Most Euro Area Countries Fails Inflation Entry Criteria
One new, interesting observation is that with regards to the formal inflation criteria for euro area entry, only 6 out of 15 existing euro area economies(data for the 16th member, France is not available), or less than half, would meet that criteria. The criterion is that inflation shouldn't be more than 1.5% above the average of the three EU countries with the lowest inflation rate. The 3 countries with the lowest inflation rate are: Ireland (-2.2%), Portugal (-1.6%) and Spain/Belgium/Luxembourg (all having -1.0%). The average of -2.2, -1.6 and -1.0 is of course -1.6, and so any country with an inflation rate above -0.1% would be ineligible.
Apart from the already mentioned countries, only Austria falls below -0.1%, meaning that 9 out of 15 would fail the test. To those convinced the criteria’s makes sense that would provide evidence against the idea of monetary unions. For those of us (yes, that includes me) who however do not think the criteria’s makes sense, it simply illustrates why they don't make sense.