ECB Warns Euro Adoption Remains Distant for Most EU Candidates

Limited progress has been made by the non-euro area Member States of the European Union (EU) towards economic convergence with the euro area since 2024, according to the ECB’s biannual Convergence Report.

The report identifies a series of external shocks as the principal obstacles to convergence, including Russia’s war against Ukraine, global trade tensions and the outbreak of conflict in the Middle East. While the economies under review have shown resilience, the ECB warned that heightened geopolitical uncertainty has clouded the economic outlook and made euro adoption more difficult.

External shocks derailing convergence

The economic stability of Europe, which until the pandemic had largely been improving following the financial crisis, has been severely tested by a succession of destabilising events.

Russia’s invasion of Ukraine continues to disrupt energy markets and supply chains, particularly in Central and Eastern Europe. Meanwhile, rising tensions in international trade have weakened global demand and constrained economic growth. More recently, the conflict in the Middle East has generated another energy price shock, increasing volatility in global markets and pushing up costs for households and businesses.

The ECB warned that higher energy prices and persistent geopolitical uncertainty could further weaken growth and keep inflationary pressures elevated. Although Europe’s economies are now less directly exposed to energy shocks than they were in 2022, the medium and long term consequences remain uncertain and will depend on the duration and intensity of current geopolitical tensions.

The report illustrates how convergence towards the euro has become increasingly dependent on geopolitical resilience rather than solely on domestic economic policy. Countries that are more vulnerable to energy price fluctuations and external disruptions have found it more difficult to achieve the stability required for entry into the single currency.

Inflation remains the biggest obstacle

Inflation remains a significant barrier to euro adoption.

Under the Maastricht criteria, countries seeking to adopt the euro must keep inflation close to that of the best-performing EU member states. For the latest assessment period, the ECB set the reference value at 2.7%.

Three of the five countries under review exceeded that threshold. Inflation was considerably above the reference value in Romania and also remained above target in Hungary and Poland. By contrast, the Czech Republic and Sweden recorded inflation rates below the benchmark.

The figures reveal a two-speed Europe. Central and Eastern European economies have proved more vulnerable to commodity and energy price shocks than their northern counterparts, making it harder to bring inflation under control.

Persistently high inflation presents a particular challenge because it not only delays euro adoption but also raises borrowing costs and undermines economic competitiveness. The ECB’s findings suggest that achieving price stability will remain a difficult task for several candidate countries in the coming years.

Fiscal deterioration a serious concern

If inflation is the most visible obstacle, fiscal performance may be an even greater cause for concern.

The European Commission requires member states to maintain a budget deficit below 3% of gross domestic product and government debt below 60% of GDP. Countries with debt above that threshold must demonstrate that it is falling at a satisfactory pace.

Hungary, Poland and Romania are currently failing to meet these fiscal requirements.

Poland recorded a deficit of 6.6% of GDP in 2025, while Romania’s budget deficit reached an alarming 9.3%. Although government debt levels remain below the 60% threshold in most countries under review, the European Commission expects debt ratios in both Poland and Romania to exceed the limit in 2026.

All three countries remain subject to Excessive Deficit Procedures and, according to current European Commission projections, none is expected to reduce its deficit below the 3% threshold before the end of 2027.

Rather than moving closer to the euro, several candidate countries are diverging from the Maastricht criteria. The deterioration in public finances highlights the difficulties governments face in balancing economic support measures with fiscal discipline in an increasingly uncertain global environment.

Euro adoption is also a political question

The ECB report also underlines that euro accession is not merely an economic exercise.

None of the five countries under review participates in the Exchange Rate Mechanism (ERM II), the system designed to prepare national currencies for euro adoption. Participation in ERM II for at least two years without severe exchange-rate tensions is a mandatory condition for joining the euro area.

Furthermore, none of the countries has national legislation that is fully compatible with the legal requirements for adopting the single currency.

The report specifically highlights institutional weaknesses in Hungary and Romania, where governance indicators continue to lag behind those of other EU member states. According to the ECB, stronger institutions and improved governance would bring significant economic benefits and support more sustainable convergence.

The findings suggest that institutional credibility, political commitment and effective governance are just as important as inflation and debt metrics in determining whether countries are ready to join the euro.

A more fragmented European Union

The report raises broader questions about the future of European integration.

Hungary, Poland and Romania continue to face a combination of inflationary pressures, excessive budget deficits and elevated borrowing costs. At the same time, Sweden has shown little political appetite for adopting the euro despite meeting many of the economic criteria, while the Czech Republic remains cautious about setting a timetable for accession.

Two decades after the EU’s eastern enlargement, the eurozone is no longer expanding in the steady and predictable manner that many policymakers once envisaged. Instead, the ECB’s latest assessment points towards a prolonged period of differentiated integration, in which several EU member states are likely to remain outside the single currency for the foreeable future. While the euro’s waiting room remains crowded, no country appears particularly close to moving into the Euro bloc at any speed.