European Exchange Rate Mechanism in the context of "Economic and Monetary Union of the European Union"

⭐ In the context of the Economic and Monetary Union (EMU) of the European Union, what is a primary prerequisite for a country seeking to adopt the euro as its official currency?

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⭐ Core Definition: European Exchange Rate Mechanism

The European Exchange Rate Mechanism (ERM II) is a system introduced by the European Economic Community on 1 January 1999 alongside the introduction of a single currency, the euro (replacing ERM 1 and the euro's predecessor, the ECU) as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe.

Following the adoption of the euro, policy changed to linking currencies of EU countries outside the eurozone to the euro (having the common currency as a central point). The goal was to improve the stability of those currencies, as well as to gain an evaluation mechanism for potential eurozone members. Since January 2023, two currencies participate in ERM II: the Danish krone and the Bulgarian lev. Bulgaria has been officially approved to join the eurozone effective January 2026, which will leave only the Danish krone remaining as part of the ERM II.

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👉 European Exchange Rate Mechanism in the context of Economic and Monetary Union of the European Union

The economic and monetary union (EMU) of the European Union is a group of policies aimed at converging the economies of member states of the European Union at three stages.

There are three stages of the EMU, each of which consists of progressively closer economic integration. Only once a state participates in the third stage it is permitted to adopt the euro as its official currency. As such, the third stage is largely synonymous with the eurozone. The euro convergence criteria are the set of requirements that needs to be fulfilled in order for a country to be approved to participate in the third stage. An important element of this is participation for a minimum of two years in the European Exchange Rate Mechanism ("ERM II"), in which candidate currencies demonstrate economic convergence by maintaining limited deviation from their target rate against the euro.

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European Exchange Rate Mechanism in the context of Bulgarian lev

The lev (Bulgarian: лев, plural: лева, левове / leva, levove; ISO 4217 code: BGN; numeric code: 975) is the currency of Bulgaria. In early modern Bulgarian, the word lev meant "lion"; the word "lion" in the modern standard language is lаv (IPA: [ɫɤf]; in Bulgarian: лъв). The lev is subdivided into 100 stotinki (стотинки, singular: stotinka, стотинка). Stotinka in Bulgarian means "a hundredth" and is, in fact, a direct translation of the French term "centime". Grammatically, the word stotinka is derived from the Bulgarian word "sto" (сто; a hundred).

Since 1997, the Bulgarian lev has operated under a currency board arrangement, initially pegged to the Deutsche Mark at a fixed rate of 1,000 BGL = 1 DEM. Following the introduction of the euro and the redenomination of the lev in 1999, the peg was effectively set at 1.95583 BGN = 1 EUR. Since 2020, the lev has been part of the European Exchange Rate Mechanism (ERM II). In November 2023, Bulgarian euro coins design was approved by the Bulgarian National Bank.

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LINKED FROM (PARENTS)
← Economic and Monetary Union of the European Union ← Bulgarian lev
LINKS TO (CHILDREN)
European Economic Community → Currency union → Euro → European Currency Unit → European Monetary System → Exchange rate → Eurozone → Danish krone → Bulgarian lev →