close to the ERM II central rate, while reasons for an appreciation may be taken into account, in accordance with the Common Statement on Acceding Countries and ERM2 by the Informal ECOFIN Council, Athens, 5 April 2003."
However, we now debate an issue, which is really not relevant by-it-self (whether or not its Article 6 or other articles granting the EC interpretation power). The main point here, is that the EC is responsible to assess compliance with the criteria and by so-doing have needed to interpret some of the criteria into additional details, which evolved into the establishment of a certain "assessment practice" which is getting more and more binding by-itself, because of existence of the overall requirement that all assessments shall respect the "equal treatment principle". The criteria can only be fundamentally changed, if all 28 EU Member States at some point of time unanimously agree about a new range of criteria (being adopted through a treaty change). Everything the EC did from 1998 straight up until now, has only been minor interpretation adjustments of the criteria, and they have published them all in their EC convergence reports under the headings "applied criteria" (following cites of the "protocol criteria"). So there is really no doubt, which one we should refer to here at Wikipedia, which of course should be the "applied criteria" rather than the exact wording of the protocol text. Danish Expert (talk) 21:32, 15 September 2014 (UTC)
You're responding to your own argument, which I tried to counter, by making it into another one. You claimed that EC has the power to extensively interpret the criteria, much like a court may interpret (or even annul) laws, which I took up as "Then, you go on to say that this article gives the EC interpretation rights, much like a court has on a law.", and now you're responding by "Of course the EC is not a court. In my reply above, I just mentioned the EC interpretations in this field are identical "to when a court has interpretation power to figure out the meaning of a loose formulated law." But, nobody claimed that the EC is a court. List of fallacies led to believe this is a red herring case of the straw man variant.
The Common Statement on Acceding Countries and ERM2 by the Informal ECOFIN Council, Athens, 5 April 2003 can be found here, on page 225, and seems a bit not too relevant to what we're discussing.
And, you continue by coming to a conclusion that seems irrelevant to me. First of all, you have NOT established that the EC can extensively interpret the criteria, so far as to introduce significant changes in them (narrower fluctuation bands) or new sub-criteria (no significant national interventions in order to remain within the fluctuation bands). Then, you go on to misrepresent art. 6 of prot. 13, which reads that there is a certain procedure to change - in any degree - the criteria, and qualify the changes made by the EC and ECB on the criteria as minor adjustments while they obviously are not (in 2000, Latvia would be compliant to the exchange rate criterion per the treaties, but was not found to be so based on the EC assessment). Furthermore, the current table fully conforms to the treaties, and the changes you want to introduce are exactly to make it resemble more the EC and ECB criteria changes. Therefore, the fundamental issue we should discuss is exactly this: "Which set of rules should we be using and representing conformity to here, the C1 found in the treaties, or the C2 revised by the EC?"
A clear example would be a member state with an annual fluctuation of +2.5, which we have to decide whether would lead into a red or a green table cell, as according to the treaties it would be within the +/- 15% fluctuation bands, but according to the EC and the ECB would be outside their +/- 2.25% fluctuation bands. The same of course holds true for the additional "severe tensions" sub-criteria and perhaps others. And, this is why I pinged @Danlaycock: on this issue, but he has refrained from commenting.
For example, are the exchange rate cells for Hungary and the UK correctly green, or they should be red? Answering this, leads to also answering which criteria to use, and thus also answers whether the severe tensions and unilateral devaluations should be introduced to the table. Heracletus (talk) 12:19, 16 September 2014 (UTC)
Personally I believe C1 would be better because we actually know what they are. As much as DE believes he has reverse engineered the EC implementation of the criteria, much of this is speculation. And on top of that, I (and the Czech National Bank) don't even believe that there are hard and fast rules which the EC implements. The better approach is to emphasize the treaty criteria, with notes to indicate the subtleties from the EC implementation. TDL (talk) 16:25, 16 September 2014 (UTC)
@Heracletus, TDL: Are you kidding? First of all, the categorization of two set of criteria's (C1 and C2) as suggested by Heracletus, is completely wrong. We only have one set of criteria (those formulated in the protocol text). These criteria has then been interpreted by EC+ECB in the exact same way on some of the loose minor corners, which they both present in their reports as "applied criteria". They never introduced any new criteria or introduced stricter exchange rate fluctuation bands to be respected (as claimed by Heracletus). This is false! On the contrary they have explicitly written over and over again, straight since 1998, that their check if the exchange rate had stayed within the +-2.25% band was only a part of the overall "severe tension" analysis - which potentially could indicate the presence of "severe tension" - emphasizing this analysis was dependent on observation of a hole set of other indicators in addition. They NEVER deviated from their previous interpretations throughout the years. Their interpretation was constant straight from 1998 to 2014. If you subject the "applied criteria" as written in 2014 retroactively it would produce the exact same assessment results, and Latvia would also (if their 2010 exchange rate behavior had taken place back in year 2000) been assessed non-compliant due to presence of "severe tensions". The European Commission only printed minor interpretation updates. When they did their first Convergence Report analysis back in 1998 for the currencies in ERM (with +-15% bands at that time also being in place around central rates), they still observed whether or not the exchange rate had stayed within a +-2.25% band, but as I have mentioned elsewhere in our debate they never took this as a separate criteria, but as info from 1 out 10 indicators being assessed as part of finding out whether or not "a severe tension" had existed. For 10 out of 29 assessments, they found values had indeed traded below -2.25%, but that this due to all other indicators being assessed did not constitute an event leading to conclusion of presence of "severe tension". The answer to the weird question posted above by Heracletus, is that neither UK/Hungary/Czech will be assessed for the presence of "severe tension" as none of them are ERM-members with a fixed central rate (so this part is impossible to assess for them). In case they would have been ERM-members, then they most likely would have been found not to suffer from "severe tension" despite of having exchange rate fluctuations in the -4% territory of their "central rates".
Heracletus has presented a false dilemma here. We really do not have C1 and C2. We only have C1, followed by interpretation of what C1 mean (the applied criteria) which in no way contradicts or changes how the criteria was formulated in the original protocol text, but just clarifies some of the minor interpretational uncertainties. On that note, I strongly recommend that our template shall reflect the applied criteria, as referenced and sourced by the EC convergence reports - and as reflected by the "updated template example" at the end of our debate. Danish Expert (talk) 17:25, 16 September 2014 (UTC)
Even if I assume everything else is correct from what you say, in 2000, Latvia was judged not to fulfil the exchange rate criterion on totally arbitrary factors, which are nowhere to be found in the treaties. Its fluctuation was from between -1 and +1 and all that was mentioned was that it intervened heavily to keep it within this band. This not only would not be a breach of the criterion, but is envisaged by the actual treaties as the "unlimited intervention" to keep the set exchange rate. This is said here. In general, the EC and the ECB have adopted stricter criteria which are not found in the treaties and they do acknowledge so themselves, when mentioning that the fluctuation band described in the treaties is +/- 15%. Let me here re-quote myself:
"Appendix D of the 2000 EC convergence report reads:
"A "standard" fluctuation band of ±15% has been established and this, in principle, corresponds to the "normal fluctuation margins" referred to in the Treaty."
and then goes on to establish its own criteria of converging within a +/- 2.25% fluctuation band, which simply do not adhere to the treaties giving EC and ECB the obligation to judge the degree of convergence. I understand and have explained the necessity of such an action as laying down stricter criteria, but that does not mean it is really legally sound. The same thing applies to basing the existence of severe tensions not only on the existence of a unilateral devaluation of the set central exchange rate, but also on potential large intervention to avoid a fluctuation that would cause such a devaluation. I am not a country and cannot complain to the EC or the ECB, but these rules are simply not in the treaties. Heracletus (talk) 10:50, 13 September 2014 (UTC)"
And, after quoting myself, I have to admit that the actual criteria being used are C2. However, they do seem totally arbitrary, as they led into a country whose currency fluctuated between +/-1% and which exactly intervened to keep it within this band, as envisaged by the treaties, which call for unlimited intervention to keep within the bands (and refer to the +/- 15% fluctuation bands), and which never even came close to the narrower bands of +/- 2.25% to be judged as not conforming with the criterion. Which seems absurd, because if Latvia had not intervened and the fluctuation was double, between +/- 2%, it would conform to the criterion either way. Unless, then, the EC noted that it did not intervene to keep its unilaterally set really narrow fluctuation band and thus did not conform to the criterion. Additionally, in the ECB report of 2000, I don't think it's mentioned that Latvia does not conform to the criterion.
So, my own conclusion is that we have a set of de jure criteria C1 and a set of stricter de facto criteria C2. C1 are clearly defined, while C2 are not so well defined, at least yet. For example, nobody knows what exactly may be interpreted as severe tensions by C2 and what won't. Therefore, although I don't like it too much, I think we have to somehow mention C2 more, as they are the ones being de facto used. However, as a final contribution, I don't see why the EDP column would have to change since it is a clearly noted criterion in both C1 and C2, and I would include the actual fluctuation in the severe tensions column, instead of the lowest one. However, as we're only 3 or 4, I don't intend my opinion to be used as a pretence of having reached some consensus one way or the other. In my mind, this is not an easy issue to address, as I cannot think of a good way to represent the "severe tensions", especially since exchange rate fluctuations were supposed to be the actual criterion according to the treaties. Heracletus (talk) 19:40, 16 September 2014 (UTC)
@Heracletus: I still maintain C2 is just a clarified version of C1. Your main objection seems to be, that they have written in the protocol that the exchange rate "should be observed within the normal fluctuation band of the exchange rate mechanism without severe tension", and then you argue this should mean that +-15% always shall be allowed within ERM2 no matter how other market circumstances appear - so if these +-15% are respected everything should be perfectly fine. The way EC+ECB interpreted it, however always since 1998, was that being part of ERM2 automatically meant you were found as a state to have respected the normal fluctuation band of the mechanism, and hence for the second part dedicated to check whether or not "severe tensions" took place, they subjected this analysis to observance of a wide range of indicators - of which breaching the -2.25% limit is only one (being argued as relevant to take into consideration because of the fact that the "normal fluctuation band of the exchange rate mechanism" was +-2.25% upon the time the original protocol text was written in 1991 and straight until August 1993). So their interpretation in no way contradicts the wording of the Protocol text, and did not at any point throughout 1998-2014 became stricter or more lenient by any sense. The Latvian 2010 example, where the EC judged them not to meet the exchange rate criterion due to presence of severe tensions (which originated from a 25% depletion of foreign exchange reserves + interest rate differentials rising to 30% + heavy balance of payment deterioration + payment by the EU of a multi-billion big tension-relieving balance of payment support package), is a clear proof of what I have been saying out loud all along. The two major parts of the exchange rate criterion throughout 1998-2014 has always been (1) Being an ERM-member for min.2yr + (2) Avoiding severe tension (as also noted by the Protocol text). Latvia was assessed in 2010 not to have "absence of severe tension", and in case they had been subject to the same analysis 10 years earlier the conclusion had been identical. The EC+ECB has just now fully interpreted and explained what will constitute a "severe tension" (and if the same type of "severe tension" events had happened 10 years earlier, these things would have been clarified already back then). The "severe tension" assessment is so complicated and very unsharply defined, that this is impossible to reflect by objective data or single criteria (because of being a set of intertwined indicators being judged together). Hence, this is why I proposed the main input values for this part of the assessment should be "No/Yes/NA", which can be sourced directly from the conclusions in the published EC convergence reports. I also emphasized, that we can never do these "severe tension" judgments ourselves, but solely needs to fill these data cells with the published written conclusions extracted from the EC convergence reports. So it will always be well sourced, when we do it like that. Plus it will not mislead readers to pay overly attention to at what territory the exchange rate traded throughout the assessment period - which is NOT the major part of this assessment (but only constitute around 25% of the "severe tension" analysis).
If we were completely to ignore the interpretation by EC+ECB of the criteria (which you proposed earlier today), then we can not list the reference values for HICP and interest rates at all, as these build upon the EC+ECB interpretation of the calculation formula and additional exclusion of "outliers" (which were not mentioned by the treaty/protocol text). So ignoring the EC+ECB interpretation just does not make any sense at all. For all historic convergence tables, the main purpose is also to reflect 1:1 the outcome of the convergence assessments as published by the EC Convergence Reports, so the decision to let our template reflect their criteria interpretation also makes perfectly sense from this point of view. Finally, the EC Convergence Reports are the primary (historically correct) source for the entire assessment, which is another strong argument for allowing our template solely to build upon their data and interpretations. For all these reasons, my proposed new template design makes fully sense. Danish Expert (talk) 20:56, 16 September 2014 (UTC)
The EC's interpretation isn't a "clarified" version of the treaty, it is a muddled version, which adds all kinds of undefined caveats and exemptions. They can't be clear because they have never actually systematically explained what they all are. At the moment all we have is "Danish Expert's interpretation of the European Commision's interpretation of the the treaty." But as I have said time and time again, observations of patterns does not imply an underlying rule. Given that your interpretation has been proven to be mistaken numerous times, we should avoid emphasizing unsupported interpretations of the EC's implementation.
"sustainable HICP" is just as hard to define as tensionless exchange rate", and we can not measure it ourselves either. I'm sure I could come up with a list of 10 different factors that go into it's assessment, and a percentage of the time that the HICP value is the deciding factor. But the HICP is still the important thing, and I don't see how readers would benefit from replacing the HICP rate with a yes/no "sustainable" box. TDL (talk) 22:06, 20 September 2014 (UTC)

Feedback on proposed changes

We should try to present this data in the most readable format:

  1. I think it makes perfect sense to add a "legal convergence" column.
  2. It looks better to keep both current exchange rate columns and use a note & color indicator if the criteria is not met due to depreciation of the central rate (which never happened) and/or severe tension (which happened once).
  3. I agree with eliminating the EDP column and using instead a color indicator and a note on the "Budget Deficit" column.
  4. The "objective" Budget Deficit criterion is based only on the last fiscal year. If this is not met due to "projected" GDP changes (which I think never happened) we should use a color indicator and a note.

Using the original numbering: 1-No,2-Yes,3-No,4-No,5-Yes. CultureArchitect (talk) 13:24, 8 September 2014 (UTC)

@CultureArchitect: As you can read from my reply above, I now also withdrawed the proposal for a separate "no devaluation of central rate" column, and on that point changed my position from a Yes to No. I would like to know, if your No opinion for point 3 can be changed to a yes, after reading my follow-up argument (listed in the below bullet-point) for keeping a "worst deficit figure for the 3yr assessment" while now retracting my previous call for data change in the debt-criteria column:
  • I now retract my proposal for the debt column to display the worst figure in the 3yr period, because, despite the fact that the "debt reduction benchmark rule" look at this 3yr window when analyzing if reductions of 60% differentials are sufficient - I forgot the essential point - that this debt reduction benchmark rule only comes into play if the state has breached the 60%-limit in the last fiscal year. So for the debt criterion we can fairly say, that it is indeed at the first part of the assessment solely based on the data from the "last fiscal year" (with only the yellow potential exemptions coming into play if "last fiscal year" is breached - and then only for the subsequent "exemption assessment" the forecast debt figures needs: either to meet the stipulated requirement in the "debt benchmark reduction rule" or otherwise the breached differential shall be deemed solely to exist from "excused events"). For the deficit criteria, the EDP rules however clearly states, that it needs to be respected both for the "last fiscal year" and the two forecast years: The Commission will always prepare a report under Article 126(3) of the Treaty when at least one of the conditions (a) or (b) below holds: (a) a reported or planned government deficit exceeds the reference value of 3% of GDP. So for the deficit criteria, it make sense that we also shall report the worst figure for the assessed 3-year period. The need to do this, is further emphasized by the fact, that the Commission in their EDP assessment recommendations confirm this is how they evaluate whether or not the state comply with the EDP deficit criteria, with no mercy granted towards states only complying with "last fiscal year" without the also required continued compliance for the "two forecast years", meaning an EDP will always be opened against them if this situation happen (and no exemption excuses exists). If you want a historic relevant example for this playing out, I can refer you to Denmark's EDP which was opened in July 2010 solely because of breaching the "EDB deficit limit" for its forecast figures (Denmarks debt was always below 60% of GDP, and our recorded EDP deficit for the last completed fiscal year was 2.7% in 2009, and subsequently recorded for the next two years to be 2.5 % of GDP in 2010, 1.9 % of GDP in 2011; so our EDP lasting from July 2010 until July 2014 solely originated from troubles with our "forecast deficits" not respecting the EDP deficit limits in due time ahead of the Commission's assessment - as it was forecast in May 2010 to reach respectively 5.5% and 4.9% in 2010+2011). So we indeed have historic examples for this playing out, which in my point of view emphasize the need we also should start to display the worst deficit for the 3yr assessment window in our convergence table. In addition, my argument also is, that our convergence table in all circumstances should inform all euro adoption applying states (plus readers), that this is how this particular EDP deficit criteria is being assessed, and hence it is best to let our table display the "worst deficit figure for the 3yr assessment window".
Finally, I also want to know if your opinion about my proposed point 4 has changed, after reading my newest in depth explaining reply about this issue (posted in the other section above)? Danish Expert (talk) 04:50, 9 September 2014 (UTC)

Note-proposal to explain why we don't list the additional assessment of "sufficient amount of overall sustainability decided by Additional Factors"

Another topic we have not touched upon yet, is that the EC write the following: "The assessment of additional factors (balance of payments, product and financial market integration) required by the Treaty, broadens the view on sustainability of convergence and allows for a more complete picture, complementing the quantitative criteria. In particular, a sound external competitiveness position, effectively functioning markets for goods and services and a robust financial system are key ingredients to ensure that the convergence process remains smooth and sustainable." However, the EC refrain to provide a summary conclusion for these "additional factor assessments" in their summary chapter, despite these summary chapters were supposed to tell all relevant conclusions for all relevant criteria checks. Their only conclusion line, is the beginning overall conclusion line, stating that after considering the legal criteria + economic criteria (HICP + EDP + interest rate + exchange rate stability) + Additional Factors, it concludes the state either complied/dis-complied overall for euro adoption. Hence, it can be extracted only for all states with 5 green lamps for the 5 overall criteria whether or not the EC found the "Additional Factors" to meet the extra requirement for "sufficient amount of overall sustainability". To be frank, its really a ridiculous way they treat this "additional requirement", as they neither have a specific criteria nor even bother to present their conclusion for "sustainability of additional factors" for all the states they assess. This is why I, when making my proposal for a new table layout, at first decided to ignore it (per the argument it had not been defined as a criteria and was not concluded on separately in the EC convergence reports). However, strictly speaking, despite this never happened during the past assessment history, in theory you could be deemed not to have met the conditions for euro adoption in a situation where you have an entire row of green lamps for the 5 overall criteria, but just fail to have "sufficient amount of overall sustainability" (measured by the Additional Factors). My proposal is, that we now shall handle this extra little challenge, just by placing a note at the very top of the table after the overall "Convergence criteria" link, to explain this particular phenomenon (a qualitative overall sustainability assessment) also exists in addition to the assessments of the other criteria assessments in the table. Can you support my "note"-proposal (which now can be inspected in full by the below "updated new version of the table") for this additional issue? Danish Expert (talk) 04:50, 9 September 2014 (UTC)

Updated new version of the convergence criteria table (reaching a compromise)

As this debate has been quiet long and extensive, I have now summarized how my update proposal look as per 9 September, after having retracted and adjusted some of the proposals during our debate. For the purpose of seeking a compromise, I also now met TDL's call to change the cut-off date for when ERM2-membership length is measured (from "euro adoption day" to "publication of assessment report") - and integrated the possibility for yellow ERM2-membership exemptions into the "yellow legend". As our previous debate proofed, all 29 times this previously was assessed (incl. all 6 previous exemptions), the 2yr requirement had been met both ahead of the "final council approving day - with irrevocable fix of the exchange rate" and "euro adoption day", plus we have several additional secondary sources (French central bank comment in 1998 + Polish ministry of Finance note in 2009 + ECB spokesperson in 2013 + formulation of ECB note on Lithuanias euro adoption in 2014) all assuming/implying that the EC's applied interpretation is equal to "2yr membership ahead of euro adoption day". For the sake of reaching a comprise, I however now give up this fight for now, and accept we implement this part of table according to TDL's exemption proposal. With all these changes implemented, the table now pop up as displayed below. Danish Expert (talk) 09:07, 9 September 2014 (UTC)

In addition, I now also adjusted the table to reflect TDL's compromise proposal for how we approach the EDP-info (posted in the above debate on 12 September, and accepted by me today on 14 September), introducing a small parenthesis beneath each figure which in text shall explain the applied color symbolics, meaning that we note respectively (No EDP) and (EDP) in addition to the fiscal figures, still being sourced on the same Commission/Council ruling status being visible one month after the Convergence Report was published (which btw is identical to the way EC judge its compliance with the criteria, which is proofed by their conditional approval of Slovakia in 2008 as a precedent case). Danish Expert (talk) 16:11, 14 September 2014 (UTC)
@Danlaycock: As an alternative to the (No EDP) and (EDP) notes in addition to the fiscal figures, we could perhaps also just add the note (exempted) for those figures breaching the limit but being exempted to the yellow color? This would result in some fewer parenthesis, so I now prefer this type of "exempted" parenthesis instead. But if you still prefer we list the EDP parenthesis instead (as displayed below), then its also OK with me. Danish Expert (talk) 18:38, 14 September 2014 (UTC)
I was thinking more along the lines of the snipit I posted below. This avoids the redundant double EDP note, emphasizes that EDP is the true criteria and debt/deficit are just indicators of convergence and whether an EDP will be launched, and follows the formatting of the header (EDP double column split into two for the debt/deficit.)
As for the rest of your response above, as I have explained to you time and time again, I'm well aware that there are many ways for "severe tensions" to exist. But that doesn't change the fact that it is the fluctuations that are the key thing. The criteria is to satisfy the exchange limits with no severe tensions. Yes there are many things that go into the determination of severe tensions, but only one of them is explicity mentioned in the treaty. Just like there are many ways for HICP not to be sustainable, but the HICP rate is still the key thing. The fluctuations are a useful illustration of convergence, not a hard and fast rule. Using a footnote for "severe tensions" still seems to be the most appropriate solution. If you don't accept this argument, then fine. But continuing to suggest that I don't understand your argument, and posting walls of text to try to re-explain it to me, is not going to accomplish anything. I have neither the time nor the motivation to continue to read the same thing over and over again, especially so when none of it actually addresses the points I've made. I'm really not sure what else there is for me to say about this. TDL (talk) 00:09, 15 September 2014 (UTC)
@TDL: Sorry about the length of my previous reply. But due to the complexity of the issue, I needed to reply in depth for the sake of posting a complete elaboration of my argument. I did certainly not enjoy it, as it takes me 10 times as long to write it, compared to what you use to read it. Before you get frustrated, please also consider I replied both to you and Heracletus at the same time, and needed to convince Heracletus that "absence of tension" was an intertwined issue depending on the outcome of multiple indicators. If my post did not change your opinion, then I have nothing more to say, other than we then perhaps will need other editors to chip in with their opinion (willing to spend the same analytical time you and I did, to digest and comprehend the issue before they reply), before you will ultimately change your mind into sharing my point of view. If I have understood your replies correct, you maintain that "lowest exchange rate fluctuation" is 80% of the severe tension analysis (just for the sake of giving an example), while I however argue its isolated weight in the analysis is limited to around 25-33% (based upon my actual reading of all 29 previous assessment cases). My biggest objection against the idea to award the main focus of the "exchange rate behvaiour column" to be "lowest fluctuation" is, as you also acknowledged, that EC does not treat it as a separate hard fast criteria (with a separate hard fast reference limit to be respected) but as part of the more complex "absence of severe tension" analysis. Latvia was the sole example of a "green state" (fluctuation wise) being judged red due to "severe tensions", but in addition we have around 10 out of 29 which were found to be "red states" (fluctuation wise) while however being judged green due to "absence of severe tensions". Italy having a -10% value for 6 months in 1998, is just one of the 10 times we had a: "Breaching of the lowest fluctuation limit but with the state being approved due to absence of severe tensions". This pretty much sums up the extend of our challenge.
  • For the sake of reaching a compromise now (and avoiding an additional heavy time consuming consultation round for this issue), I am however willing to accept, that we can keep the "lowest fluctuation value" as a small parenthesis and data input in the "Absence of severe tension" column. It would be incorrect of us (painting a wrong picture), if we were to color this cell with a yellow exemption color due to having entitled it "lowest fluctuation value (max. -2.25%)" - plus provide "symbolic problem" for the "2010 Latvian example" where we would need to explain a value within the limit suddenly is red. Readers would get pretty confused, if we did it like that. Moreover, as per the EC's applied assessment method, this "exchange rate behavior" column can only be either green or red - which solely depends on whether or not there was "absence of severe tension". They refrain from using the phrase "exemption" in their exchange rate stability assessments, and as I mentioned earlier, EC only listed the "lowest fluctuation values in 1998-2002 and then afterwards completely stopped to report them (which I btw also take as a clear sign they are not so highly important as you still believe they are). So in order to report these values post 2002, we would need to look them up separately in the ECB convergence report. Despite still being against even showing these values at all, I can however accept we keep them as a compromise (for the sake of moving us fast forward to the implementation phase), but only if it then happen as a small parenthesis input below the "No/Yes/NA" input-values (answering the main question if there was "absence of severe tension"). Therefore, I have now implemented the "lowest fluctuation parenthesis" as a compromise in the table below.
  • As for your EDP proposal, I apologize for misunderstanding it at first. My bad. Thanks for showing it as an example below. To be frank, I can accept all 3 EDP layout versions we have considered. Its only a question which one, we think look best and is most understandable for casual readers (incl. for the blind and color blind people). For this reason, I have now adopted your third proposal into the table below, and can also accept this one as a compromise. In case other readers want to chip in and flash their opinion if they perhaps prefer one of the other two alternative designs (that I first imagined yesterday) - I have now added them as alternative examples beneath the "Compromise table". It is no secret, that I still personally prefer the "Alternative EDP column design nr.2" only with "exemption parenthesis" for yellow values, as I think it provides sufficient clarity while also resulting in the best table layout. However, its not a major issue for me, so if you insist your proposed design (now implemented in the compromise table below) is the best one, then I can also accept this. :-)
With these two latest compromise adjustments made to the table, can you then accept we implement it as it appear now? Danish Expert (talk) 17:25, 15 September 2014 (UTC)
Why would readers get confused with a red cell for the exchange rate for the 2010 Latvian example? How is it any different than a red cell for a state with HICP<limit but that is unsustainable?
"Severe tensions in the exchange rate" is no different than "unsustainable HICP". We shouldn't treat one differently than the other. If we were to convert this table to "singular deciding factors" as measured by the EC as you wish, we would have 5 yes/no boxes, one for each EDP/sustainable inflation/interest rate/tensionless exchange rate/legal. I find that is quite uninformative. I think the current layout, where we list the indicators of convergence, is much more informative for readers. TDL (talk) 22:12, 20 September 2014 (UTC)
@TDL: Your claim that we would end up with 5 yes/no boxes for sustainability if my proposed "compromise table" gets implemented, is simply incorrect. The "compromise table" below has addressed and integrated all "singular deciding factors" (the rest is just indicators being part of something else). There are no additional hidden "singular deciding factors". In example, the "sustainability of interest rates" is not assessed as part of the compliance check with the "interest rate criterion" (which only is about whether or not the measured "interest rate value" respected the interest rate reference value). A finding of "unsustainable interest rate values" can in no circumstances render a green value red in this column. The sustainability of measured interest rate values is only assessed as part of the "overall sustainability assessment" together with the infamous "Additional Factors", which I already addressed and explained in the table by adding "note 1" after the "Convergence criteria" link.
In regards of our debate, whether or not its best for our "exchange rate behavior column" to feature the main title "severe tension" (with reference value NO/YES/NA) or "lowest fluctuation value" (with reference value being max. -2.25%), you can not compare it directly with the HICP column. Because for the HICP column we just do not have any yellow values (figures exceeding the reference limit but being approved by exemption), but only occasionally a green HICP value being rendered red if they find it was achieved by an "unsustainable way", and hence this column symbolics are much easier for readers to understand. Your observation is however valid, that it could be implemented in a similar way for the "exchange rate behavior column" - if it made any sense. My main point however is, that it does not make any sense. If you read through the conclusion summary of all 29 previous assessment cases, you will find that in 10 out of 10 times where a state had been found breaching the -2.25% limit this always ended with the Commission concluding it had fulfilled the exchange rate criterion - because it did not equal a case with existence of "severe tension". A conclusion of "in-compliant exchange rate behavior" was ruled exactly 0 out of 10 times when they observed fluctuation values below -2.25%. Meanwhile, they concluded for the +-1% fluctuations for Latvia in 2010, that this was equal to in-compliance due to existence of "severe tension". If you read the conclusion summary for all 29 previous assessment cases, you will find that they note whether or not they found existence of "severe tension" for the exchange rates - and refrain to note (at least for all reports published after 2002) whether or not the -2.25% limit was breached. If you combine this observation together with a re-read of Appendix D from the 2000 EC Convergence report, you will discover that the EC actually never claimed the -2.25% limit was a singular deciding criteria, but just one out of many indicators potentially indicating presence of "severe tension" which would be deemed leading to overall in-compliance with the exchange rate criterion. My previous "4 September reply" quoted all relevant cites in full, while the list below now repeat the 3 most important ones:
  • "A breach of the ±2.25% fluctuation margins against the median currency was not automatically classified as indicative of severe tensions. In assessing whether a breach of the margins corresponded to severe tensions, a range of elements was taken into account. These included: (i) the duration and amplitude of the deviation; (ii) the nature and extent of any policy response with particular reference to foreign exchange intervention and/or changes in short term interest rates and (iii) whether the pressure has been towards appreciation or depreciation of the currency. Indeed, a distinction was drawn between tensions in respecting the upper and lower margins, which was seen as corresponding, respectively, to relative strength and weakness of a currency. Given the implied linkage between severe tensions and devaluation in the wording of the Treaty, it was considered reasonable to exclude movements above the 2.25% margin against the median currency as a possible cause for non-fulfilment of the criterion. This interpretation was relevant in the case of the Irish pound, which had been far above the 2.25% range for most of the two-year assessment period."
  • "While the median currency approach no longer applies in the ERM II, a similar assessment of exchange rate stability can be made in the context of a fluctuation band of ±2.25% around a currency's central parity against the euro. (...). The "euro-based approach" would also imply that an appreciation/depreciation of 4.5% would be tolerated, although, once again, a breach of the band would not necessarily correspond to severe tensions but would be assessed by reference to the same range of elements as in the examination of 1998. As with the median-currency approach, a distinction would be drawn between movements above the 2.25% upper margin and movements below the 2.25% lower margin, with only the latter potentially indicating severe tensions within the ERM II."
  • "In summary, therefore, the conditions to be respected in fulfilling the exchange rate criterion would be as follows:
    (1) Participation in the ERM II at the time of the assessment is mandatory. Participation in the ERM/ERM II for at least two years is expected, although exchange rate stability during a period of non-participation before entering ERM/ERM II can be taken into account.
    (2) No downward realignment of the central parity either in the ERM or in the ERM II within the two-year examination period.
    (3) Exchange rate to have been maintained within a fluctuation band of ±2.25% around the currency's central parity against the median currency in the context of the ERM and against the euro in the context of the ERM2. However, the extent to which a breach of the ±2.25% fluctuation band would correspond to severe tensions would take account of a range of relevant considerations. A distinction is to be made between exchange rate movements above the 2.25% upper margin and movements below the 2.25% lower margin."
Moreover, when the EC in all of their published convergence reports during 1998-2014 concluded for each state, on potential compliance with the referred to "exchange rate stability criterion", they solely concluded for ERM-members whether or not the above (1)+(2) subcriteria was respected ("ERM-membership-length" and "no devaluation of central rate"), and in regards of the (3)-compliance: If there had been "absence of severe tension/pressures" throughout the backwards looking 2yr assesment period. They never directly paid attention to how low the lowest fluctuation value was in their assessment as a stand-alone criteria - but only took these observations into consideration as part of their overall assessment whether or not "a severe tension existed". Once again, the "lowest fluctuation" is just one out of many data indicators (used for the overall "severe tension" criteria assessment) and not a singular deciding criteria by itself. It is only "severe tension" that it is the true overall singular deciding criteria for the assessment whether or not the "exchange rate behavior" was considered to be stable enough. In my above "12 September reply", I explained why this approach also makes fully sense from a logical point of view, because of the co-existence of 5 overall equally strong stability factors having a direct influence on how wild the exchange rate will fluctuate at the market (i.e. if the central bank hike up short-term interest rates this will have a direct increasing effect on the traded exchange rate, and so will "support buying local currency with the central banks foreign currency reserve" plus the grant of tension relieving "stability loans"). Therefor it makes fully sense also to take these additional indicators into consideration, before you hand out the final judgment whether or not severe tension existed. Not only does it make sense, but it is also exactly how the EC approach this assessment, which you can find proofed by reading the conclusion for all the previous 29 assessment cases.
To sum up, the above paragraph is why I strongly recommended the column should be renamed to "Severe tension" with the approving reference value being "No". Doing it the other way around (as you have initially proposed), would be incorrect from the point of view, that the EC does not treat the "lowest fluctuation value" as an important singular deciding subcriteria, but only treat it as one out of many indicators as part of the assessment to find out if a "severe tension" existed. Readers would be confused if we present this "lowest fluctuation value" as the major deciding value for the column, because its not - and was never meant to be. If we implement it as the below "compromise table" display it, then we would avoid using yellow exemption colors for the 10 out of 10 assessment cases where the -2.25% limit had been breached. This would also be more correct if we want to reflect the actual assessment approach, as the EC never explicit left any comment that they exempted breaches of the -2.25% limit, but just took note overall if their had been "absence of severe tensions".
For these above reasons, I really think its a reasonable call when I ask you to accept the below proposed compromise, where we turn No/Yes/NA input-values into the main criteria for the column - while still keeping a small parenthesis to show the "lowest fluctuation value". In that way we do not completely throw it out (as refused by you), while we however at the same time do not treat it as "a singular deciding criteria" which it is not (as argued and required by me). Another point you should remember to take into consideration, is that these "exchange rate behavior" colors will be grey for all non-ERM members, as none of them have a bilaterally fixed central rate to measure up against, and for this reason the EC refrain to assess whether or not they experienced "severe tension" (because this can not be assessed in absence of a bilaterally fixed ERM central rate). I am aware that the ECB for non-ERM members without bilaterally fixed central rates, solely for illustrative purposes, noted the daily max+min. deviations throughout the 2yr assessment period as being the calculated distance from the state's "average exchange rate in the first month of the assessment period". However, I can only accept we keep displaying such values in the table, if it happen in the below "lowest fluctuation value parenthesis" with the color overall being GREY because of "no assessment of severe tensions". Again this is because, the true assessment of these states will always be "GREY", because nobody knows if the artificially chosen central rate (selected only for illustrative purposes as the average of the first month of the assessment period), is close/far from being the correct one. In most cases this is a complete shot in the dark (i.e. it could both be 10% too high in that arbitrarily chosen month, or 10% too low), and this is why the "lowest fluctuation values" in all circumstances only can be listed for "illustrative no assessment purposes" for these no-ERM states. Again, the proposed approach to color the "exchange rate behavior" grey for all non-ERM members with a NA input-value, would also be identical to how the EC approaches this assessment, where they refrain to do these concluding assessments towards all no-ERM states.
Based on all above argumentation, I hope you are now ready to finally approve the below "compromise table". It has not been developed on basis of random thoughts or careless personal believes. It was developed while taking care accurately to reflect how the EC has presented their "interpretation of how the 5 criteria shall be assessed" (according to Appendix D of the 2000 EC Convergence report for the exchange rate criterion in particular, but also according to the 10 page long "introduction chapter" in the 2014 EC Convergence report), in combination with a careful read of all summary assessment conclusions published in their reports throughout 1998-2014 confirming that what they had described would be assessed in certain ways, indeed also was assessed in exactly those certain ways. On that note, I hope you can now approve the significantly improved "compromise table" below, so that we can move on to the long awaited implementation phase. Danish Expert (talk) 17:16, 21 September 2014 (UTC)
No, I'm not ready to accept that for the multitude of reasons that I have repeatedly explained to you above. I'm not going waste my time repeating my arguments, but by the magic of wiki they are still all available above if you would like to re-read them. But briefly, your theory of "singular deciding factors" is quite simply the product of your imagination. As I have explained to you above, HICP rate is not a "singular deciding factor". States can fail the inflation criteria even if they are below the limit. See for example the 2012 report for the Czech Republic. Their HICP rate was 2.7%, well below the limit of 3.1%. And yet the EC concluded that "The Czech Republic does not fulfil the criterion on price stability." Thus it is very, very clear that it is the "sustainable inflation" that is the "true" criteria. The HICP rate is but one of a numerous factors that go into determining "sustainable inflation". Thus a yes/no "sustainable inflation" box is the only way to reflect this to be consistent with your proposal to repurpose this table into "singular deciding factors". It is no different than "severe tensions". You have not offered any credible explanation for why they are different, and why we should treat them differently. By your logic it would be "incorrect" to give the HICP rate, and would "mislead" readers into thinking that the HICP rate was the "singular deciding factor" when clearly it is but one of many factors that go into the inflation criteria. Turning the table into a bunch of yes/no boxes with no data is not helpful to readers.
I hope that you are finally ready to accept that your proposal is unacceptable to numerous editors for numerous legitimate reasons. Posting walls of text which ignore the points that have been made while repeating the same things over and over again is not going to change anyones mind. Given that this discussion is just going in circles, I don't see any point in continuing it. TDL (talk) 04:26, 26 September 2014 (UTC)
@TDL Please dont twist my latest "21 September" reply into saying something that it did not! We have agreed now for almost 1 month, that the HICP criteria comprised two separate assessments: (1) Did the state respect the HICP reference value?, (2) Was this respectful HICP value obtained in a "sustainable way"?. Only when the answer both to (1)+(2) is YES, then this render approval with the HICP criterion. Beside of your above 2012 Czech example, I also in my earlier reply confirmed 2008 Poland was an example of this. Why do you want now suddenly to discuss something we perfectly agree on (and also has been adopted by the below compromise table)??? My point in the above "21 September" reply was, that the EC do not perform direct additional sustainability checks for "Fiscal criteria"+"Interest rate criteria", and this is why we wont end up with any sustainability boxes for them.
I also really think you should reconsider your opinion about whether or not you stand ready to approve the "compromise table". My proposed "severe tension" column really deserves approval, because your argument that we instead should treat the so-called "-2.25% limit" equally in the same way as the HICP reference value is in direct conflict compared to how ECB+EC treat this subindicator (only being one of the underlying indicators forming a part of the "severe tension" assessment). First of all, neither ECB nor EC has ever described the "-2.25% limit" as a "reference value". For the second, among all of the previous 29 assessment cases there was never just one of them where a breach of the so-called "-2.25% limit" led to the EC concluding incompliance with the exchange rate criterion. Instead they focused their "exchange rate criterion" compliance check solely to be about (1) ERM-membership for min.2yr + (2) Absence of severe tension. Based on this, and based on the fact that you can not deliver proof EC ever treated the so-called "-2.25%-limit" as a "reference value", then my below compromise proposal for the transformation of the "lowest fluctuation value" column into a new "Severe tension" column (where the lowest fluctuation value is still mentioned in parenthesis), makes perfect sense.
Finally, I also have to remind you, that we have absolutely no consensus for continued display of the template as it is currently displayed at our Wikipedia articles. To reflect this, I will soon revert it back to its old 2013-layout, which I do not like either - but this will be better to display at least until we implement the new "compromise table". My arguments for why we should implement the below significantly approved compromise table instead, has been really sound (with the overall focus to let it reflect as accurate as possible how the EC handle these euro convergence assessments), and so far you or nobody else succeeded to post arguments why the layout of the below "compromise table" would be a "bad idea". I am still listening, if you have any valid argued objections. If none of these are presented, we should really start implement the below compromise table (as it without any doubt will be hugely appreciated by the vast majority of readers). Best regards, Danish Expert (talk) 09:27, 26 September 2014 (UTC)
And I really think you should reconsider you opinion on whether you are ready to approve my "compromise table". My compromise "fluctuations" column really does deserve your approval. No doubt the vast majority of readers would very much appreciate this change. You have not succeeded in posting any arguments on why the current table is a "bad idea", but if you have a valid objection to the current layout then I'd be happy to listen to them. See: your silly rhetoric works just as well both ways!
Three editors have supported showing the fluctuations in the table, while you alone object. All three of us have made very sound arguments on why this should be done, so for you to suggest that "you or nobody else succeeded to post arguments why the layout of the below "compromise table" would be a "bad idea"" just illustrates that you have not WP:LISTENed to these arguments. I believe that there is a pretty clear WP:Rough consensus here to include the fluctuations column, but if you disagree with that we can ask an uninvolved admin to assess the level of consensus. TDL (talk) 20:06, 26 September 2014 (UTC)
@TDL: During our debate, I listened to all concerns. This is why the below "compromise table" evolved from the first posted at the very beginning (top) of our debate, in order to address those concerns revealed by our debate to be valid. I can see that you a few hours after having delivered the above emotional reply, now have started to adopt all columns of the below compromise table - except for the "exchange rate behavior" column. This however do not mean, that we have any form of consensus for your "exchange rate column" added to the currently displayed template on 5 July 2014, and neither any consensus support for your resent idea to change the reference value for the fluctuation column from +-15% to -2.25%. Nor can you claim consensus has been established to reject my proposed "severe tension" compromise column (posted below in late September).
First of all, according to WP:CONSENSUS, you never count the number of voting supporters for a certain view to decide what the consensus should be, but you measure the strength of their posted arguments when deciding which view came out strongest to win consensus. For the second, you count like the devil. Heracletus always (like me) opposed -2.25% should be introduced as a deciding reference value. In his last reply from "16 september", Heracletus replied: Nobody knows what exactly may be interpreted as severe tensions by C2 and what won't. Therefore, although I don't like it too much, I think we have to somehow mention C2 more, as they are the ones being de facto used.(...). I would include the actual fluctuation in the severe tensions column, instead of the lowest one. However, as we're only 3 or 4, I don't intend my opinion to be used as a pretence of having reached some consensus one way or the other. Based on the reply from Heracletus, and your very strong resistance towards completely kicking out the fluctuation values, I then as a compromise obeyed to the call by Heracletus to "keep display fluctuation values in the "severe tensions column", as I adjusted the design now to show this in parenthesis. It is simply incorrect if you read the reply from Heracletus, as an editor who submitted a clear consensus qualifying support to your proposal of turning the "exchange rate behavior column" into being entitled "Lowest fluctuation value" that shall operate with a -2.25% reference limit. In regards of the posted opinion by CultureArchitect, he submitted this on 8 September, at a point of time where the argumentation against why it was a bad idea to do it like this, had not yet been fully presented; in fact I asked for the same reason this editor to return with a post to flash if the presented argumentation had caused any changed opinion on this concern. In absence of reply, its is incorrect when you count his old reply as a support for your counter proposal (as the negative consequences of this proposal had not yet been fully presented at the point of time he submitted his first opinion).
Bottom line is, that when evaluating into which direction the Consensus now points, we have 1 (me) expressing a clear unreserved opinion that "it only make sense to keep the lowest fluctuation value in the severe tension column, if this happen as a parenthesis where the values are not having any direct influence on the color of the column, meaning it shall only be presented as additional info where the color deciding factor solely is the input-value NO/YES/NA if severe tension had been ruled by the European Commission for the past 2yr period." Towards this reasonable call, we have 1 (you) who firmly reject this well-argued proposal, while insisting the column instead should be renamed to "Lowest fluctuation value" that shall operate color-wise with a -2.25% reference limit. In our debate, you have failed directly to respond to my explained concerns, which outlined the clear reasons why your counter-proposal was a bad idea. For the sake of keeping it clear, here you have the 5 reasons again:
  1. EC never explicit claimed or noted "-2.25% flucutation" to be a "Reference value" in any of their past Convergence Reports.
  2. EC on the contrary described in their Appendix D interpretation note of the 2000 EC convergence report (and repeated this stance in all subsequently published convergence reports), that the "-2.25% fluctuation check" was part of a complicated overall "severe tension analysis" with many other indicators having influence on the ruling as well.
  3. When comparing how EC judged the "exchange rate behavior" in all 29 previous assessment cases, they stopped noting whether or not the -2.25% limit had been crossed ever since 2002, and for all 10 out of 10 assessment cases found with exchange rate values below -2.25% they each time concluded "this did not equal presence of severe tension when considering all relevant indicators - and hence the states were found to comply with the exchange rate criterion".
  4. Latvia's assessment in 2010 was a clear example that the "deciding reference value" for "exchange rate behavior" is "absence of severe tension", as this state had +-1% fluctuation but still was ruled incompliant with the exchange rate criterion due to presence of severe tension.
  5. For all states not being ERM-members, it does not make any sense to draw "exchange rate behavior" conclusions based on their measured "relative lowest fluctuation value" compared to their "average exchange rate in an arbitrarily picked month". The EC explicit admitted this in their convergence report, and underlined this is why these fluctuation deviations noted for non-ERM members with absence of a bilaterally agreed central rate, was only published for illustrative purposes measured against their "average exchange rate in the first month of the assessment period", and therefor this info would not be used to draw any "exchange rate behavior conclusions". In fact this is also the reason why the Commission completely refrain to conclude whether or not "severe tension" existed for all these non-ERM member states. Because its basically impossible to conclude anything in this regard, before they become ERM-members and have a bilaterally agreed central rate to measure up against (and not a constantly moving central rate, which nobody really knows the true equilibrium position of).
While I agree with you, that concern 4 in theory could be addressed by your counter-proposed idea, that we in parenthesis could note whether or not there was presence of severe tension beneath each "lowest fluctuation value", all the other concerns 1+2+3+5 would still not be solved. On the contrary, the compromise column I have proposed, meet the call from both you and Heracletus to keep fluctuation values listed, while we ensure that all of my 5 concerns still are addressed - as we do not let the display of these "fluctuation values" have direct deciding influence of the color of the "severe tension" column (but only treat it as additional info). This is why, I keep insisting its a reasonable compromise, now to implement the "severe tension" column as displayed by the below compromise table. Danish Expert (talk) 08:41, 27 September 2014 (UTC)
No, I don't "count like the devil", but you certainly do read like the devil. My argument above was that there was no consensus for you to remove the current fluctuations column, as you threatened to do, if you can't get your way to change it to a "lowest fluctuation" column, because all editors but you have made very strong and well supported arguments in favour of showing this data. Never did I suggest there was a consensus for my version of the "compromise table" fluctuation column (hence why I did not implement it yesterday, I specifically only implemented the non-controversial changes on which we had reached a consensus). Never did I suggest that the column should be renamed "Lowest fluctuation value". Never did I suggest that Heracletus supported converting to a 2.25% limit. Never did I suggest that CultureArchitect supported converting to a 2.25% limit. In fact, I'm quite OK with keeping it at 15% as Heracletus has argued.
All of your points listed above have been thoroughly and repeatedly refuted by a several editors above. If you really honestly believe that I "have failed directly to respond to my explained concerns" then I suggest re-reading the discussion above as this claim is quite simply laughable. This discussion is 250kb large: you have received plenty of responses. I have listened very carefully to you throughout this debate and tried very hard to propose a number of different compromises to address your concerns. But I don't have the time or motivation to repeat the same argument with you for an umpteenth time. Evidently no one else does either, as I am the only one responding to you at this point. TDL (talk) 20:51, 27 September 2014 (UTC)
@TDL: Please stop twist and derail the debate. Please filter away your non-appropriate emotional element of your replies to me. If you stop doing these nonconstructive things, the debate would be much easier, would not scare away other editors away from posting their opinion, and we would avoid anyone deciding to pull the plug for a year without contributing to the articles just because of being treated ridiculous disrespectful by another editor. Anyone reading our debate from top to bottom (which I by the way did a total of 6 times now), will realize you pushed for the "exchange rate behavior" column to adopt and operate a "-2.25% reference limit", while I always argued it should not be treated as a "Reference limit", because it was not a singular deciding criteria and instead only had status as being one out of many indicators forming the "severe tension" judgment. Now you have suddenly changed your opinion after reading my latest reply, which I welcome, and acknowledged -2.25% is not treated as a reference value by the EC.
You now instead propose we shall list the "exchange rate behavior" column with a "reference value" to be +-15%. If we do this with the add of a (NO/YES/NA) severe tension parenthesis beneath each value (which you earlier in the debate indicated you would be willing to support on my request), then I admit this would indeed solve my above concern 1+2+3+4. If you accept, that the color of the "exchange rate behavior" column shall be decided solely by the "severe tension" parenthesis rather than "fluctuation values", then my concern 5 will also be met. However, if you require the color only shall display if fluctuations stayed within +-15%, then it continue to conflict with my concern 4+5. Point here is, that the EC can not conclude any meaningful on "exchange rate behavior" for all non ERM-members, because they did not implement a bilaterally agreed equilibrium central rate to measure up against. For the same reason, the EC write explicit in all of their convergence reports, that fluctuation changes and exchange rate market developments for these non ERM-member states, has only been noted in the report for "illustrative purposes" - and wont be used to draw any conclusions on the subject of convergence for their "exchange rate behavior". In fact they have this cited key line noted in the introduction chapter of all reports:
  • "As in previous reports, the assessment of this criterion verifies the participation in ERM II and examines exchange rate behaviour within the mechanism."
This pretty much proofs the case, that "exchange rate behavior" is not assessed and concluded on, for all states not being members of the mechanism. When I was reading through all previous assessment cases for the states' compliance with the exchange rate criterion, I also found the EC indeed stick to this decision, as they for all non-ERM-members refrain to publish the overall "exchange rate behavior" conclusion, whether or not these states suffered from existence of a "severe tension". This mean, that it likewise will be illusive and incorrect, if we for all non-ERM-members start to show a green color for "exchange rate fluctuations" based on our own invented "+-15% reference value" applying for states outside the ERM. If we however display the "exchange rate behavior" data in the way, as I have argued straight from the beginning: "Only to let the color of the column depend on the "severe tension" input-values, where all non-ERM-members will get the value NA and be colored grey", then it would be correct when compared to how EC actually carry out this assessment in their convergence reports. Based on those clear reasons and arguments, can you accept we now start doing it like that? If yes, wouldn't it then also be more logical and more comprehensible for readers, if we also start entitle the "exchange rate behavior" column with the new title "severe tension" along with the "reference value" NO (while we then can still continue listing the exchange rate fluctuations in a parenthesis of the same column for all states, but only for illustrative purposes without having color-deciding influence)? Best regards, Danish Expert (talk) 06:50, 28 September 2014 (UTC)
My position is that we should go by the actual assessment criteria (as set by ECB/EC), although the ones set out in the treaties are better defined. It is obvious that there is no point in assessing convergence here by different criteria than the ones that are actually used. However, the criteria actually used are a bit bogus, which makes Danish Expert's proposal not look too good. This yes/no/NA is not too informative. Nevertheless, it is not certain if the fluctuation band limits are a dominant sub-criterion, so, we cannot have only them. Including however, only a lowest fluctuation is quite silly, as it will mostly be 0.0, and as I am not certain if that is mentioned in the reports for every country every year. Therefore, although I think I now understand the situation and the arguments of both of you, the ambiguity of the actual criteria does not allow me to support an exact position. I would go for changing the table, as it should reflect the ECB/EC criteria, but have not yet identified a proper way to do this. Therefore, and as we're only 3-4 people talking here, I do not think there's a clear consensus either way (yet). I am also puzzled to some degree as to why you don't also identify this.
For example, it's clear that the +/- 15% fluctuation bands are not used as a sub-criterion, but rather any potential crossing of -2,5% is considered as an indicator for "severe tensions". On the other hand, even going between -1% and +1% and using some currency reserves to stabilise the movement is considered as a deviation from convergence. Therefore, it may not be possible to propose a good solution for representing what one could call as EC's whims. For example, in the "compromise" table, Latvia in 2000 would be a severe tensions "yes" without a devaluation and a lowest fluctuation of -1%, which is a bit ...weird, not to call it otherwise.
I come to think that perhaps keeping the annual fluctuation as a column would give normal people a better view of how much convergence there has been achieved, even though it's not being used as an actual (sub)criterion, while also having a plain "severe tensions" (without any subcriterions) could indicate if there's convergence by the de facto criteria. Accordingly perhaps, we could keep the annual fluctuation column without a colour or somehow signify it's not a criterion per se, but rather what a normal person would use to judge convergence. But, I also don't see this as an optimal solution, but rather as a make-do one. Heracletus (talk) 19:39, 29 September 2014 (UTC)
@DE: Seriously? Your whole objection is to the 2.25% limit rather than the 15% limit? Why didn't you just say so? And when did this change? You previously said that: "TDL implemented his own invented reference limit being +-15% ... So it has nothing to do with the assessment criteria itself" and proceeded to argue that 2.25% is what the EC used. That you have seemingly suddenly changed your position on this is quite surprising to me. Though you claim otherwise, I certainly never "pushed" for a 2.25% limit. I proposed it as a compromise because you called the 15% limit "invented". I though I had made it very clear here that this proposal was designed as a compromise to address your concerns, not something that I was insistent upon. And I was always working under the assumption that cells would be coloured green based on the presence/absence of "severe tensions", not a breech of the limit. I can accept leaving it grey (or some other colour) for non-ERM states. But I think a title of "Fluctuations in rate" or something similar is the simplest and is all encompassing, since it is "severe tensions" in the fluctuations that we are speaking of. Personally, I think 2.25% would probably be a better choice, since that seems to be what the EC actually uses, but since it would have no impact on colouring it really isn't a big deal. It's really just an argument over what we put in the header (ie "max. ±15%"). I'll accept either, though I am quite curious why you now insist on 15%.
This is an excellent illustration of the communication issues that your massive walls of text create. Perhaps you did say that you no longer opposed the 15% limit somewhere above and I just missed it in the all the verbosity. It is a lot of work trying to read your posts due to their length and your quite awkward use of English. Especially so since the vast majority of your responses are dedicated to refuting points that have never actually been made, due to your miscomprehension of the points made by others.
I'm sorry that you find it to be "ridiculous disrespectful" when people point out the flaws in your argument, but quite honestly I find your repeated erroneous claims about what I have said to be very disrespectful. If you disagree with my argument, then fine. Reasonable people can disagree. But when you say things like "you or nobody else succeeded to post arguments why the layout of the below "compromise table" would be a "bad idea"", when there have been dozens of posts explaining just this, it is entirely impossible to have a debate with you. If you won't even acknowledge that an argument has been made, how can we have a debate? If you want to have more successful communication you need to a) listen to objections when people raise them and b) be concise and c) learn to step back and let others have their say. Responding to every post with a 15kB rebuttal reiterating your points, even if you have a good point, just derails the conversation. No one is going to jump into this conversation because of that. It has nothing to do with me "scaring away" other editors. I'm not saying this to criticize you, you generally do make good contributions to the encyclopedia, but it's an attempt to try to avoid future problems. TDL (talk) 21:10, 29 September 2014 (UTC)


Convergence criteria [nb 1] (valid for June 2014)
Country HICP inflation
rate[1][nb 2] 		Excessive Deficit Procedure[12] Exchange rate Long-term
interest rate[3][nb 3] 		Legal compliance of
law and statutes[6]
Budget deficit to GDP[7] Debt-to-GDP ratio[7] ERM II member[5] Severe tensions[6]
Reference values max. 1.7%[nb 4][nb 5]
(May 2013-April 2014) 		max. 3.0%[nb 6]
(worst deficit in 2013-15) 		max. 60%
(in 2013) 		min. 2 years
(as of 4 June 2014) 		No[nb 7]
(May 2013-April 2014) 		max. 6.2%[nb 4][nb 8]
(May 2013-April 2014) 		Yes
(as of 4 June 2014)
 Lithuania 0.6%
(Sustainable) 		No EDP 10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
2.2% 39.4%
Example of
a mixed
EDP breach 		0.6%
(Sustainable) 		EDP 10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
3.3% 130.2%
Example of
a double
EDP breach 		0.6%
(Sustainable) 		EDP 10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
3.3% 130.2%
Example of
a double
EDP exemption 		0.6%
(Sustainable) 		No EDP 10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
3.3% 130.2%
 Lithuania 0.6%
(Sustainable) 		No EDP 10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
2.2% 39.4%
  Criterion fulfilled by exemption: If the budget deficit exceeds the 3% limit, but is "close" to this value (the European Commission has deemed 3.5% to be close by in the past),[15] then the criteria can still potentially be fulfilled if either the deficits in the previous two years are significantly declining towards the 3% limit, or if the excessive deficit is the result of exceptional circumstances which are temporary in nature (i.e. one-off expenditures triggered by a significant economic downturn, or by the implementation of economic reforms that are expected to deliver a significant positive impact on the government's future fiscal budgets).[9][10] In addition debt-to-GDP ratios exceeding 60% can also be exempted, if the ratio either have a declining trend as per the new "debt benchmark reduction" rule or alternatively solely has been caused by certain exceptional debt rising circumstances.[16] As it is only the European Commission who can recommend the Council to rule "exemptions to exist" as part of their official EDP decisions, these yellow exemption colors can not be known/predicted for state's not being part of the European Union (whereas all colors consequently will be colored red for them, if they exceed the limits). Finally, the European Commission are also entitled to rule "criterion fulfilled by exemption", for states being "close to" comply with the formal requirement of "minimum 2 years of ERM2-membership ahead of assessment time".
0
Notes
  1. ^ A qualitative overall sustainability assessment of "Additional Factors" also exists in addition to the regular criteria assessments displayed by this table. This mean, that in theory a state could be deemed not to have met the conditions for euro adoption, even in a situation where it complied with all criteria in the table, if it failed to deliver a qualitative "sufficient amount of overall sustainability" measured by the Additional Factors. The European Commission refrain to conclude whether or not the "Additional Factors" overall has been assessed to deliver "sufficient amount of overall sustainability" until the point of time when the state managed to reach a full compliance with all other criteria in the table. The Additional Factors comprise: (1) Balance of payments developments assessed through observation of the "situation and development of the external balance (the combined current and capital account)", (2) Product market integration ("assessed through trade, foreign direct investment and a smooth functioning of the internal market"), (3) Financial market integration (the main characteristics, structures and trends of the financial sector, compliance with the EU acquis on financial markets, and impact of the 2008 financial crisis), (4) "Development of Unit Labour Costs and other price indices" (which however is already assessed as part of the sustainability assessment of the HICP criteria), (5) Since 2012 the "results of the surveillance of macroeconomic imbalances under the Macroeconomic Imbalance Procedure" has also been integrated into being part of the assessment.
  2. ^ The 12-months average for the annual HICP inflation rate must be no more than 1.5% larger than the unweighted arithmetic average of the similar HICP inflation rates in the 3 EU member states with the lowest HICP inflation. If any of these 3 states have a HICP rate "significantly below" the similarly averaged HICP rate for the eurozone (values being at least 1.4% below were found to meet this requirement in previous EC reports),[6] and if this low HICP rate has been primarily caused by exceptional circumstances (i.e. severe wage cuts or a strong recession), then such a state is not included in the calculation of the reference value and is replaced by the EU state with the fourth lowest HICP rate. In addition to the backwards-looking quantitative compliance with the HICP reference value, each state is also required to have achieved this compliance in a sustainable way, which the European Commission perform a separate assessment for, by checking if "the country is likely also to meet the HICP reference value in the months ahead". The parenthesis behind each figure in the table list the classification "sustainable" (when the answer was yes) and "unsustainable" (when the answer was no), with the latter event leading to overall dis-compliance with the HICP criteria.
  3. ^ The annual average for the yield of 10-year government bonds must be no more than 2.0% larger than the unweighted arithmetic average of the bond yields in the 3 EU member states selected for the calculation of the HICP reference value. If any of these states have bond yields which are "significantly larger" than the similarly averaged yield for the eurozone ("significant larger" has not been quantified, but Ireland was judged to be "significant larger" when it posted a 4.71% differential in March 2012) and at the same time does not have complete funding access to financial markets by the last day of the 2-year assessment period (which will be the case for as long as a country is unable to issue new government bonds with 10-year maturity - instead being dependent on disbursements from a sovereign state bailout programme), then such a country will not be included in the calculation of the reference value - leaving it to be calculated as the average of fewer than three states.[13][14]
  4. ^ a b The reference values for HICP inflation and long-term interest rates are calculated based on the "calculation principle" outlined in the 2014 EC Convergence Report,[6] with the input of forecasted data for the sliding assessment year 1 May 2013 - 30 April 2014.
  5. ^ The 3 best performing countries in regards to HICP inflation were Latvia (0.1%), Portugal (0.3%) and Ireland (0.3%). The inflation rates of Greece, Bulgaria and Cyprus (-1.2%, -0.8% and -0.4%, respectively) were found to be "outliers", and thus excluded from the calculation of the reference value.[6]
  6. ^ The value displayed in the table is the worst annual deficit during the 3-year assessment window, which comprise the last recorded fiscal year and forecast data for the upcoming two years. This data value has been extracted from the European Commission's Spring 2014 Economic Forecast report, and needs to stay within the 3% limit in all 3 years - or alternatively be granted exempted compliance by the European Commission (as noted by the tables yellow legend) - in order to avoid the existence of a deficit criteria breached EDP.[7]
  7. ^ Compliance with absence of severe tensions, is something the European Commission test for, based on a complex evaluation of a wide range of data values. No objective single data can predict the outcome of this assessment. The assessment is only conducted for states, that already fulfill the first ERM2 membership subcriteria, while no conclusions are noted for all other states. As part of the no severe tension assessment, the state is required to have experienced No devaluation of its central rate throughout the 2-year assessment period.
  8. ^ The three best performing countries in terms of price stability were subject to an interest rate of 3.3% (Latvia), 3.5% (Ireland) and 5.8% (Portugal).[6]
0
Alternative EDP column design nr.1
Convergence criteria [nb 1] (valid for June 2014)
Country HICP inflation
rate[1][nb 2] 		Excessive Deficit Procedure[17] Exchange rate Long-term
interest rate[3][nb 3] 		Legal compliance of
law and statutes[6]
Budget deficit to GDP[7] Debt-to-GDP ratio[7] ERM II member[5] Severe tensions[6]
Reference values max. 1.7%[nb 4][nb 5]
(May 2013-April 2014) 		max. 3.0%[nb 6]
(worst deficit in 2013-15) 		max. 60%
(in 2013) 		min. 2 years
(as of 4 June 2014) 		No[nb 7]
(May 2013-April 2014) 		max. 6.2%[nb 4][nb 8]
(May 2013-April 2014) 		Yes
(as of 4 June 2014)
 Lithuania 0.6%
(Sustainable) 		2.2%
(No EDP) 		39.4%
(No EDP) 		10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
Example of
a mixed
EDP breach 		0.6%
(Sustainable) 		3.3%
(EDP) 		130.2%
(No EDP) 		10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
Example of
a double
EDP breach 		0.6%
(Sustainable) 		3.3%
(EDP) 		130.2%
(EDP) 		10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
Example of
a double
EDP exemption 		0.6%
(Sustainable) 		3.5%
(No EDP) 		130.2%
(No EDP) 		10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
 Lithuania 0.6%
(Sustainable) 		2.2%
(No EDP) 		39.4%
(No EDP) 		10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
  Criterion fulfilled by exemption
0
0
Alternative EDP column design nr.2 (only using the "exempted parenthesis" to denote whenever breached values were approved)
Convergence criteria [nb 1] (valid for June 2014)
Country HICP inflation
rate[1][nb 2] 		Excessive Deficit Procedure[18] Exchange rate Long-term
interest rate[3][nb 3] 		Legal compliance of
law and statutes[6]
Budget deficit to GDP[7] Debt-to-GDP ratio[7] ERM II member[5] Severe tensions[6]
Reference values max. 1.7%[nb 4][nb 5]
(May 2013-April 2014) 		max. 3.0%[nb 6]
(worst deficit in 2013-15) 		max. 60%
(in 2013) 		min. 2 years
(as of 4 June 2014) 		No[nb 9]
(May 2013-April 2014) 		max. 6.2%[nb 4][nb 8]
(May 2013-April 2014) 		Yes
(as of 4 June 2014)
 Lithuania 0.6%
(Sustainable) 		2.2% 39.4% 10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
Example of
a mixed
EDP breach 		0.6%
(Sustainable) 		3.3% 130.2%
(exempted) 		10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
Example of
a double
EDP breach 		0.6%
(Sustainable) 		3.3% 130.2% 10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
Example of
a double
EDP exemption 		0.6%
(Sustainable) 		3.5%
(exempted) 		130.2%
(exempted) 		10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
 Lithuania 0.6%
(Sustainable) 		2.2% 39.4% 10 years, 1 month No
(No devaluation)
(lowest fluctuation: 0.0%) 		3.60% Yes
  Criterion fulfilled by exemption
  1. ^ a b c d "HICP (2005=100): Monthly data (12-month average rate of annual change)". Eurostat. 16 August 2012. Retrieved 6 September 2012.
  2. ^ "The corrective arm". European Commission. Retrieved 2014-07-05.
  3. ^ a b c d "Long-term interest rate statistics for EU Member States (monthly data for the average of the past year)". Eurostat. Retrieved 18 December 2012.
  4. ^ "Government deficit/surplus data". Eurostat. 22 April 2013. Retrieved 22 April 2013.
  5. ^ a b c d "What is ERM II?". European Commission. 31 July 2012. Retrieved 8 September 2012.
  6. ^ a b c d e f g h i j k l m n o p q r s t "Convergence report 2014" (PDF). European Commission. 4 June 2014.
  7. ^ a b c d e f g h i j "European economic forecast - spring 2014" (PDF). European Commission. 5 May 2014.
  8. ^ "Luxembourg Report prepared in accordance with Article 126(3) of the Treaty" (PDF). European Commission. 12 May 2010. Retrieved 18 November 2012.
  9. ^ a b "EMI Annual Report 1994" (PDF). European Monetary Institute (EMI). April 1995. Retrieved 22 November 2012.
  10. ^ a b "Progress towards convergence - Nov. 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 22 November 2012.
  11. ^ "Progress towards convergence - November 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 17 March 2013.
  12. ^ "The corrective arm". European Commission. Retrieved 2014-07-05.
  13. ^ a b c "Convergence Report (May 2012)" (PDF). ECB. May 2012. Retrieved 18 November 2012.
  14. ^ a b c "Convergence Report 2012" (PDF). European Commission. 30 May 2012.
  15. ^ "Luxembourg Report prepared in accordance with Article 126(3) of the Treaty" (PDF). European Commission. 12 May 2010. Retrieved 18 November 2012.
  16. ^ "Progress towards convergence - November 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 17 March 2013.
  17. ^ "The corrective arm". European Commission. Retrieved 2014-07-05.
  18. ^ "The corrective arm". European Commission. Retrieved 2014-07-05.


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