A4-0194/97

Resolution on the 1996 annual report of the European Monetary Institute (EMI) (C4- 0175/97)

The European Parliament,

- having regard to Article 109f of the EC Treaty,

- having regard to Protocol No 4 of that Treaty on the Statute of the EMI,

- having regard to the 1996 annual report of the EMI which was prepared and addressed to the European Parliament and the other institutions in accordance with Article 11.3 of the Statute of the Institute (C4-0175/97),

- having regard to the hearing of the President of the EMI before its competent committee on 7 May 1997,

- having regard to its resolution of 28 November 1996 embodying the opinion of the European Parliament pursuant to Article 109(2) of the EC Treaty on the 1996 convergence decision by the Council, meeting in the composition of the Heads of State or of Government ((OJ C 380, 16.12.1996, p. 56.)),

- having regard to its resolution of 28 November 1996 on the report of the EMI on the changeover to the European currency ((OJ C 380, 16.12.1996, p. 58.)),

- having regard to its resolution of 10 June 1997 on the report of the EMI on the single monetary policy in Stage Three - Specification of the operational framework ((Part II, Item 5(b) of these Minutes.)),

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy (A4-0194/97),

A. whereas the aim of this annual report of the EMI is to provide an overview of all aspects related to its tasks as set out in the Treaty and whereas the analysis covers, in turn, the economic, monetary and financial situation in the European Union, including the state of economic and institutional convergence of the individual Member States, the preparatory work for Stage Three, other tasks of the EMI especially concerning cooperation between central banks, and, finally, its annual accounts in accordance with Article 11 of its Statute,

B. pointing out first of all that, under the EC Treaty, all of the Member States are intended to take part in the Stage Three of EMU,

C. whereas, like the Commission in its annual economic report on 1996, the analysis of the general economic situation confirms that there has been a degree of economic recovery in the European Union and that gradual convergence of monetary policies has been established,

D. whereas, however, this economic recovery has not brought about a substantial reduction in unemployment, which remains at worryingly high levels in most countries, and whereas the cumulative growth in GDP in the last three years has been about 7% and yet there has been virtually no increase in total employment,

E. whereas, moreover, the rate of inflation in the Union remains subdued and there has been a noticeable downward convergence in the inflation rate to 2.6% in 1996 compared with 3.1% in 1995, and whereas long-term interest rates fell again in 1996, except in the United Kingdom which is at a different stage in the business cycle,

F. whereas stability on the foreign exchange markets was bolstered in 1996 by the Finnish markka and the Italian lira joining the EMS,

G. whereas, however, the achievement of sound public finances remains a matter of major concern given that the overall public deficit is still well above 4% of GDP and the average public debt ratio is still in excess of 70% of GDP,

H. whereas the EMI has made satisfactory progress in its preparatory work for Stage Three and this work must continue unrelentingly in order to meet the relevant deadlines; whereas, however, the success of the single currency will also depend to a large extent on its acceptance by the general public,

I. having regard to the importance of the EMI activities described under 'other tasks' for the development of banking cooperation within the Union,

1. Welcomes the publication of this 1996 annual report of the EMI insofar as this very comprehensive document makes it possible, firstly, to assess the degree of convergence on the basis of largely definitive figures for 1996 and, secondly, to evaluate the progress achieved in preparing for Stage Three of monetary union;

2. Congratulates Mr Lamfalussy, who is nearing the end of his term of office as first President of the EMI, on setting up the EMI and quickly making it operational, carrying out so effectively the tasks conferred upon him by the Treaty, and, throughout his term of office, demonstrating an independent, open- minded approach, and a willingness for dialogue as attested by the highly satisfactory relationship he established with the European Parliament in spite of the limits imposed by the Treaty;

3. Stresses the importance which it attaches to the transparency of the role and activities of the EMI, and of course of the future ECB, in order to make that institution credible to European citizens, thereby contributing to the favourable perception of the euro and of the future European monetary policy;

As regards the macro-economic framework and convergence

4. Shares the EMI's concern at the weak relationship between GDP growth, employment and unemployment, but rejects the systematic nature of the EMI's analysis which blames the situation principally on 'structural rigidities in labour markets' (minimum wage, social protection etc.) while ignoring low investment, lack of purchasing power and demand, largely as a result of high unemployment, and the many other crucial structural causes such as the low level of research and technological innovation, the shortcomings of Europe's educational and apprenticeship systems, obsolete administrative regulations and structures and the failure of the internal market to provide sufficient stimulus, particularly for small businesses;

5. Notes that a large number of Member States already fulfil many of the requirements for the implementation of economic and monetary union and that the main difficulty lies in the state of public finances in the Member States in spite of the efforts made in this area in the last two years; takes the view, therefore, that the decision as to which Member States should enter the monetary union should take full account of the historical role and of the tendential and lasting nature of convergence developments;

6. Acknowledges that the lasting improvement of the budgetary positions of the Member States actually depends on a real reduction in public spending rather than on an increase in the tax burden, but believes that this objective can and must be attained by the selective use of public investment in productive investments (transport, energy and telecommunications infrastructures);

7. Regrets that the EMI has not mentioned the general problem of the coordination of both direct and indirect taxation in Europe;

As regards preparatory work for Stage Three of economic and monetary union and the other tasks of the EMI

8. Takes note of the summary of the preparatory work being carried out with a view to introducing Stage Three of EMU, which provides a range of information on the potential strategy being contemplated for Stage Three (noting the EMI's cautious approach to strategic decisions), on the definition of the main instruments of the monetary policy of the ESCB and on more practical matters relating to the changeover to the euro, in particular the preparation of banknotes where there would also still seem to be a great deal of uncertainty with regard to the industrial production stage;

9. Believes that the monetary policy as defined in Article 105(1) of the EC Treaty is based on an objective of price stability which respects the Treaty's fundamental principles of sustainable growth, prosperity and employment and therefore takes the view that the monetary policy of the Union is indissociable from the introduction of a Union economic policy based on the close coordination of Member States' economic policies;

10. Urges once again that the cooperation and relations of the EMI with the respective international financial institutions must be stepped up as soon as possible, to ensure the efficient work of the future ECB in this field;

11. Notes that legal problems persist with regard to secondary legislation and requests the EMI and the Commission to make sure that all these texts are ready by the prescribed deadline for the commencement of Stage Three;

12. Is surprised to note that many Member States have still not fully complied with Article 108 of the EC Treaty, which relates to the independence of the national central banks, as regards incompatibility between national legislation (including the statutes of the national central banks) and the present Treaty and the statutes of the ESCB, while emphasizing the extremely useful role which the EMI could perform in this regard vis-à-vis the Member States and the central banks;

13. Draws attention to the political, economic and social consequences of the belated entry of certain Member States into the monetary union;

14. Expresses some concern about the setting up of the information and communications systems which will be essential to carry out the operational functions of monetary policy within the ESCB and the description of which in this report would seem to indicate insufficient preparedness for the deadline of 1 January 1999, and for the magnitude and complexity of the problems involved; expresses its surprise, by the same token, that the electronic exchange of statistics between the national central banks, Eurostat and the future ESCB seems to be at no more than the embryonic study stage;

15. Wishes in this connection to upgrade the tasks of the EMI which entail fostering cooperation between the central banks, in particular to promote standardization, electronic money, banking supervision and relations with international financial institutions, and the exercise of advisory functions for the benefit of the European banking sector in general;

16. Believes that these duties, which are carried out at present by the EMI and most of which will be taken over by the European Central Bank, need to be strengthened in order to ensure the necessary credibility of the body which will be responsible for implementing monetary union vis-à-vis the central banks and the pre-in Member States through the diversified management arrangements of the new European monetary system and through Community lending mechanisms;

As regards relations with the European Parliament and preparations for the commencement of Stage Three of EMU

17. Considers that publication of the annual report should be the occasion for a more detailed dialogue on the present and future activities of the EMI and then the ECB;

18. Reiterates the importance it attaches to genuine democratic monitoring of EMU policy which requires, in particular, the establishment of regular and frequent relations between Parliament and the EMI and in future the ECB;

19. Issues a reminder that it will be called upon to deliver an opinion on the appointment not only of the President of the ECB but of the whole Executive Board, comprising the President, the Vice-President and four other members;

20. Believes that plans should already be made to strengthen its future relations with the ECB and proposes in particular:

- that the ECB should provide quarterly information, in writing or through the appearance of a member of the Executive Board before Parliament, on the implementation of monetary policy within the monetary union, with the other Member States and with non-member countries,

- that meetings should take place twice a year between Parliament's competent committee and, as far as possible, the member of the Executive Board of the ECB responsible for a particular field;

- that there should be regular reporting on the background to interest-rate decisions;

21. Considers that it does not make sense to draw up a convergence report on the basis of the economic data for 1996 as provided for in the EC Treaty, because misunderstandings and uncertainty may arise in public opinion; considers it extremely desirable that, between the end of 1997 and publication of the EMI report on convergence, close contacts should be established between the EMI and Parliament's competent committee to ensure that the latter is in possession of a maximum amount of statistical data and economic information on convergence in the various Member States, with a view to Parliament's involvement in the decision as to which Member States should enter the monetary union;

22. Emphasizes the importance it attaches to the ESCB and the ECB being set up as soon as the decision on which Member States are to accede to the Union has been taken, and stresses the need to provide the ECB from the outset with sufficient material and personnel resources, and in particular the most efficient staff, to ensure that it performs its tasks with real effectiveness and complete independence in this crucial initial stage;

23. Instructs its President to forward this resolution to the Council, the Commission, the EMI, the Governors of the Central Banks of the Member States and the governments and parliaments of the Member States.