A4-0422/98

Resolution on the adjustment mechanism in cases of asymmetric shocks

The European Parliament,

- having regard to Article 103a of the Treaty,

- having regard to Rule 148 of its Rules of Procedure,

- having regard to its resolution of 9 April 1997 on the evaluation of the facility for medium-term financial support of balance of payments of Member States ((OJ C 132, 28.4.1997, p. 105.)),

- having regard to the hearing of experts organised by the Subcommittee on Monetary Affairs,

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy (A4-0422/98),

A. whereas after the introduction of the euro country-specific shocks will diminish, but will not disappear entirely,

B. whereas, with the introduction of the euro, monetary turbulence within the euro area and national monetary policies will disappear and monetary policy will be conducted for the euro area as a whole; whereas better coordination of the economic strategies pursued by Member State governments will, however, be needed,

C. whereas, following the end of national monetary sovereignty, there will be a need for more active budgetary policies and wage adaptations,

D. whereas the only instrument not easily replaced by other means that Member States lose by the introduction of the euro is the possibility to devalue (or revalue) their currencies, even though this instrument has already ceased to be an effective instrument for the countries which are part of the euro area,

E. whereas this currency adjustment facility does not structurally improve the economy and, actually, at best buys governments time to make the required structural changes in the economy,

F. whereas Member States in EMU might still need an instrument that can buy them time when they are confronted with serious asymmetric shocks,

G. whereas such an instrument would be particularly needed if Member States were to be confronted with serious asymmetric shocks before they had brought their deficits down sufficiently,

1. Is of the opinion that asymmetric shocks should in principle be dealt with by the Member States that are affected by taking measures to structurally adapt their economy;

2. Takes the view that it will be necessary to coordinate the Member States' economic policies more closely;

3. Is aware of the danger that in a currency union asymmetric shocks that are not dealt with correctly or sufficiently early could have adverse effects on the internal trade and prosperity of the union as a whole;

4. Believes that making the Community's main policies and actions more coherent will help to lessen the risks associated with asymmetric shocks;

5. Does not expect asymmetric shocks to disappear completely after the introduction of the euro; considers it therefore wise to be prepared for them to happen; considers that shocks will not only affect individual Member States but will also affect particular industries and sectors in different regions and Member States at the same time;

6. Is of the opinion that renewed efforts will be needed to foster the mobility of production factors by encouraging the learning of Europe's various languages, promoting closer coordination of academic studies and vocational training and removing the obstacles to the transfer of social benefits;

7. Advises Member States and social partners to consider creating at national level an insurance mechanism against asymmetric shocks, similar to the one created in Finland;

8. Believes that, in the future, the EU should have a budget to enable it to take effective action to combat economic slumps;

9. Believes however that because of the danger that its effect will be felt all over the Union if it is not dealt with adequately and in time, it would be wise to create an insurance instrument at Community level as a means of last resort;

10. Believes that Article 103a of the Treaty could be such an insurance instrument and was intended as such by the drafters of the Treaty;

11. Recognises however that this instrument will be slow in its use, as it requires unanimity in Council both on the assistance itself and on the conditions of its application;

12. Believes however that if such an insurance instrument were to be prepared now and made ready, its application could be decided quickly in case of emergency;

13. Does not believe there will be a moral hazard if this insurance instrument is created: it is not a transfer mechanism, but purely an insurance one; it concerns credit that has to be repaid with interest; moreover, the conditionality of this instrument will prevent Member States from relaxing or slowing down their efforts to reach balanced budgets;

14. Calls on the Commission and Council quickly to prepare and adopt a regulation based on Article 103a that would enable the Euro-11 to authorise the use of this insurance instrument quickly, when the need arises;

15. Calls on the Commission to set up a European panel of experts which would draw up two reports a year and to develop an early warning system for country-specific shocks to enable the Member States and the Union to respond quickly and adequately;

16. Asks the Commission to evaluate other possibilities to stabilise the economies of Member States that are subject to country-specific shocks, and specifically the possibility to advance or delay payments to the budget of the Union (interest being paid to the creditor);

17. Asks Commission and Council to consult it in good time on a proposal for an insurance instrument;

18. Instructs its President to forward this resolution to the Commission, the Council and the European Central Bank.