The conditions include:
2. Government Finance: This head contains limits for the Government deficit and the Government debt.Firstly, the ratio of the annual government deficit to the GDP should not exceed 3%(as reckoned at the end of the preceding fiscal year).Secondly, the ratio of the gross government debt to GDP should not exceed 60%(as reckoned at the end of the preceding fiscal year).
3. Exchange Rate: The aspirant countries should have been members of the Exchange Rate Mechanisms under the European Monetary System for two consecutive years and should and have devalued their currency during that period.
E) The European Central Bank (ECB) is chiefly responsible for formulating the monetary policy for the 13 member states. The main objective if the ECB is to maintain price stability in the euro area. Additionally the Bank is bound to pursue the objectives stated under Article 12 of the Treaty of EU, ie; to achieve a high level of employment and sustainable economic growth. The banks functions by employing the following tools to achieve the aforementioned objectives:
The ECB must fix a single interest rate as a part of the monetary policy formulation. The rate is set by the governing council of the ECB which meets twice every month. Once the interest rate has been fixed the National Central Banks must implement and maintain it in their countries.Thi is done by initiating the "open market operations". For the foreign exchange operations, the bank operates a minimum reserve system. The credit institutions in the euro area must keep a minimum reserve with the ECB which has been currently set at 26% of their total liabilities. Additional tasks include issuance of bank notes in the euro area and promotion of smooth payment system.
F) Impact of Euro adoption: Fundamentally the adoption of the euro is the most important example of structured co-operation inside the EU and marks the full monetary integration of the 13 member states. A preliminary study by the European Commission indicates that the single