A4-0383/97

Resolution on the communication from the Commission on the impact of the introduction of the euro on capital markets (COM(97)0337/3 - C4-0443/97)

The European Parliament,

- having regard to the Commission communication (COM(97)0337/3 - C4-0443/97),

- having regard to its resolution of 22 September 1995 on financial derivatives: their present role on capital markets, their advantages and risks ((OJ C 269, 16.10.1995, p. 217)),

- having regard to the Commission communication on the draft action plan for the single market (COM(97)0184),

- having regard to the report of January 1997 by the European Monetary Institute on 'The Single Monetary Policy in Stage Three - Specification of the Operational Framework',

- having regard to the conclusions of the Madrid European Council of December 1995 and the Amsterdam European Council of June 1997,

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinion of the Committee on Legal Affairs and Citizens' Rights (A4-0383/97),

A. whereas with the introduction of the single European currency the existing national European bond markets, which are fragmented and relatively small and hence involve higher capital charges for issuers and transaction costs for investors, will become a single large European bond market which will be the second largest in the world after the US bond market,

B. whereas stage three of Economic and Monetary Union will create the world's third largest share market after the USA and Japan, although full integration of the share markets will not come about so rapidly since inhibiting factors such as different accounting rules, fiscal systems, stock exchange laws and corporate governance structures will continue to have an effect,

C. whereas in the European Union there are at present 32 stock exchanges and 23 futures exchanges, compared with only 8 and 14 respectively in the USA,

D. whereas distortions caused by differences in national fiscal arrangements and regulatory provisions are a significant obstacle to trade and investment activities and hence are incompatible with the principle of an open and fair internal market,

E. whereas the Commission has proposed measures to reduce tax distortions, and whereas the Member States, only out of self-interest, should at last reach agreement with regard to establishing fair framework conditions,

F. whereas, in accordance with the conclusions of the Madrid European Council, all negotiable public debt instruments are to be issued in euro with effect from stage three of EMU,

G. whereas stock exchanges will be dealing and quoting in euro as from 1 January 1999,

H. whereas the introduction of the euro will be accompanied by greater competition between the financial centres and in the banking sector,

I. whereas particular attention must be paid to protecting investors,

J. whereas, in accordance with the Commission communication on which it is based, this resolution is concerned only with the impact of the introduction of the euro on capital markets after monetary union commences and hence does not consider any speculation on the financial markets prior to introduction of the euro,

1. Welcomes the recommendations of the group of experts which are published in the Commission's communication, but regrets that they are purely technical in nature;

2. Is of the opinion that the introduction of the euro is an excellent opportunity for pushing ahead with harmonization on the capital markets, thereby moving one stage closer to completion of the internal market;

3. Agrees with the Commission, however, that in the final analysis market harmonization must be left to the markets themselves, but that there is a political duty to remove, where necessary and where possible, the legal and fiscal barriers and to create a framework for reducing distortion of competition;

4. Calls on the Commission to carry out a study of the USA, the world's largest capital market in this field, as a pointer towards harmonization of markets in the internal market;

5. Calls on the Commission and the Member States to push through the harmonization of company law (taking account of the European Parliament's decisions to date), accounting rules and stock exchange regulations which is required to create a competitive share market;

6. Calls on the Commission to submit, as soon as possible, a list of the harmonization measures it considers are needed;

7. Stresses that with the growing together of the European capital markets a statute for European companies (taking account of the European Parliament's decisions to date) is more urgently required, and calls for it to be adopted as soon as possible;

8. Looks forward with great interest to the Commission's framework directive on UCITS (Undertakings for Collective Investment in Transferable Securities) announced in the action plan for the single market;

9. Points out that the intensification of competition between financial centres following the introduction of the euro will have a particular impact on the smaller stock exchanges, which will have to specialize, cooperate or cease trading; notes that this, together with new developments in technology such as electronic trading, will lead to job losses;

10. Points out that large firms have announced that they will be converting their accounting systems to the euro with effect from 1 January 1999 and that this will have a knock-on effect on small and medium-sized suppliers who will be forced, whether they like it or not, to proceed down this path towards conversion to the euro;

11. Points out that statutory provisions and investment principles often require dividend payments and repayments from pension funds, life assurance policies or even real property investment funds to be made in national currency, i.e. large proportion of the monies must remain in the country of origin ('principle of congruence'), and that monetary union will transform the entire monetary territory into the 'country of origin', which will considerably extend the scope for capital investments; calls on the Member States, in this connection, to review, as soon as possible in the light of the euro, any stringent quantity restrictions that they may have on investing in pension funds;

12. Is of the opinion that European Monetary Union will also result in a flourishing share culture, and regards this as a particularly important development in the light of the current scarcity of risk capital;

13. Believes it is also important, for the credibility of the EMU process, for existing national debt instruments to be converted to euro at the commencement of stage three of EMU, and welcomes the decisions to this effect which have been taken by Belgium, Germany, France and the Netherlands;

14. Points out that the end of the exchange risk will also mean the end of one of the main factors determining differences in interest rates between government bonds of the current EU Member States, and that as a result the creditworthiness of the debtor will become a major criterion;

15. Points out that the use of derivatives and other new financial instruments is associated with special risks, even though their genuine advantages are acknowledged, and therefore calls for a substantial improvement in present national and Community regulations and monitoring systems covering banks and similar undertakings, with emphasis on framework rules on accounting, disclosure and monitoring at European and at a later stage also at world level;

16. Points out that the European Union is not liable for the debts of its Member States, nor are the Member States liable for each other's debts, and that the individual countries are therefore subject to a specific credit risk, although markets regard this as less than the currency risk;

17. Refers in this connection to the stability and growth pact agreed in Amsterdam which guarantees sound budgetary policy for the Member States and which is particularly important in the light of demographic trends in the European Union which point to an increase in the costs of retirement pensions and hence, in some states, an additional burden on the budget;

18. Is of the opinion that differences in interest rates, which have already been reduced quite considerably in the last two years because the financial markets have made the fiscal and monetary policy adjustments, will continue to be ironed out;

19. Calls on the Commission to study the USA's experience of regulating the derivatives markets, which have undergone a transition from strict regulation to liberalization, and to draft proposals for a European solution;

20. Is of the opinion that a consistent stability policy on the part of the European Central Bank and a fiscal policy on the part of the participating Member States aligned with the stability and growth pact will create the climate for the euro to act as an attractive reserve currency - the world's second largest after the US dollar - and for a capital market with a variety of profitable investment opportunities, not least for investors from outside Europe;

21. Calls on the Member States, therefore, to take account of the measures proposed by the Commission to tackle unfair tax competition, eliminate distortions in the taxation of capital income and abolish tax loopholes for companies operating across borders and implement them with a view to establishing a stable environment for investment and trading;

22. Believes that use of the euro will not be confined to the euro area of the Member States taking part, but will have a knock-on effect on neighbouring countries and beyond;

23. Calls on the Commission and the Member States to take measures to protect consumers from fraud and fraudulent business practices;

24. Instructs its President to forward this resolution to the Council, the Commission and the parliaments of the Member States.