What kind of convergence does the euro area need?
The euro area needs new convergence goals. The study proposes three simple rules and indicators:
a. Convergence in prices, measured on the basis of inflation differentials when compared to the euro area average
b. Convergence in competitiveness, measured on the basis of nominal unit labour costs
c. Convergence in the external balance, measured on the basis of the current account
These convergence goals are necessary to stabilize the euro area. They should be binding criteria in the new convergence process led by the European Commission. Stability in the euro area is a pre-condition for future reforms and growth.
By Dr. Anna auf dem Brinke works for the German Ministry of economy, she formally worked for the Jacques Delors Centre.