with paragraph 1 of the Protocol on certain provisions relating to Denmark annexed to the Treaty and the Decision taken by the Heads of State or Government in Edinburgh in December 1992, Denmark has notified the Council that it will not participate in the third stage of EMU. Denmark has not requested that the procedure referred to in Article 122(2) of the Treaty be initiated.
(4)By virtue of Decision 1998/317/EC Sweden has a derogation as defined in Article 122 of the Treaty. In accordance with Article 4 of the Act of Accession6, the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland and Slovakia
have a derogation as defined in Article 122 of the Treaty. In accordance with Article 5 of the respective Act of Accession7, Bulgaria and Romania have a derogation as defined in Article 122 of the Treaty.
(5)The European Central Bank (ECB) was established on 1 July 1998. The European
Monetary System has been replaced by an exchange rate mechanism, the setting-up of which was agreed by a resolution of the European Council on the establishment of an exchange-rate mechanism in the third stage of economic and monetary union of 16 June 1997.8 The procedures for an exchange-rate mechanism in stage three of economic and monetary union (ERM II) were laid down in the Agreement of 1 September 1998 between the ECB and the national central banks of the Member States outside the euro area laying down the operating procedures for an exchange rate mechanism in stage three of economic and monetary union.9
(6)Article 122(2) of the Treaty lays down the procedures for abrogation of the derogation of the Member States concerned. According to that Article at least once every two years, or at the request of a Member State with a derogation, the Commission and the ECB shall report to the Council in accordance with the procedure laid down in Article 121(1) of the Treaty. On 13 February 2007, Cyprus submitted a formal request for a convergence assessment.
(7)National legislation in the Member States including the statutes of national central banks shall as necessary be adapted with a view to ensuring compatibility with Articles 108 and 109 of the Treaty and the Statute of the ESCB. The reports of the Commission and the ECB provide a detailed assessment of the compatibility of the legislation of Cyprus with Articles 108 and 109 of the Treaty and the Statute of the ESCB.
(8)According to Article 1 of the Protocol on the convergence criteria referred to in Article 121 of the Treaty establishing the European Community, the criterion on price stability referred to in the first indent of Article 121(1) of the Treaty means that a Member State has a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination, that does not exceed by more than one and a half percentage points that of, at most, the three best performing Member States in terms of price stability. For the purpose of the criterion on price stability, inflation will be measured by the harmonised indices of consumer
6OJ L 236, 23.9.2003, p. 33.
7OJ L 157, 21.6.2005, p. 203.
8OJ C 236, 2.8.1997, p. 5.
9OJ C 345, 13.11.1998, p.6 as amended by the Agreement of 14 September 2000 (OJ C 362, 16.12.2000, p. 11).