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ECB Releases 2026 Convergence Report on Euro Adoption Progress

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ECB Releases 2026 Convergence Report on Euro Adoption Progress

The European Central Bank (ECB) published its 2026 Convergence Report today, assessing the progress of five non-euro area EU Member States - Czech Republic, Hungary, Poland, Romania, and Sweden - towards adopting the euro. The report concludes that limited progress has been made by these countries on economic convergence with the euro area since 2024.

Key Findings

The ECB's Convergence Report assesses the degree of sustainable economic convergence with the euro area, compatibility of national legislation with the EU legal framework, and fulfillment of statutory requirements for the respective national central banks. The report highlights that the countries under review have shown economic resilience to external shocks but still face obstacles on the road to euro adoption.

Economic Assessment

The ECB notes that economic activity in the countries under review has shown resilience despite external challenges, including Russia's war against Ukraine, global trade tensions, and the outbreak of the war in the Middle East. However, the pace of growth has differed across countries. The economic outlook is clouded by heightened geopolitical tensions, with the war in the Middle East contributing to greater volatility in global energy markets and rising energy costs. As regards the price stability criterion, three of the five countries under review recorded a **12-month average inflation rate** above the **reference value of 2.7%**. Specifically, inflation was considerably above the reference value in **Romania** and above it, albeit to a lesser extent, in **Hungary** and **Poland**, with rates of **above 2.7%**. In contrast, the **Czech Republic** and **Sweden** recorded inflation rates below the reference value, at **0.9%** and **1.6%** respectively, based on the data from **June 2025 to May 2026**. The fiscal deficit has deteriorated in most countries since the 2024 Convergence Report, with debt-to-GDP ratios rising significantly in some cases. In **2025**, **Hungary**, **Poland**, and **Romania** exceeded the deficit reference value of **3% of GDP**.

Fiscal and Monetary Policy Implications

The report highlights that the general government gross debt-to-GDP ratio in **2025** was below or well below the reference value of **60%** in all of the countries under review except **Hungary**. However, the European Commission's latest projections indicate that in **2026**, the debt ratio will rise above the reference value in both **Poland** and **Romania**. The number of countries subject to an excessive deficit procedure has increased to three since the 2024 Convergence Report, with **Hungary** and **Poland** joining **Romania**. None of these countries is projected to reduce its deficit to below the **3% of GDP** reference value before the end of **2027**, according to the European Commission's projections. As regards the exchange rate criterion, none of the currencies of the countries under review is participating in the exchange rate mechanism (ERM II), and some currencies have experienced sizeable fluctuations against the euro over the last few years.

Market Implications

The report's findings may have implications for European sovereign bonds, as the fiscal deficit and debt-to-GDP ratios of some countries are deteriorating. The **long-term interest rates** of **Poland**, **Hungary**, and **Romania** were above the **reference value of 5.1%**, at **5.4%**, **6.7%**, and **6.7%** respectively. The quality of institutions is also important for the sustainability of convergence, with **Hungary** and **Romania** requiring significant improvements in this area.

Forward Guidance

The ECB's Convergence Report is published every two years or at the request of a specific country. The next report is expected in **2028**, although it

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