A4-0352/96

Resolution on the report of the European Monetary Institute on the changeover to the single currency (C4-0559/95)

The European Parliament

- having regard to the EC Treaty, in particular Title VI thereof 'Economic and Monetary Policy',

- having regard to the report of the European Monetary Institute 'The changeover to the single currency' (C4-0559/95),

- having regard to the hearing held in the Subcommittee on Monetary Affairs on 25 June 1996 with representatives of the European mail order business and department store chains,

- having regard to the resolutions of the European Council held in Madrid on 15-16 December 1995, to the informal meeting of the ECOFIN Council held in Verona on 12-13 April 1996 and the conclusions of the Presidency of the European Council held in Florence on 21-22 June 1996,

- having regard to its resolutions of:

. 19 May 1995 on the introduction of the ECU as legal tender ((OJ C 151, 19.6.1995, p. 483.)),

. 25 October 1995 on the practical arrangements for the introduction of the single currency ((OJ C 308, 20.11.1995, p. 54.)),

. 30 November 1995 on economic and monetary union ((OJ C 339, 18.12.1995, p. 65.)),

. 18 June 1996 on exchange rates in the third stage of economic and monetary union ((Minutes of 18.06.1996.)),

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinion of the Committee on External Economic Relations (A4-0352/96)

A. whereas it is appropriate to adopt a resolution of principle on Economic and Monetary Union in order to give a clear signal to all those involved in economic life for the introduction of the single currency (Euro),

B. whereas Economic and Monetary Union (EMU) has become part of primary Community law through its adoption by the governments and through ratification by the parliaments of the Member States and whereas, therefore, its realization is removed from the realm of political expediency,

C. whereas existing freedom of movement for capital and financial services will acquire a new dimension with the introduction of the single European currency and whereas the elimination of exchange rate risk in monetary transactions between the states participating in stage 3 will result in the formation of a single financial market superior to the stage 2 market in depth, liquidity and competitiveness and with broader scope for investment,

D. whereas monetary union, through the initial introduction of the Euro in the hard currency countries, is a necessary corollary of the internal market, improves conditions for investment to produce more jobs, eliminates exchange commission and costly currency hedging and will considerably reduce speculative disruption between the Euro and the currencies not (yet) participating in the third stage of EMU (EMS II),

E. whereas, regardless of monetary union and the criteria laid down for the transition to the third stage, there is a need for a thrifty spending policy to put the Member States' budgets in order, taking into account also the need to maintain a sufficient level of demand in the economy,

F. whereas creating jobs by borrowing when the causes of unemployment are structural is a cosmetic measure which produces greater government debt, a heavier interest load for public budgets and price rises,

G. whereas a failure to combat cyclical unemployment with direct measures to increase employment by boosting active demand is liable to convert temporal, cyclical unemployment into large-scale structural unemployment,

H. convinced that measures to curb unemployment help achieve the preconditions for a single currency, while a perpetuation of unemployment will hamper the attainment of EMU,

I. whereas it would be appropriate to conclude another stability pact in the context of applicable Community law, since all Member States of the European Union have an interest in stable monetary, economic and social development, though the criteria for entry to the third stage of monetary union should not be made more stringent, either by means of legislation or in practice,

J. whereas those with political and economic responsibility in the European Union must resolutely pursue a policy which creates the preconditions to enable the permanent fulfilment of the convergence criteria to go hand in hand with a lasting reduction in unemployment,

K. whereas it is not at the present time but by the dates laid down in the Treaty, in particular Article 109j of the EC Treaty, and on the basis of the quantitative and qualitative convergence criteria that a decision must be taken as to which Community countries with hard currency will enter the third stage of monetary union,

1. Stresses that Article 109j of the EC Treaty lays down binding provisions for the transition to the third stage of Economic and Monetary Union with the dates and convergence criteria to be observed by the Council;

2. Considers it imperative, in order to clarify unequivocally the convergence criteria relating to the decision as to which States will participate in the third stage - to be taken in 1998 on the basis of 1997 statistical data -, that the assessment procedure provided for in Article 109j of the EC Treaty be carried out in 1996 so that the Member States receive guidance on interpretation of the convergence criteria;

3. Reminds the Irish Presidency of the undertaking it gave in Parliament on 17 July 1996 to carry out the assessment procedure provided in Article 109j of the EC Treaty with Parliament's participation, as laid down by the Treaty, so that the Heads of State and Government meeting in the European Council on 13 December 1996 in Dublin can make their decision with due regard to Parliament's opinion;

4. Refers in this context to Article 190 of the EC Treaty under which the decision adopted by the Council must state the reasons on which it is based and must refer to the opinions which must be obtained pursuant to the Treaty, in this case the opinion of the European Parliament;

5. Notes that fortunately a majority of Member States already fulfil the convergence criteria of low inflation, low long-term interest rates and exchange rate stability, and that progress has been made in budgetary discipline, although the proceedings relating to an excessive deficit have been initiated against 12 of the 15 Member States;

6. Regrets that public opinion has misunderstood the convergence criteria on the budgetary deficit and government debt as 'spot landing' and stresses that the Maastricht Treaty must be strictly respected, and notably the provision that an assessment must be carried out as to:

'(a) (as regards the budgetary deficit)/whether the ratio has declined substantially and continuously and reached a level that comes close to the reference value, or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value;

(b) whether the ratio of government debt to gross domestic product exceeds a reference value, unless the ratio is sufficiently diminishing and approaching the reference value at a satisfactory pace' (see Article 104c(2) of the EC Treaty);

7. Regrets that in some Member States the impression is gaining currency that savings are having to be made 'because of Maastricht', and that the European ideal is thereby being undermined;

8. Stresses that the introduction of the Euro cannot be carried out against the will of European citizens and that for this reason the open debate on the common currency and the conditions for the introduction thereof must be intensified;

9. Stresses the need regularly to conduct information campaigns concerning the Euro, targeting specific groups and involving members of the European Parliament, so as to overcome the ignorance which prevails throughout Europe on monetary union and to increase willingness to accept the Euro;

10. Calls on the Commission to submit a proposal before the end of 1996 on the parallel pricing which is necessary in the eyes of consumers;

11. Stresses that a successful start to the third stage depends on the Council as soon as possible in 1998, after consulting Parliament pursuant to Article 109a(2)(b) of the EC Treaty, appointing the Executive Board of the European Central Bank (ECB) and setting up the ECB and the European System of Central Banks (ESCB), as the ESCB is responsible from the third stage for the common monetary policy in the Euro area;

12. Welcomes the scenario for the changeover to a single currency, adopted by the European Council meeting in Madrid on 15 and 16 December 1995, in particular the irrevocable fixing of conversion rates for 1 January 1999 between the Euro and the currencies of the participating Member States which will make the Euro and national currencies different expressions of what is economically the same currency;

13. Is convinced that, following the irrevocable fixing of the Euro exchange rate, the Euro will quickly and extensively be used as scriptural money for non-cash transactions since the ESCB will conduct foreign currency transactions in Euros and the public authorities will make new issues in Euros;

14. Takes the view that the changeover planned to take place between 1 January and 1 July 2002, when national banknotes and coins will be replaced by Euro notes and coins, should take place in quick succession, where technically possible, in order to avoid costs arising from double accounting and parallel pricing which would be particularly costly for the retail mail order business and stock market listings of shares and bonds;

15. Therefore considers it appropriate to convert public bonds, prior debt and quotations of securities traded on the markets to Euros as soon as 1 January 1999 since a division into two quotations, one in national currencies and one in Euros, would lead to system-overload for stock exchanges and the conduct of business;

16. Recalls, in this particular context, that when German currency union took place during the night of 1 July 1990 by completely exchanging and replacing the East German Mark with the DM across the board, it was done in such a way as to make double accounting and pricing superfluous; a slow currency changeover prolongs the learning process, as demonstrated at the beginning of the sixties when France switched from the old to the new franc; sterling, on the other hand, made a very rapid and effective transition to the decimal system;

17. Considers that the period of three years between 1 January 1999 and 1 January 2002, during which the Euro will be used as scriptural money and prices could be displayed in national currency and the Euro for information, is long enough for consumers to become accustomed to the new currency;

18. Recommends therefore that private and public sector enterprises prepare the technical and organizational adjustments in such a way that an effective cash changeover to the Euro can be accomplished in those States taking part in the third stage of EMU as far as possible on one day between 1 January and 1 July 2002;

19. Points out in this connection that individuals' and firms' need for cash will diminish as electronic methods of payment, credit cards and chips become more widely used, which means that when the changeover is made, large sums will be changed in the form of Euro scriptural money and only small amounts will be changed into Euro banknotes and coins;

20. Stresses the need, pursuant to Article 109f(3) of the EC Treaty, for the EMI to specify by 31 December 1996 the regulatory, organizational and logistical framework necessary for the ESCB to perform its tasks in the third stage;

21. Considers it essential that a clear legal framework, in the form of a Community Regulation applicable from the first day of stage 3, should be established as early as 1997 but no later than when the decision is taken on which States will be participating in stage 3, so that money-users are assured in law of the status of the Euro and of the irrevocable exchange rates;

22. Shares the EMI's view that such secondary Community law on monetary matters should take the form of a Council regulation adopted pursuant to Article 109l(4) of the EC Treaty and takes the view that Parliament should deliver an opinion by way of non-compulsory consultation;

23. Calls on the EMI and the Council, in drawing up this legislation, to safeguard the principles of transparency and public acceptance, ensure the legally enforceable equivalence of the Euro with the national currencies and lay down uniform rounding-off rules for the use of conversion rates;

24. Considers it imperative that the date for the introduction of Euro banknotes and coins by the Governing Council of the ECB should be fixed as soon as possible after setting up the ECB and before the start of stage 3, as there will be confidence in the Euro only if all parties involved are amply informed at an early stage, which requires close coordination between the efforts of the national central banks, the EMI and the future ESCB as the issuer of the Euro;

25. Points out that the public sector, which represents almost half of gross national product, and the private sector will have to cooperate closely at an early stage to enable the changeover to take place smoothly;

26. Calls on the EMI and the Commission, in order to ensure stable exchange rates within the Union, to submit to the Council the necessary proposals for decisions to regulate currency relations between the Euro and the States not yet using the Euro so as to minimise exchange rate fluctuations and avoid competitive devaluations by Member States which are not yet members of the Euro area; calls on the Council to adopt a resolution on EMS II as soon as possible in order to provide the ECB and the ESCB with the necessary powers and the markets with the basic conditions in time to stabilize their expectations;

27. Calls on the European Monetary Institution and the Commission, with a view to safeguarding the principle of Community solidarity, to submit the necessary proposals to enable the Council to take decisions so that the cost of measures to avoid excessive fluctuations in exchange rates under the previous article will be fairly divided among Member States of the Union which are 'inside' and 'outside';

28. Reaffirms its belief that the new European monetary system to be introduced in stage 3 must ensure the stability of the Euro and, at the same time, the stable development of the other currencies to facilitate and to accelerate their subsequent accession to the Euro area;

29. Stresses that the States in the third stage must belong to the exchange rate mechanism of the European Monetary System for two years without devaluing against the currency of any other Member State while observing the normal fluctuation margins (Article 109j(1), third indent);

30. Takes the view that the Euro should act as an anchor currency for those currencies not belonging to the Euro area from the outset, while a flexible system managed with the aid of the ECB should have sufficiently broad fluctuation margins with the option of laying down narrower margins for those States whose situation in terms of the convergence criteria justify that;

31. Encourages the Member States not participating in the third stage from the outset to continue their efforts to achieve convergence as, pursuant to Article 109k(2) of the EC Treaty, the Council must decide every two years, or earlier at the request of a Member State with a derogation, whether the convergence conditions have been fulfilled in the meantime, which might further increase the number of States participating in stage 3 by 1 January 2002;

32. Stresses its resolve, therefore, to assert its rights in appointing the members of the Executive Board of the ECB pursuant to Article 109a of the EC Treaty and to monitor closely the activities of the ECB and the ESCB pursuant to Article 109b of the EC Treaty by means of a general debate on the annual report on the activities of the ESCB and, should the occasion arise, to request the President of the ECB or members of its Executive Board to appear before its competent committees;

33. Points out that the transition to the single currency will entail, internationally, a greater responsibility on the Union in the conduct of international economic and monetary affairs; consequently, considers that there is a pressing need to draw up procedures for participation by the Union in international economic and financial organizations, in particular the IMF and the multilateral or regional development banks (World Bank, EBRD, IDB, etc);

34. Considers it essential for an external reference scenario to be adopted on the chronological progression of developments with details of the timetable, adjustment and coordination measures and the sharing of responsibilities between the Member States and the Community institutions;

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