A4-0130/98

Resolution on the Convergence Report of the European Monetary Institute (C4-0201/98) and the document from the Commission entitled 'EURO 1999 - 25 March 1998 - Report on progress towards convergence and its recommendation with a view to the transition to the third stage of Economic and Monetary Union¨ (COM(98)1999 - C4-0200/98)

The European Parliament,

- having regard to the presentation of the timetable for the introduction of the single currency and the groundwork for the third stage of monetary union by the Madrid European Council on 15 and 16 December 1995,

- having regard to the convergence report from the European Monetary Institute (C4-0201/98),

- having regard to the document from the Commission entitled 'EURO 1999 - 25 March 1998 - Report on progress towards convergence and its recommendation with a view to the transition to the third stage of Economic and Monetary Union¨ (COM(98)1999 - C4-0200/98),

- having regard to its resolution of 2 April 1998 on democratic accountability in the third phase of EMU ((Minutes of that sitting, Part II, Item 9.)),

- having regard to the fact that, at the same time, the Commission submitted a recommendation for the introduction of the single currency on 1 January 1999 in eleven Member States,

- having regard to the fact that two member countries - Denmark and the United Kingdom - have stated that they are availing themselves of their right not, for the time being, to join the single currency,

- having regard to the fact that Greece has made considerable headway with regard to convergence in recent years, but does not yet meet the stability criteria of the Treaty on European Union; whereas the Greek Government has therefore stated that it will not be participating in economic and monetary union until a later date,

- having regard to the fact that Sweden does not presently meet all conditions for participation in monetary union; whereas, in particular, there continue to be shortcomings concerning the independence of the central bank; whereas the Swedish Government has stated that it will not be participating in monetary union on 1 January 1999 in spite of the fact that it did not negotiate an opt-out,

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinion of the Committee on Employment and Social Affairs (A4-0130/98),

Price stabilityWhereas:

1. According to the Treaty on European Union, only countries with an inflation rate not exceeding 2.7% may move to monetary union;

2. According to the presented reports, the eleven Member States have inflation rates of less than 2%, which is generally termed price stability;

Long-term interest rates

3. Long-term interest rates have considerably converged and are at an all-time low. The eleven Member States are appreciably below the reference value of 7.8%. This means that the markets are satisfied as to the durability of the present stability trend;

Participation in the exchange rate mechanism

4. None of the countries which has been participating in the exchange rate mechanism for at least two years has devalued against other Member States' currencies during that period. The same holds true for the two countries which will have belonged to the exchange rate mechanism for two years by 1 January 1999;

Compliance with the monetary criteria

5. With regard to price stability, all eleven Member States have made great progress. This means that, by 1 January 1999, they will meet these monetary criteria of the Treaty on European Union and that the stability of the monetary value of the euro at its introduction is secure;

Government financial position

6. According to the Treaty, a sustainable government financial position is required in order to secure the long-term stability of the euro;

Budget deficit

7. According to the findings of the Commission and the European Monetary Institute, none of the eleven Member States has a budget deficit exceeding 3%. Thus, it can be stated that there has been a significant reduction in budget deficits in recent years and that this criterion of the Treaty on European Union is met by the eleven Member States;

Overall debt

8. An assessment needs to be made as to whether all candidate countries are moving sufficiently quickly towards the reference value of 60% or whether, as the case may be, a positive decision is made possible by the overall assessment of the economic and budgetary situation of the country concerned;

9. The Commission has given an affirmative answer to this question in its proposal for a decision. It has concluded that no excessive deficit exists in any of the candidate countries;

10. In the opinion, nevertheless, of the European Monetary Institute, the trend in overall debt in two countries continues to give cause for concern. The European Parliament is therefore pressing for concrete commitments by the governments concerned to continue the process of consolidation;

11. Moreover, the European Parliament insists on the strict observance of the Pact on Stability and Growth by all participants in monetary union;

12. However, note must be taken of the fact that both countries have a high level of savings and a net external debt position which is in balance or is tending to make progress;

13. In order to achieve a more satisfactory financial balance, it would be appropriate to take account, in an overall assessment, also of the indebtedness of firms and households;

14. Such a policy must not be applied solely as an accounting exercise, but, rather, must promote the sustainability of public finances in the context of the Pact on Growth and Stability and apply fiscal rigour by introducing all the reforms required to leave sufficient leeway for development requirements, given that the objective is to reduce the ratio between debt (which should tend to fall) and gross domestic product (which should increase);

15. Taking account of trends in recent years, debt structure, ratios of savings to income and 1998 budgets, and on the basis of the medium-term convergence programmes submitted by the Member States, the European Parliament's conclusion is positive overall;

Central bank independence

16. To ensure the independence of the European System of Central Banks, stipulated in the Treaty on European Union, the national central banks of the Member States must also be independent;

17. Although the necessary legislative procedures have been set in train in all countries, this process has not yet been concluded. Under the Treaty, these legislative procedures must have been concluded by 1 July 1998 at the latest;

General economic indicators referred to in the Treaty

18. With regard to integration of markets, it can be stated that significant progress has been achieved. Nonetheless, a host of shortcomings remain. Twenty-one percent of the necessary measures have not yet been implemented in all Member States. For this reason, the single internal market must be expanded, on the basis of an 'action plan', to form a genuine European Home Market, which will be of particular benefit to small and medium-sized enterprises;

19. Last year, on average, the eleven countries ran surpluses on their balances of payments on current account. Eight countries have a surplus, three a modest deficit; this area is therefore unlikely to be a source of tension;

20. To date, a high proportion of external trade, as a percentage of goods-related gross domestic product, has been affected by exchange rate fluctuations. There will be a marked fall in that proportion as a result of the introduction of the single currency. This increases certainty in terms of planning and is of particular importance to small and medium-sized enterprises;

21. The current trend in prices and cost indices in addition to consumer prices, e.g. production costs, wholesale prices and, in particular, unit labour costs, is positive too. These are further signs of lasting price stability;

Employment

22. Employment, albeit not a formal criterion in the Treaty on European Union, is nonetheless the greatest challenge facing Europe at present. It must therefore be taken into account for the overall assessment of economic trends in the member countries;

23. The high level of unemployment in most of the eleven countries must be resolutely reduced, since it may jeopardize the European Union's cohesion and the realization of the main objectives of economic and monetary union;

24. Monetary policy must be supported, in its task of ensuring price stability, through commensurate budget measures, movements in pay and efficient product markets. Monetary conditions, including exchange rates and long-term interest rates, may then have a beneficial impact on economic growth, investment and employment;

25. In the context of employment policy, substantially improved occupational mobility and adaptability is of particular importance. To reduce unemployment, investment-induced growth must be buttressed by life-long skills training based on a strengthened education system, structural employment measures and supportive tax/benefit systems;

26. To assist in improving occupational mobility, the European Parliament believes that occupational pension schemes should be made flexible and portable especially by reducing the period before an employee's rights are 'vested¨ to no more than 2 years;

27. European dialogue between economic and social partners in the framework of the Community institutions and Community consultation procedures is essential in order better to define and achieve the Community's economic, social and environmental objectives;

28. The European Parliament invites the Council to be consistent with the undertakings given at the Luxembourg European Council on Employment and to promote actions and measures capable of outlining a European policy on employment in the near future;

29. The European Parliament stresses the importance of a policy mix that fosters stability and sustainable growth which implies, on the one hand, sound macroeconomic policies conducive to sustained non-inflationary growth and employment, and, on the other hand, greater coordination of economic and structural policies to maximize the growth and employment potential of the EU;

30. The European Parliament calls on Member States to intensify coordination between economic policy and active labour market policies and to speed up the implementation of initiatives agreed at the Extraordinary European Council on Employment in order to create favourable framework conditions for the strengthening of internal demand and investment;

31. The European Parliament underlines the importance of a level playing field in the allocation of resources and asks for the reduction of non-wage labour costs, which could be compensated by other fiscal reforms without curbing social benefits, targeted at the lower end of the wage scale; it stresses also the critical importance of active labour market measures combining vocational training, retraining, or education, with a work experience or an apprenticeship, which could be financed partly through the activation of unemployment benefits and the development of local partnerships;

European economic and monetary policy for the promotion of convergence

32. The Pact on Stability and Growth is a valuable instrument for guaranteeing the necessary budgetary discipline during the third stage of EMU. In the context of multilateral surveillance policies, particular attention must be paid to coordination of the member countries' budgetary policies;

33. Under the Treaty on European Union, each Member State is obliged to conduct its exchange rate policy as a matter of common interest. Departing from this principle may have negative consequences for other member countries' economies;

34. A single monetary policy has to take into account the different economic cycles in the Member States¨ economies and must be prepared to deal with asymmetric shocks which might hit the different economies, all of which makes enhanced economic and monetary policy cooperation increasingly important. Only in this way can lasting convergence and economic and social cohesion be achieved. To achieve this, the procedure for economic policy coordination must be improved and strengthened;

35. In the area of policy on taxation, a balance must be found between Member States' fiscal sovereignty and the need for stepped-up coordination of tax systems and rates, thus avoiding distortions of competition;

36. Research, development and innovation are the main pillars for economic development. Initiatives at national and Community level to promote investment in human capital, new technologies and infrastructure facilities must be stepped up;

37. Being the EU's only directly elected institution, the European Parliament has a formal role interacting with the European Central Bank. It will keep a close watching brief on its monetary policy without calling the Bank's independence into question;

Conclusions

The European Parliament,I. Welcomes the considerable progress made by the Member States of the European Union in terms of convergence with a view to the start of the third stage of economic and monetary union, which has led to low rates of inflation, low long-term interest rates, minor monetary fluctuations and discernible consolidation of government budgets;

II. Welcomes the introduction of the single currency by 11 Member States which have fulfilled the requisite conditions and should like to enter the third stage of EMU on 1 January 1999, namely Belgium, Germany, Finland, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Spain;

III. Approves the Commission's recommendation that the third stage of economic and monetary union should begin on 1 January 1999 with 11 Member States fulfilling the necessary conditions, and calls for all the conditions to be met to enable the independent European Central Bank to be founded as soon as possible and monetary policy sovereignty to be transferred to it on 1 January 1999; calls also, with regard to the national central banks, for the legal provisions of the Treaty on European Union to be implemented;

IV. Calls on the European Council to abide by its undertakings and propose a single candidate for the presidency of the European Central Bank at its forthcoming summit on 2 May 1998;

V. Recalls that the European Parliament's opinion on the achievement of convergence conditions will again be sought when other Member States ask to join the single currency in future;

VI. Instructs its President to forward this resolution to the Heads of State and Government of the European Union, the Council of Ministers for Economic Affairs and Finance, the European Commission, the European Monetary Institute, and the Parliaments of the Member States.