Spectator on facebook

Spectator on facebook

What is the ERM II?

The European Exchange Rate Mechanism (ERM) II is the EU's system of exchange rates. Countries have to stay in the ERM II for at least two years before adopting the euro.

The European Exchange Rate Mechanism (ERM) II is the EU's system of exchange rates. Countries have to stay in the ERM II for at least two years before adopting the euro.

Within this system, national currencies are given a central parity - a fixed median exchange rate against the euro. Currencies can move 15 percent higher or lower than their parity rate.

The agreement on ERM II membership does not include a clause about countries that are expelled or choose to leave the system. Slovakia would leave the ERM II if the crown exceeds its limits, but before that happens it could negotiate another change of its central parity. This would not be considered a violation of ERM II conditions.

When a parity rate changes, it is usually due to revaluation or a currency's increasing value. Devaluation, or decreasing the value, is less likely.

If the crown gets close to its ERM II limits, the European Central Bank and the central banks of the eurozone can help the National Bank of Slovakia to keep the crown within its limits through interventions. They would do this on the condition that the government is following a responsible budgetary policy that does not increase the state deficit and complies with the ERM II programme.

Besides Slovakia, other states included in ERM II are Estonia, Latvia, Lithuania, Cyprus, Malta, and Denmark.

Top stories

Bratislava growing high Photo

High-rise buildings sprouting up in Bratislava

Visualisation of the future skyline of Bratislava

People of Pezinok fighting against landfill again

Dispute over controversial Pezinok waste dump, which started 18 years ago, continues.

The controversial landfill site in Pezinok

Crisis ends in Danko’s defeat

Education minister steps down following Fico’s call, Danko not ruling out he might leave politics.

Former education minister Peter Plavčan and PM Robert Fico on July 24.

First Slovak woman crossed the English Channel

Before her, only six Slovak men had managed to complete the difficult swim.