A4-0066/95

Resolution on the Commission's Annual Economic Report for 1995 (COM(94)0615 - C4-0277/94) and on the Council's report on the implementation of the broad economic policy guidelines (C4-0004/95)

The European Parliament,

- having regard to the Commission's Annual Economic Report for 1995 (COM(94)0615 - C4-0277/94),

- having regard to the Council's report on the implementation of the broad economic policy guidelines (C4-0004/95),

- having regard to the fact that its Annual Economic Report for 1995 could be considered as the Commission's preparatory work for the broad guidelines of economic policies in accordance with Article 103 of the EC Treaty ,

- having regard to Articles 102a and 103(1) of the EC Treaty, which require Member States to co-ordinate their economic policies and to conduct them with a view to advancing the objectives set out in Article 2 of the EC Treaty,

- having regard to the White Paper on Growth, Competitiveness, and Employment (COM(93)0700 - C4-0509/93),

- having regard to its resolution of 6 May 1994 on the Annual Economic Report for 1994 ((OJ C 205, 25.7.1994, p. 541.)),

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinion of the Committee on Regional Policy (A4-0066/95),

A. welcoming the findings of the Annual Economic Report for 1995 regarding a rate of growth of GDP of 2.6% for 1994 (versus -0.4% for 1993) and predicted rates of growth of 2.9% for 1995 and 3.2% for 1996, which mark the beginning of recovery of the European economy from the recession of the years 1988- 1993,

B. whereas economic recovery facilitates the achievement of the conditions for EMU set out in the Treaty of Maastricht, especially with respect to the public finance criteria thereof, by enabling governments of member states to reduce budget deficits more effectively and lower the debt/GDP ratio faster,

C. whereas the President of the ECOFIN Council has stated his welcome intention to pursue launching the third stage of EMU at the earliest stipulated date (1 January 1997),

D. whereas a number of independent Central Bank governors have recently expressed doubts and outright opposition to a 1997 starting date for EMU, declaring it premature, in clear contradiction to the positive evaluations and attitudes of the Presidency of the Council, a fact that can only spread despondency, confusion and outright opposition among the public,

E. whereas the degree both of technical preparation and of the preparation of public opinion for the introduction of a single currency, particularly at an early date, cannot as of the present moment be considered adequate,

F. whereas it is clear, on present evidence, that the nominal convergence criteria regarding inflation and interest rates are already satisfied by eight of the old Member States to which at least two of the new ones can easily be added, and that therefore the majority of Member States required by Article 109j(3) for entering into the third stage of EMU on 1 January 1997 has, to that extent, already been achieved,

G. whereas literal adherence by an equal number of Member States to the strict version of the public finance criterion by the end of 1996 - especially that part of the criterion which refers to the debt to GDP ratio - demands important efforts and appears, as of this moment, not possible for all countries,

H. whereas it is clear that the Treaty on European Union does not decree the mechanical application of strict numerical standards as the exclusive manner of satisfying the nominal convergence criteria of Article 104c EC but makes certain judgmental elements, concerning rate of progress towards and degree of achievement of an acceptable level of budget deficits and debt to GDP ratios, a part of the substance of the relevant criterion, not an exemption from it,

I. whereas, for the purposes of applying the debt/GDP ratio of Article 109j and Protocol No 5, Article 1, to the EC Treaty, in an economically sensible manner, the relationship between total public debt and total saleable government assets must also be taken into consideration,

J. whereas, while relative exchange-rate stability among European currencies has not undergone any further major upheavals since August 1993, the ERM still remains traumatised by the continuing absence from its ranks of two major currencies, still suffers from lack of clarity regarding definition of the exchange-rate fluctuation band relevant to convergence and has recently been shaken - by the repercussions of the peso devaluation - to the detriment of a subset of its currencies, shown up to be vulnerable to shocks originating outside the European area,

K. whereas persistent trends in the exchange rate of the US dollar against the group of European currencies raise the possibility of the presence of a fundamental exchange rate misalignment in the world monetary system,

L. whereas the whole strategy of an accelerated EMU presented in the Annual Economic Report depends crucially on maintaining the momentum of economic recovery between now and the year 2000 at rates of GDP growth between 3% and 3.5% per year, which are obtainable but should not be taken for granted,

M. whereas medium-term consolidation of the recovery depends on the proper sequencing of the sources of growth shifting from exports to investment, and finally to internally generated consumption demand; whereas this process requires a delicate balance of saving, taxation, public spending, productivity, wages, profitability and interest rates, leading the European economy from an export-led recovery to self-sustaining stable growth; whereas, therefore, measures to overcome the structural weaknesses of the EU in the fields of infrastructure, research, development and energy must support this process, as rightly provided for by the White Paper on Growth, Competitiveness and Employment,

N. whereas co-ordination among all factors necessary to achieve the desirable growth effect requires an important and difficult effort which must be based on market forces as well as on adequate economic policies,

O. concerned that, despite evidence of a certain recovery-stimulated progress towards convergence of real economic performance among various Member States, distances in this area, especially between the European North-West and the European South, remain large,

P. deploring the fact that reduction of the level of unemployment from virtually 11% in 1994, to 10.4% in 1995 and 9.8% in 1996, as forecast in the Commission's Annual Economic Report for 1995, will be excessively slow, and that, even under optimal assumptions of a steady rate of growth between 3% and 3.5%, unemployment will only fall to the disappointingly high level of 7% by the year 2000 which demonstrates that important efforts must be undertaken to make growth more employment-creating,

Q. noting that both the level and the unequal spread of unemployment among Member States by 1997 may create possibly insuperable tensions for the currencies as well as the fiscal policies of various Member States, a fact hinted at by the Chairman of the EMI in his oral presentation before the Monetary Subcommittee of the EMAC and recently emphasised in the speech of the Governor of the Bank of England to the Institut d'Etudes Bancaires et Financières at the Association Française des Banques on Tuesday, 31 January 1995,

R. whereas fiscal and other policies, intended to achieve gains in productivity, competitiveness and steady, non-inflationary growth, should not work at cross-purposes with other policies directed at alleviating unemployment,

S. whereas a more lasting improvement in the economic position of all social partners, inclusive of labour, can arguably be achieved only by virtue of a drastic improvement in the overall competitive position of the European economy world-wide and by achieving, in the medium term, sustainable, non- inflationary GDP growth of around 3.5% per year; whereas various of the underlying sources of competitiveness in Europe, particularly in the areas of innovation, are seriously neglected,

T. whereas strengthening economic, social and regional solidarity is a prominent objective of the Union,

U. whereas the elimination of poverty and unemployment and the levelling up of the purchasing power and living standards of European citizens are principles which must be fundamental to EMU,

V. whereas the growing gap between rich and poor, the lack of environmental protection and the unsustainable use of natural resources and land, the increase in economic insecurity, the erosion of the tax base through international tax avoidance or evasion, underinvestment in public services and infrastructure and threats to social protection constitute urgent socio- economic problems for Europe which have been well analysed in the White Paper but not taken sufficiently into consideration in the Broad Economic Policy Guidelines and their implementation reports,

W. whereas certain economic policies among Member States often tend to slip into excessive, if not exclusive, reliance on an individualistic market philosophy, threatening to erode the principles of social solidarity and become divisive, dogmatic, socially insensitive and oblivious of the need for a measure of public-spirit in the guidance of economic endeavour and for the safeguarding of collective values alongside individual ones - an attitude which should not prevail at the level of the Union,

X. whereas, without an overarching ideal of free enterprise, social justice and a sense of commonly shared progress for all members of the European society, efforts to redress the economic position of Europe world-wide will be placed in serious jeopardy and, in any case, would be perceived by many as hardly worth pursuing,

Y. whereas Member States and the Community, in establishing a common market and economic and monetary union, shall also promote economic and social cohesion by adopting and conducting economic policies based on close coordination (Articles 2, 3, 130a and 130b of the EC Treaty),

Z. whereas, in its abovementioned resolution of 6 May 1994, it reminded the Commission and Member States that the EMU convergence criteria pose comparatively greater social and economic difficulties for the regions lagging behind in development,

UNEMPLOYMENT

1. Declares that the target of generating 15 million new jobs by the year 2000 remains as desirable today as when it was stated in the White Paper on Growth, Competitiveness and Employment; calls upon the Union and its Member States to spare no effort in turning this commitment into a reality within a reasonable time and invites them to set full employment as the permanent, ultimate aim of their policies,

2. Recommends that any steps towards controlling budget deficits should have due regard to their impact on employment, be carried out in a socially balanced manner and be implemented by a mix of fiscal measures appropriate to the above purposes,

3. Requests, in view of the impact of the black economy on the budgets of Member States, that the Annual Report should examine this issue and possible policy responses,

4. Requests the Council and Member States to intensify the employment content of growth by introducing fiscal reforms designed to shift health and national insurance burdens from the hiring of labour to the use of other productive resources, in particular to those using non-renewable natural resources and polluting production, and recommends that the social partners start discussions among themselves on the possibility of and conditions for reducing working time, at a rate slower than the rate of productivity increase, so as to make room for more employment at every given level of production,

5. Notes that the fulfilment of the Maastricht criteria and the investment led growth envisaged by the Commission's guidelines will not become reality unless the financial instruments available at Community level are substantially expanded and put into use. Sustained growth until the year 2000 will demand structural policies implemented in close collaboration between private and public sector. These will include expansion of SMEs, heavy investments in environment, education and training on a large scale, as well as a more prompt implementation of the TEN-investments agreed upon at the ministerial summits since Edinburgh 1992,

RECOVERY AND MEDIUM TERM GROWTH

6. Recommends the encouragement of investment by all available means - including tax reforms directing capital resources away from financial speculation and towards the real economy - with the aim of achieving a permanent increase in the share of investment spending from the present level of 19% to approximately 25% of GDP, balanced by corresponding policies of adjustment in savings and consumption, so that increases in productive capacity do not outrun the capacity of the markets to absorb the product,

7. Stresses the importance of continuing industrial policies oriented towards new products and new sectors of industrial activity, particularly in the areas of information technology, environmental technology, ethically responsible biotechnology and the audio-visual sector, in order to strengthen Europe's technological position; places particular emphasis on the need to raise expenditure on research and development from 2 per cent to 3 per cent of GDP,

8. Underlines the crucial importance of strengthening competitiveness by means of an overall improvement in the quality of all factors of production via education, training and encouragement of new enterprise, especially among small and medium-sized enterprises, as well as by means of better co- ordination among factors of production via new, imaginative ways of involving employees in the management of their own activities in production,

9. Accepts the need for real wage rises not to outrun gains in productivity, so that the profitability of employment-creating investment is further strengthened; however, encourages the social partners to balance wage discipline with profit-sharing and employee share ownership participation schemes,

10. Recommends that deregulation and privatisation of state-owned companies be conducted in the context of plans for increasing investment, injecting innovation and raising the level of competitiveness in the relevant sector, that mere substitution of public monopolies by private oligopolies be discouraged and that adequate provision for the redeployment of workers displaced by such reforms be made in every case,

11. Calls on the Commission and Member States to ensure that in promoting policy measures aimed at fulfilling the convergence criteria, economically weak and disadvantaged regions and their requirements are given full attention and assisted, particularly at national level, in such a manner as to enable their citizens to benefit from the wealth created,

12. Insists that economic policy measures, which have as their main objective economic growth through increased productivity and competitiveness, must include considerations on the economic and social effects of that policy, particularly on employment and the economic fabric of regions undergoing structural change or those under economic and social strain,

13. Reminds the Commission and the Council of the Treaty requirement that the Broad Economic Guidelines shall be drawn up with a view to advancing the achievement of the objectives set out in Article 2 EC; regrets that, to date, the Guidelines procedure has paid little attention to many of those aims; insists that in future the Guidelines must pay appropriate attention to the full range of objectives laid down in the Treaty,

14. Asks in particular that the Guidelines should make clear that the necessary reduction of budget deficits should be achieved in ways which respect the Article 2 goals of cohesion, solidarity and a high level of employment, and that welfare and employment policies must therefore not be weakened,

THIRD STAGE OF MONETARY UNION

15. Endorses, in the spirit of the previous paragraph, the declared policy of the Presidency of the Union to strive to recognise and avail itself of the current opportunity simultaneously to achieve high employment and introduce the third stage of EMU at the earliest possible date, but warns that flagging political will combined with most unfavourable economic developments may push back the agenda of a common currency, and that this tendency will have to be resisted both by Member States and Union institutions,

16. Calls upon the Council, the Commission and the EMI urgently to clarify the timetable actually envisaged for proceeding to EMU and combine such clarification with a vigorous campaign of public awareness, dialogue and persuasion regarding the merits of the single currency for the European economy as well as the modalities of its introduction into general use, and to accelerate drastically the pace of technical preparations required for the beginning of the third stage of EMU,

17. Invites the Council, in conjunction with the campaign mentioned in the previous paragraph, to take steps to strengthen the economic governance of Europe by introducing a framework of coordination, at the highest level of exchange rate, fiscal and economic policies, not only in preparation for the third stage of EMU but also thereafter, under the democratic control of the European Parliament and national Parliaments,

18. Considers the development, within the framework of the Treaty, of appropriate forms of democratic control and accountability for central banks in Member States and the future European central bank, especially on fundamental policy issues like EMU, to be a necessary complement to central bank independence; calls on the Commission and the Council to inaugurate studies, submit substantive proposals and issue guidelines to this effect,

19. Warns against the risk of complacency in matters of exchange rate and interest rate stability and in particular calls upon the Commission and the Monetary Committee to institute an enquiry into the appropriateness of the current US dollar exchange rate for fair competition in world trade,

ACCOUNTABILITY

20. Expresses its disquiet at the disregard for democratic accountability shown in chapter 4 of the Report, which restricts its focus to monetary and budgetary policies on the grounds that other policies had been the subject of several reports to the European Council; reminds the Commission that the Economic Report is a report also to the European Parliament and that the duty to give a full account of economic policies is not discharged by a series of reports, several of which were not presented to Parliament; insists, therefore, that all texts pertaining to matters of EU competence which are presented to the Council or European Council must also be presented to Parliament,

21. Instructs its committee responsible to draw up a report on links between exchange rate and interest rate stability, trade, investment, growth and employment,

22. Instructs its President to forward this resolution to the Council, the Commission and the Governments of the Member States and to take all necessary steps, including negotiating with the Council and the Commission a formal interinstitutional agreement, to keep Parliament fully involved in all stages of the shaping of the economic policy of the Union (broad economic policy guidelines, multilateral surveillance, excessive deficits procedure).