A European perspective on currency and convergence

Boris Vujčić, Vice-President of the European Central Bank (ECB), delivered a keynote speech at the conference on Iceland’s Currency Options, providing a European perspective on currency and convergence.

He noted that this was his second day in his new role, drawing a thematic link between transitioning into a new regime and the evolution of the euro.

Vujčić highlighted that the euro, launched in 1999, has expanded to 21 countries, with over 350 million Europeans using it daily. The euro is now the second most important currency in international trade and finance.

The speech emphasized that the success of the euro was due to efforts beyond political commitment, including a shared framework for stability and convergence. The convergence criteria—price stability, sound public finances, long-term interest rates, and exchange rate stability—are designed to ensure long-term stability of EMU.

He explained that participation in ERM II, the exchange rate mechanism, serves as a ‘waiting room’ or ‘exercise room’ for euro adoption, fostering policy coordination, institutional readiness, and market confidence. Countries like Estonia, Latvia, Lithuania, Slovakia, Croatia, and Bulgaria have demonstrated the framework’s flexibility and resilience through their convergence journeys.

Vujčić also discussed the reforms following the global financial crisis, including the banking union and strengthened economic governance, which support sustainable monetary integration.

The euro’s role in facilitating trade, investment, and financial stability within Europe was underscored, along with high public support for the currency, even after crises.

He concluded that the EMU will continue to evolve through improved governance, financial integration, and fiscal coordination, emphasizing that a rules-based convergence framework has supported Europe’s successful monetary integration and that the euro remains a testament to European unity and stability.