No C 329/44 Official Journal of the European Communities 30. 12. 89 
insignificant drop in production has been accompanied 
by an increased risk of desertification and hydrogeologi-
cal imbalance. 
3. The Committee sees the present proposal as only 
one means of ensuring that the set-aside mechanism is 
used in an effective and balanced manner. 
4. While approving the proposal, the Committee 
notes that one of the main reasons why the scheme has 
Done at Brussels, 19 October 1989. been insufficiently used is that some of the Member 
States for whom it was principally devised are not 
applying the maximum aid-level allowed. This prevents 
farmers from receiving full compensation and thus ham­
pers the use of the scheme. 
5. The Committee therefore asks the Commission to 
use the instruments at its disposal to press the Member 
States to set their aid at a level which truly reflects the 
agronomic and economic needs of the various regions. 
The Chairman 
of the Economic and Social Committee 
Alberto MASPRONE 
Opinion on the report on Economic and Monetary Union (EMU) in the European Community 
(Delors report) 
(89/C 329/16) 
On 30 May 1989 the Economic and Social Committee, acting under the fourth paragraph of 
Article 20 of the Rules of Procedure, decided to draw up an Opinion on the abovementioned 
report. 
The Section for Economic, Financial and Monetary Questions, which was responsible for 
preparing the Committee's work on the subject, adopted its Opinion on 10 October 1989. 
The Rapporteur was Mr Meyer-Horn. 
At its 270th plenary session (meeting of 19 October 1989) the Economic and Social Committee 
adopted the following Opinion by 111 votes to six with four abstentions. 
1. Causes, conditions and benefits of EMU 
1.1. EMU is described as a realistic target in the 
report which was presented on 12 April 1989 by the 
committee of central bank governors and economists 
chaired by the President of the Commission of the 
European Communities, Jacques Delors, in accordance 
with the terms of reference issued by the European 
Council in Hanover on 27-28 June 1988. 
1.2. The conditions for the achievement of Economic 
and Monetary Union are better now than they were at 
the time of the Werner plan (Council Decision of 22 
March 1971) or of the establishment of the European 
Monetary System (EMS) (Council Resolution of 13 
March 1979), which has never moved on to stage two: EMU will supplement the Internal Market which is 
to be established by 1 January 1993 .under the terms 
of the Single European Act. The advantages of the 
Internal Market will be felt in the monetary sector, 
too; as a matter of fact, monetary union is even a 
key feature of a Community-wide internal market. 
A single monetary area would also be a logical 
sequel to the plan for liberalizing capital movements 
by 1 July 1990 (even if transitional rules are to apply 
until 1993 for Ireland and Greece and until 1992 
for Spain and Portugal), and to the lifting of all 
restrictions on banking under the terms of the 
second Directive on the coordination of banking 
legislation. 
30. 12. 89 Official Journal of the European Communities No C 329/45 
— The prerequisites for EMU have improved because 
the gaps between inflation rates have narrowed and 
economic policies have converged more, thanks to 
the closer cooperation between central bank gover­
nors and Economic and Finance Ministers. 
1.3. Given the objectives listed in Article 2 of the 
EEC Treaty and the fact that the arguments put forward 
in the first chapter of the Delors report are to be 
endorsed, it would seem advisable and realistic to move 
towards EMU. In so doing it will be possible to build 
on the good record of cooperation within the EMS. 
Approval is given to the view (in point 5) that the EMS 
has succeeded as a zone of relative price and exchange-
rate stability, though this success has also been due 
to the particularly favourable economic and monetary 
climate in recent years. 
1.4. The key to progress towards EMU will be politi­
cal will and readiness to make the requisite institutional 
arrangements. The Madrid European Council's 
Decision of 27 June to launch the first phase of EMU 
on 1 June 1990 as proposed in point 43 of the report is 
obviously not yet regarded in all Member States as a 
clear political commitment to a fully-fledged monetary 
union, i.e. as a 'decision to embark on the entire process' 
as the Delors report states in point 39. On the other 
hand, some progress will be made in the monetary 
sector in the run-up to 1992 thanks to the liberalization 
of capital movements and financial services and the 
coordination of banking supervision. 
However, the question of how the transfer of economic 
and monetary powers to the Community is viewed is 
still all-important for the broad political approval 
needed by EMU. One difficulty here is that the Com­
munity bodies have not yet discussed to what extent 
irrevocable exchange rates or even a single Community 
currency will make it necessary to transfer powers and 
decision-making to the Community. The extent of this 
transfer of powers to Community bodies (such as the 
Council of Ministers and the European system of central 
banks) is of key importance for the political endorse­
ment of EMU and should therefore be agreed on before 
a binding decision is reached on the final stage of EMU. 
The discussions should also cover the alternatives to 
the Delors report which have been given a public airing 
in the meantime but which are not considered by the 
Committee in this Opinion. 1.4.1. Many more powers are to be transferred under 
the Delors report's proposals than under the Single 
European Act in the run-up to 1992. Political concern 
about the surrender of powers to joint Community 
decision-making bodies is therefore understandable. 
Economic constraints by themselves will not ensure 
requisite political will. It is true to say that the scope 
for independent monetary and economic policymaking 
will be reduced if Member States' economies and capital 
markets merge more closely, as explained in points 
10 and 12 of the report. However, it was—and still 
is—possible for Member States to shield their econo­
mies to some extent by adjusting their exchange rates. 
In the last two-and-a-half years this possibility has 
deliberately not been used in the EMS. During the 
preparations for EMU it will be vital to seize on the 
opportunity still existing under the growing constraints 
of the internal market with its free movement of capital 
and unrestricted banking services and especially when 
all Member States are full members of the EMS. Politi­
cal understanding for the fact that the structural adjust­
ments required during the transitional period can be 
made easier by parity changes is a sine qua non for 
endorsement of the transfer of decision-making to Com­
munity bodies which irrevocable and firmly fixed 
exchange rates will require. On the other hand, 
although the existence of a common economic and 
monetary policy will reduce national control over pol­
icy, the Member States acting together will normally 
have more economic and monetary scope. 
1.4.2. The willingness of policymakers at all levels 
to bow to economic constraints and approve the surren­
der of sovereignty needed for EMU will not fit in easily 
with a three-stage plan, even if no deadlines are fixed 
for these stages. However, a target date, such as the 
year 2000, might facilitate decision making and taking. 
The fact that the 1992 deadline for the Internal Market 
is working well is evidence of this. In addition, the 
hitherto mainly academic discussion should be extended 
and action taken generally to promote the political 
willingness to accept EMU. Above all, the public should 
be made aware of the need for EMU, with all its benefits 
and consequences. 
1.4.3. An early date, if possible in the second half of 
1990, should be set for the intergovernmental confer­
ence for drafting an EMU Treaty which was proposed 
in the Delors report and accepted at the Madrid Sum­
mit. This conference should not be held in full secrecy 
No C 329/46 Official Journal of the European Communities 30. 12. 89 
throughout; a suitable way of briefing parliaments— 
European, national and regional—should be found. 
These briefings and discussions should include econ­
omic and social groups, as represented in particular 
on the European Community's Economic and Social 
Committee, which should be consulted regularly on 
further developments. EMU extends far beyond the 
internal market and has far-reaching consequences for 
the economy and the social fabric and thus for the 
public in general. The implications of EMU must be 
broadly known when the final vote is taken, because 
such a vote will be tantamount in its importance to a 
Community-wide referendum. In view of these impli­
cations, the powers of the European Parliament must 
be strengthened as soon as possible in preparation 
for the democratic policy-forming, decision-taking and 
supervisory role it will be assigned in EMU. The change­
over to EMU would be made easier if the European 
Parliament cooperated more closely with national and 
regional parliaments. 
1.5. Because of the desire to seek broad political 
approval for EMU, it would be advisable to agree on 
its consequences as soon as possible and incorporate 
all the main decisions required for the completion of 
EMU in a single Treaty. In addition, the path towards 
EMU described in the Delors report could be underpin­
ned by an action programme—basic social rights, tax 
harmonization, regional policy—to be proposed by the 
Commission (as in the 1985 White Paper on the Internal 
Market). 
1.5.1. It would not be important for the measures 
adopted on the basis of such a programme to be assig­
ned to one of the stages described in the Delors report. 
Instead they should accompany the run-up to 1992 and 
be in response to how this run-up fares, especially after 
the liberalization of capital movements, the establish­
ment of freedom to supply banking and financial ser­
vices, the inclusion of all Community currencies in the 
EMS's exchange rate mechanism and the changing of 
taxation. Since these events will mean radical changes 
in many Member States and could widen existing gaps 
in development still further, there is a case for 
accompanying Community measures (see point 2.8 et 
seq.). 
1.5.2. The four aspects—liberalization of capital 
movements, freedom to supply financial services, the 
EMS's exchange rate mechanism and changes in tax­
ation—could prove to be the acid test for EMU, and 
require considerable adjustments to exchange rates. 
Unlike the last two-and-a-half years when EMS 
exchange rates have undergone no adjustments, the 
possibility for making parity changes (coordinated at 
Community level) would have to be exploited in good 
time and to the requisite extent during this period of adjustment. Such parity changes would not endanger 
progress towards EMU—they would in fact establish a 
favourable basis. 
1.6. It will be important, for the sake of the political 
will and the public understanding which ought to be 
fostered (especially among economic and social groups, 
trade associations and the two sides of industry), to go 
into more detail than the Delors report does about the 
consequences of EMU. The real benefits—and con­
straints—of EMU are simply touched on in the Delors 
report (e.g. point 14—significant increase in 'economic 
welfare'). 
1.6.1. The cost and benefits of EMU have not been 
calculated in the way 'non-Europe' was costed in the 
Cecchini report on the Internal Market. It would, how­
ever, be useful to make some mention of the magnitude 
of the savings that will be made, as President Delors 
announced to the European Parliament in September 
1989. The benefits of monetary union will be felt 
throughout the economy, as described in points 2.9 et 
seq. below. In a monetary union, and especially if there 
is a single Community currency, the man in the street 
will probably identify himself more closely with Europe, 
and even though this closer identification cannot be 
quantified it will be welcome for the sake of integration. 
Households and small firms are among those who will 
benefit financially from the elimination of exchange-
rate risks and—if a single currency is introduced—from 
the disappearance of exchange costs, the simplification 
of payment transactions and not least the greater price 
transparency which is so important for competition. 
1.6.2. On the other hand, the constraints of EMU 
should not be concealed from the public. These con­
straints are referred to in the Delors report under the 
headings 'parallelism', 'subsidiarity', 'plurality' and 
'solidarity' but they are not dealt with in any great 
detail. In particular there should be a thorough, frank 
discussion of the consequences of establishing a sound 
basis for price stability, of not allowing the central 
banks to engage in inflationary deficit financing by 
providing unlimited loans, and of securing transfer 
payments from regional and structural funds. It will 
also be necessary, apart from adopting economic policy 
measures, to make several exchange-rate adjustments 
if the differences—still considerable in some cases— 
between individual countries' tax structures and 
budgetary balances and between their security costs 
and the funding thereof are to be eliminated or at least 
reduced before the launch of EMU. 
1.7. The Economic and Social Committee draws 
attention to the manifold consequences of the requisite 
adjustments and structural changes in its comments 
below on the final stage of EMU (Chapter 2) and on the 
steps towards that union (Chapter 3). The Committee 
believes that the Delors report does not give sufficient 
consideration to the various social aspects of these 
30. 12. 89 Official Journal of the European Communities No C 329/47 
adjustments and structural changes, and trusts that the 
social dimension of EMU will be carefully examined in 
the course of the further preparations. The purpose of 
this cannot be to encroach on the autonomy of the 
collective-bargaining partners (point 30 of the Delors 
report) or to lay down a Community blueprint for wage 
policy which goes further than simple guidelines such 
as a reference to real productivity gains. Wage policies 
which are based on real improvements in productivity 
and which also lead to real increases in income could 
indeed make a major contribution towards safeguard­
ing price stability in EMU, and would also be of particu­
lar benefit to the economically less developed areas of 
the Community where there are considerable pro­
ductivity reserves. These areas would have a better 
chance with such a policy (than with the inflationary 
policy pursued to date) of catching up with the incomes 
in the rest of the Community and making social pro­
gress. According to the Economic and Social Committee 
it is vital that economic and social developments 
throughout the Community—which, as it is, are closely 
knit—keep pace with economic and monetary inte­
gration and that workers have trust in the Community. 
The Economic and Social Committee would therefore 
stress once again that in its view EMU is only conceiv­
able if a high degree of economic and social convergence 
is attained. 
2. The final stage of EMU 
2.1. The old dispute between 'monetarists' and 
'economists' on whether economic union is an inevi­
table consequence of monetary union or merely its 
culmination has not been fully laid to rest in the Delors 
report. The parallel implementation of economic union 
and monetary union is advocated in point 21. However, 
the report rightly admits in point 42 that 'temporary 
deviations from parallelism' cannot be avoided and are 
indeed 'part of the dynamic process of the Community'. 
Be this as it may, the Committee agrees with the Delors 
report that parallelism means that the principal features 
of economic union are influenced by the agreed monet­
ary arrangements and constraints, but equally that 
monetary union is only conceivable if it goes hand-in-
hand with a high degree of economic convergence. 
2.1.1. Monetary integration must and can be to the 
fore if it is decided to set up a European System of 
Central Banks (ESCB) (point 32) with a mandate for a 
common monetary policy (point 24). On the other hand, 
individual Member States should rightly be entitled to 
retain a certain degree of autonomy in their economic 
decision-making. This degree of autonomy, which still 
has to be agreed on, would satisfy the principle of 
subsidiarity and would ensure that Member States 
retain their identity and plurality (economic, social, cultural, political—point 17) as they should. Basically 
it is more a question of enhancing the political will 
to act jointly and not so much one of creating new 
institutions as soon as possible. 
2.1.2. Unlike the monetary sector, no new Com­
munity body would be created for economic policy 
decisions. Powers would be allocated in accordance 
with the 'principle of subsidiarity' (point 20). The 
Council of Ministers would determine the broad lines 
of economic policy (point 33) but the Member States 
would remain responsible for decisions which can be 
carried out at national, regional and local level without 
having adverse repercussions on the cohesion and oper­
ation of EMU. Before this principle can be put into 
practice in all economic and social sectors, there will 
have to be close legally sanctioned agreement between 
the Member States. Experiences show that even in a 
federation such as the USA there is considerable scope 
for political decision-taking without this leading to 
economic or monetary disintegration. 
2.1.3. It will be difficult for the common monetary 
policy and a convergent economic policy to advance in 
parallel as long as they are the responsibility of bodies 
which are not committed solely to Europe in their 
composition. As an indication of the lack of parallelism 
tensions may arise between monetary policy on the one 
hand and economic and fiscal policies on the other. 
Another reason why parallelism is difficult to achieve 
is that the responsibilities for (a) monetary policy and 
(b) economic and fiscal policies differ from country to 
country. The more economic policy in general is in tune 
with the price stability objective, the easier it will be to 
achieve parallelism at Community level. 
2.2. The basis for a common monetary policy, as 
required by irrevocably fixed exchange rates and—ulti­
mately—a common currency (point 16), is the mandate 
assigned to this policy. Here the Delors report mentions 
first and foremost (point 32) the commitment to price 
stability and support for the general economic policy 
set at Community level. Community and national econ­
omic and fiscal policies will have to be in tune with the 
price stability objective. 
It is vital in connection with monetary policy to super­
vise the entire supply of money and credit and ensure 
that there is an efficient system of payments and finance, 
including electronic payment systems. By contrast, the 
issuing and circulation of banknotes and coins is no 
longer as important as it once was. Therefore, the 
Delors report has not been negligent—despite public 
speculation—in failing to submit any proposals about 
what form Community banknotes and coins should 
take. 
No C 329/48 Official Journal of the European Communities 30. 12. 89 
2.2.1. The key role to be played by price stability 
should be embodied in the ESCB's statute in accordance 
with the Delors report's proposals (point 32). Price 
stability is important for a number of reasons: 
— Price stability is an important, albeit not the only, 
prerequisite for economic growth and a low level 
of unemployment. 
— If price stability is guaranteed to the same extent 
throughout the Community, a major incentive for 
speculation on currency revaluations and devalu­
ations will be lost. 
— Stable currency relations within the Community 
will help considerably to make the Community into 
an attractive capital market worldwide. 
The commitment to price stability will also be of great 
social benefit because the savings and earnings of less-
privileged groups will not be eroded by inflation. EMU 
will thus contribute something to the social dimension 
which many still find lacking in the Internal Market. 
2.2.2. If monetary depreciation can be minimized, 
small savers and persons receiving state pensions will 
not suffer socially questionable losses in purchasing 
power. Collective bargaining will also be made easier 
since 'compensation for inflation' will no longer have 
to be included in wage negotiations, and all countries 
of the Community will become equally attractive targets 
for investment capital. A monetary union committed 
to price stability will thus make it easier for the Com­
munity to raise capital on the international markets for 
structural and regional development projects. It would 
also help the Community to face up better to the 
currencies which have dominated the international 
monetary system in the past (in particular the US dol­
lar), and to fight the importing of inflation (cf points 
2.9.1 and 2.9.2), although even monetary union in the 
Community cannot of course provide complete protec­
tion from all the upheavals caused by the international 
monetary system. 
2.2.3. The EMS's good track record militates in 
favour of the political acceptance of a Community 
committed to stability. As the Delors report quite right­
ly points out, the EMS has given increasing priority to 
price stability and has benefited from the role played 
by the Deutschmark as an 'anchor' for participants' 
monetary policies. A large core of countries with low 
inflation rates has now emerged within the EMS and 
criticism about 'skewed exchange-rate adjustments' and 
the Deutschmark's 'dominance' has subsided, especially 
as the Deutschmark, too, is seriously affected by inter­
national monetary constraints. A monetary union, giv­
ing a Community basis to the responsibilities and pol­
icy-forming processes which have often been guided by decisions of the German Bundesbank in the past, will 
offer the chance to progress still further here. The 
lessons learnt from the EMS will make it easier to find 
a solution at Community level to the tensions which 
may arise if support for a policy geared to balanced 
growth, converging standards of living, high employ­
ment and external equilibrium is to coincide with 
greater price stability (point 16). This will require agree­
ment at Community level on this list of economic 
objectives and—even more so—on joint priorities. The 
decisions to be taken here by the bodies responsible for 
economic policy must be based on analyses of each 
individual case. Special care must be taken to ensure 
that Community priorities are taken into consideration 
in the areas of economic and fiscal policy still the 
responsibility of national authorities. 
2.2.4. The use of monetary policy to support econ­
omic policy is regarded in some quarters as the Achilles 
heel of modern central banks, particularly when ex­
change-rate policy is used as a means of safeguarding 
external balances. The Delors report is not clear about 
who is to be responsible for exchange-rate policy, which 
even in countries with a 'modern' constitution is by no 
means the sole responsibility of the central bank. Thus, 
while 32 states that the ESCB is to be responsible 
for exchange-rate management, point 33 talks about 
formulating the Community's exchange-rate policy in 
cooperation with the ESCB Council and point 60 talks 
about exchange-market interventions in third cur­
rencies being the sole responsibility of the ESCB Council 
in accordance with Community exchange-rate policy. 
However, because of their economic consequences, and 
in particular because of the effect they have on structur­
al policy, changes in exchange rates cannot be justified 
solely on monetary-policy grounds. 
2.2.5. The intergovernmental negotiations on the 
EMU Treaty or on the ESCB statute must therefore 
specify which body is to be responsible for the Com­
munity's exchange-rate policy towards third country 
currencies—for example, the Council of Economic and 
Finance Ministers—and how cooperation with the 
ESCB will function. It must be stated clearly here that 
decisions about exchange-rate changes vis-a-vis third 
countries should not have an adverse effect on the 
ESCB's policy as regards price stability. In an EMU 
with irrevocably fixed parities or even a single currency, 
the exchange-rate policy to be adopted towards third 
countries may be determined more by market influences 
and fundamental factors (e.g. greater differences in 
productivity) than in the past in individual community 
countries, which—especially during the early years of 
the EMS—used this policy instrument to balance out 
divergent trends in income, growth and inflation. 
30. 12. 89 Official Journal of the European Communities No C 329/49 
2.2.6. The ESCB should be involved in the coordi­
nation of banking supervision policies, instead of a 
special body being set up for this purpose. However, 
this task should be kept separate from monetary policy's 
task. On no account should the ESCB take over a 
central supervisory role for the Community's banking 
sector, similar to that performed by the Bank of England 
in the UK. On the premises that it is the home authori­
ties' responsibility (subsidiarity principle), this super­
vision should be left to the national bodies which scru­
tinize the Community-wide activities of nationally 
licensed credit and financial institutions. The mutual 
recognition of banking supervision, the principle of 
which is to be confirmed in the second banking Direc­
tive after the alignment of minimum standards, will 
make it possible to relieve the ESCB of any direct 
supervisory duties and merely entrust it with coordinat­
ing duties. 
2.3. The ESCB's statute must be tailored to the par­
ticularly difficult and unprecedented mandate of a com­
mon monetary policy for twelve countries. The Euro­
pean Parliament must be involved in the drafting of the 
statute. The most important rules will concern the 
ESCB's federal structure and independence (point 32). 
2.3.1. The logic behind the ESCB's federal structure 
is that national central banks should continue to be 
legally independent and should not merge to form a 
Community central bank. In view of the Community's 
diversity this is the correct logic. The ESCB's federal 
structure will mean that the governors of the central 
banks will form the ESCB Council, together with the 
members of the board appointed by the European 
Council; such a structure will not hinder the adoption 
and implementation of joint monetary-policy decisions 
by the ESCB. 
2.3.2. Since monetary policy cannot be decided feder­
ally and regionally, the ESCB should operate only at 
one level with regard to the taking of decisions and 
their implementation. This is the way other central 
banks with a federal system operate, such as the US 
federal reserve system. In the USA the twelve regional 
federal reserve banks, which are responsible for the 52 
US States, implement the common policy determined 
by the federal reserve board and do not have different 
central banking policies of their own, and likewise 
the Community countries' central banks would be the 
ESCB's executive organs. The ESCB Council could 
transfer important tasks such as open market oper­
ations or intervention on the money or foreign-currency 
markets to some—or even all—of the central banks. 
However, the statute must ensure that in the final stage 
of EMU the national central banks are bound by the 
ESCB's instructions in all instances. 2.4. In the interest of a stability-oriented monetary 
policy, the ESCB must, in the performance of its duties, 
not be bound by instructions from national govern­
ments or Community bodies (point 32). This indepen­
dence is required in particular for the task of safeguard­
ing price stability within the framework of the ESCB's 
sole responsibility for the common monetary policy in 
the EMU. One factor restricting this independence is 
that the ESCB—like the German Bundesbank under 
Article 12 ot its statute—must support general Com­
munity economic policy, though not each individual 
measure, provided that this does not conflict with the 
objective of safeguarding price stability. The cooper­
ation needed to support economic policy could involve 
participation, without the power to vote, in discussions 
of the ESCB Council, the Council of Economic and 
Finance Ministers and the Commission (point 34). 
2.4.1. Apart from its functional independence, the 
legal and financial independence of the ESCB should 
be embodied in its statute. The political independence 
of the ESCB Council's members will be safeguarded in 
particular by the fact that the chairman and the mem­
bers of the Board will have appropriate security of 
tenure, e.g. twice the length of the EC Commissioners' 
terms (point 32). The nominations should be made by 
the Council of Ministers acting on a proposal from 
the Commission and after consulting the European 
Parliament. The Member States should be left to decide 
the terms of the central bank governors and their 
appointments to the ESCB Council in accordance with 
national practices. 
2.4.2. In view of the—albeit desirable—powers of a 
future Community monetary body, the ESCB should 
be answerable in keeping with normal democratic prac­
tice. It should report not only to the Council of Minis­
ters but also—at least once a year—to the European 
Parliament and the Economic and Social Committee. 
This accountability should not lead to any interference 
in the ESCB's ongoing business, but it should make 
some form of democratic scrutiny possible. Any dis­
putes could be brought before the European Court of 
Justice. 
2.4.3. It is only logical that the national central banks 
and their working bodies should enjoy the same inde­
pendence as the ESCB (point 52). 
2.4.4. The ESCB Council should take decisions by a 
majority, and not a unanimous, vote. A purely political 
and rather rigid weighting of votes such as in the 
Council of Ministers or in the European Parliament or 
Economic and Social Committee, where the seats are 
allocated country by country, is not the only method 
which could be used. Monetary or economic weighting 
criteria could also be taken into consideration. 
No C 329/50 Official Journal of the European Communities 30. 12. 89 
2.5. In the monetary union, a Community-wide 
body—the ESCB—will be responsible for monetary 
policy, but in the absence of a democratically appointed 
Community government, economic union will have no 
comparable body to lay down common policy guide­
lines. 
2.5.1. It would be feasible—without the role of the 
EC Commission being changed and pending an increase 
in the European Parliament's powers—for the Council 
of Economic and Finance Ministers to be entrusted 
with temporary economic policymaking powers on the 
basis of Articles 102a, 104 and 105 of the EEC Treaty. 
The powers of the Council of Ministers would have to 
go further than the 18 February 1974 decision on the 
convergence of economic policy, which would have 
to be amplified considerably as the EC Commission 
proposed on 20 September. For example, the Council 
of Economic and Finance Ministers ought to agree on 
important economic policy targets based on a review 
of economic developments (annual economic report) 
and a statement on medium-term budget intentions. It 
should be borne in mind here that the Council of 
Ministers, by virtue of its make-up, is prevented from 
running the Community economy on a day-to-day 
basis. The fate of the 1974 convergence decision has 
shown that ministers tied by national government 
responsibilities will be overtaxed as members of a Com­
munity-wide body where economic policy decisions 
have to be taken frequently. 
2.5.2. The broad lines of the Community's economic 
and monetary policy should be determined more by 
Community-wide considerations provided that this is 
compatible with the principle of subsidiarity. In this 
way not only will monetary policy be put on a Com­
munity-wide footing, but the Community's economic 
policy will gradually acquire a degree of independence. 
This would appear to be necessary for the sake of 
greater convergence and if new imbalances are to be 
averted, especially in the event of an economic crisis. 
The Commission should therefore consider how econ­
omic policy can also be given some degree of indepen­
dence in an EMU. 
2.5.3. It would, however, be undesirable to interfere 
directly in individual areas of national economic and 
social policy, e.g. the level of State aid in, say, the 
housing and social sectors and decisions on what shares 
of government budgets and social security and pension 
funds are to come from direct taxes, indirect taxes and 
social-security contributions. All the same, care should 
be taken to ensure that the individual areas of economic, 
social and fiscal policy which remain the Member 
States' responsibility are generally compatible with the macroeconomic framework established at Community 
level so that the convergence of economic policy as a 
whole is secure. 
2.6. However, there should be one important excep­
tion in the field of budgetary policy to the rule that 
there should be no direct interference in national econ­
omic and fiscal policies. In order not to thwart the 
common monetary policy geared to stability, the 
inflationary financing of budget deficits must not be 
allowed. Accordingly, there must be no inflationary 
financing of budget deficits (local, regional, national 
or Community) by unlimited use, either directly or 
indirectly, of central banks loans. The comments made 
on this matter in the Delors report (point 33) are 
endorsed. Community ex-ante coordination in the form 
of binding rules for upper limits on budget deficits and 
the definition of aggregate budgetary balances does not 
seem to be necessary. The adoption of such ex-ante 
rules by the Council of Ministers would be in conflict 
with the principle of subsidiarity and the basic demo­
cratic budgetary rights of the Member State parlia­
ments. Nevertheless public and social budgets have a 
significant influence on Member States' economic and 
social policies. They affect hundreds of thousands of 
jobs throughout Europe, they influence individual 
Member States' wage policies and they determine the 
level and quality of a large number of community 
services. Full-scale budgetary-policy cooperation is 
therefore needed to ensure that existing imbalances do 
not deteriorate any further. 
2.6.1. The rule that there should be no direct inter­
ference in budgetary policy does not rule out efforts to 
ensure that budgets comply with the stability objective, 
as part of the general coordination of economic and 
fiscal policies (see 2.5.2). It should be added that, in an 
EMU, Member States' budgetary policies will be under 
greater pressure to obey the constraints of (i) a common 
monetary policy geared to stability and (ii) central 
banks' inability to resort to deficit-financing. 
2.7. After the completion of EMU it will no longer 
be possible for Member States to regain their competi­
tiveness and the economic advantages of their geo­
graphical locations by adjusting their exchange rates. 
Prosperity in the Community, as measured in terms of 
per-capita income, still varies by as much as 6:1 
between the richer and the poorer regions, and this gap 
will be even more obvious in a single monetary area. 
For then wages and salaries as well as prices (and 
purchasing power) will be able to be compared in the 
same currency in all Member States. 
2.7.1. In the past balances of payments have been 
determined by economic and monetary policies (more 
30. 12. 89 Official Journal of the European Communities No C 329/51 
successful in some cases than in others) and by econ­
omic performance. The wrong conclusions should not 
be drawn here for a future EMU, which cannot be 
expected per se to eliminate national and regional 
income differentials; for a common currency would 
in itself still not constitute a commitment to reduce 
differences in prosperity—even though it would make 
them more obvious—or even to fully replace the bal­
ances of payments used so far with revenue equalization 
payments from the Community budget. 
2.7.2. Even in an EMU the reduction of competitive 
differences and variations in prosperity will require 
structural adjustments—which will leave their mark on 
regional employment and growth. The Community is 
obliged by Article 130a of the EEC Treaty to strengthen 
'its economic and social cohesion' with a particular 
view to reducing disparities between regions. For this 
purpose the European Council decided in February 1988 
that the structural funds were to be doubled by 1993, 
that there was to be a shift in emphasis from project 
to programme financing and that a new form of part­
nership was to be established between the Community 
and its less developed regions. Approval is given to 
the Delors report's view (point 29) that the principal 
objective of regional policy should be not to subsidize 
incomes and simply offset inequalities in standards of 
living but—with the aid of investment programmes for, 
say, improving infrastructure—to prevent the large-
scale migration of labour from becoming the major 
adjustment factor. 
2.7.3. On the other hand, the Delors report also 
considers it necessary (point 59) to further strengthen 
Community structural and regional policies 'adapted 
to the needs of the economic and monetary union' and 
to supplement structural transfers to Member States. 
These 'needs' will stem in particular from the adjust­
ment difficulties which may occur at the start when it 
is no longer possible to fund economic and budget 
measures by inflationary financing and offset the conse­
quences by devaluing against the currencies of neigh­
bouring countries. 
2.7.4. Monetary union will require the abandonment 
of inflationary economic and fiscal policies, but this 
cannot be 'rewarded' by simply introducing equaliza­
tion payments. The European Community, which even 
with EMU will be a long way from being a federation, 
would be overtaxed by such transfers between Member 
States of equalization payments not earmarked for a 
specific purpose: 
— financially, such payments between twelve countries 
would exceed the Community budget, and — politically, it would not be possible to push through 
such supranational payments as long as budgetary 
and fiscal policies remain a national responsibility. 
The dispute that might very well break out on the 
subject of transfer payments not earmarked for a spec­
ific purpose would be much more of a burden to the 
Community than the negotiations about the reform of 
the common agricultural policy (CAP) or the increase 
in own resources, and might even leave a permanent 
scar. 
2.8. Simple transfer payments for no specific purpose 
or some form of equalization payments from one state 
to another as mentioned in 2.7.4 are not the solution 
to the considerable structural adjustment problems that 
will have to be tackled. Because these adjustments will 
be far-reaching, a suitable way of making them easier to 
bear will have to be found. Above all, these adjustments 
should not be made at the expense of the most under­
privileged groups and regions. It is therefore regretted 
that the Delors report has made no practical proposals 
about the support measures required to lessen these 
adjustments' impact on such groups and regions. 
2.8.1. The EC structural funds will have to be con­
siderably increased still further after 1993 in the run­
up to EMU. However, the payments therefrom should 
not be akin to revenue equalization payments. Instead 
they should be deployed within the framework of a 
European structural and regional policy, if possible in 
such a way (point 29) that the recipients are prompted 
to make major efforts to adjust. These efforts would 
have to fit in with jointly-agreed Community objectives 
and would thus contribute to the sought-after economic 
and social cohesion in the Community. 
2.8.2. The development of infrastructure and meas­
ures for improving occupational skills are particularly 
urgent, given the necessary adjustments to exchange 
rates still possible initially. Unless there is some align­
ment of the factors determining the location of industry, 
wage and social policies will be overstretched in their 
efforts to give workers and underprivileged groups a 
share of economic growth, which will include ensuring 
minimum social standards throughout the Community. 
Unfortunately, the Delors report fails to mention the 
effect of EMU on national systems of social security. 
2.8.3. The comments on wage policy in the report 
are welcomed insofar as they expressly confirm the 
autonomy of the parties to wage agreements. The Rec­
ommendation (point 30) that wage policy should be 
geared to improvements in productivity is regarded 
as a non-binding policy guideline. The EMU's price 
stability target would benefit from the use of (real) 
improvements in productivity as such a guideline, with­
out this ruling out special demands with regard to 
wages and wealth distribution. Furthermore, regardless 
No C 329/52 Official Journal of the European Communities 30. 12. 89 
of the provision of resources from EC funds, some 
room should be left for national structural and regional 
policies, though naturally with due regard to Com­
munity competition rules and in particular the ban on 
selective aid. 
2.8.4. As for the rest, some improvement for the 
structurally disadvantaged and economically backward 
regions can be expected from the capital market of an 
EMU. Thanks to the monetary union and the abolition 
of restrictions on capital movements, all EC Member 
States will have equal access to the 'European financial 
area' and an important reason for the discrimination 
against the 'soft-currency' countries caused by the inter­
national-rating standard will be eliminated. By having 
access to the capital market, possibly at interest rates 
still varying from region to region, the less-favoured 
areas will become more attractive for private investors 
so that their comparative cost advantages and differ­
ences in purchasing power can be exploited to a greater 
degree. This will make it possible to use the EC funds 
to a greater extent for capital and interest subsidies, 
particularly with the participation of regional credit 
institutions, so that more resources can be mobilized 
for projects contributing to the development of less-
developed areas. 
2.9. Thanks to the monetary union the chances for 
the less-favoured regions of the Community will 
improve on the whole, albeit not in the same way for 
all or by any means automatically, and the Community 
in general will most certainly profit internationally. 
An almost continental market, in which there are no 
exchange risks, which will later even have a common 
currency, in which bank and financial services can be 
freely provided and in which there are no restrictions 
on capital movements—such a European financial area 
will be an attractive location for investors from third 
countries. Not only would more money from the rest 
of the world be attracted to the European financial area 
but also Community savings would be invested more 
in the Community itself. 
2.9.1. EMU would give the Community greater clout 
internationally. The ECU would be able to compete 
better with the dollar and the yen, as an investment and 
reserve currency, than any European currency today. A 
Community speaking with one voice could play a 
greater role (and a role that really benefits Europe) in 
the world monetary system, in international organi­
zations such as the World Bank and the International 
Monetary Fund and in other groups such as the G7 
(and a future G4?). 
2.9.2. The ECU would be increasingly used as an 
invoicing currency internationally, thereby strengthen­
ing the Community's position in world trade. Price 
quotations and contracts for oil, raw materials and 
technological products would no longer be exclusively in dollars. The at times extreme volatility of these 
prices, aggravated by fluctuations in the exchange rate 
of the dollar, has over the last two decades been very 
detrimental to the Community economy—not least in 
the energy sector, the CAP and the aircraft industry. 
2.9.3. The role that the ECU would over time assume 
here would bring immeasurable benefit to the Com­
munity. Monetary union would thus have a 'usefulness' 
extending far beyond the abovementioned savings in 
exchange costs and in payment transactions. On the 
other hand, the risks associated with the circulation of 
large volumes of ECUs should not be underestimated. 
The types of upheavals which might be caused have 
been seen on the Eurodollar market. 
2.9.4. The importance and also the responsibilities 
of the Community at world level would increase not 
just in monetary terms but also in economic terms. The 
international role of the Community mentioned more 
or less in passing in the Delors report (points 35-38) 
would gain considerably in significance. Community 
policy must adjust to this role in good time. The pub­
lic—and in particular economic and social groups— 
should be made aware of the new possibilities accruing 
from the Community's responsibilities worldwide (cf. 
points 1.4.2, 1.4.3 and 3.3.4). This applies firstly to 
external trade policy proper, for which the Community 
is responsible according to the EEC Treaty and for 
which the Commission represents the Member States 
as their spokesman in the General Agreement on Tariffs 
and Trade (GATT) negotiations. It applies also in 
general to the ability of the Community to improve 
relations between the industrialized and the developing 
countries and to contribute through the importance of 
its internal market and open trading system to progress 
towards a more liberal world trade system. 
3. The steps towards EMU 
3.1. EMU needs careful preparation, particularly 
since tax changes and the establishment of a single 
market for capital movements and bank and financial 
services can have considerable repercussions on excha­
nge-rate relationships, which have remained relatively 
stable in recent years: 
— The Community-wide freedom of movement for 
bank and financial services will mean that when 
there is free movement of capital (points 12 and 24) 
the currency area of a central bank will no longer 
largely coincide (as has usually been the case) with 
the area in which its currency is used and its banking 
system operates. 
— The abolition of currency restrictions in respect of 
. capital movements (points 12 and 14) will remove 
a shield that has materially helped a number of 
Member States to protect the exchange rate of their 
30. 12. 89 Official Journal of the European Communities No C 329/53 
currency for a fairly long time even when inflation 
has been relatively high. 
— The abolition of tax barriers with a view to the 
closer alignment or approximation of tax systems 
may in the transitional period also create new com­
petition parameters, which lead to changes in the 
flows of goods and funds and bring pressure to bear 
on exchange rates. 
— The effects of EMU on social insurance systems 
—whose scale and funding needs to be carefully 
scrutinizxd—will create additional parameters. 
The experiences with these and other changes in par­
ameters determined by integration form an important 
basis for additional support measures in the run-up to 
monetary union. Here exchange rates still have an 
important equalizing function. It is therefore understan­
dable that some Member States have had reservations 
about submitting to the constraints of the EMS 
exchange rate mechanism. This applies to the hesitation 
shown in the case of the pound sterling, which is still 
subject to special pressures as a world currency, and to 
the use of a larger fluctuation margin of 6% for the 
lira and the peseta, following the courageous decision 
to make the latter a full member of the EMS. 
3.1.1. The negotiations on the participation of all 
EC currencies in the exchange rate mechanism of the 
EMS on the same conditions show—like the debate 
concerning the Commission's proposals for tax direc­
tives—that the basic preconditions for EMU—and 
especially for the (irrevocable) renunciation of changes 
in exchange rates—have still not been fulfilled. 
3.1.2. Progress towards monetary union thus cannot 
be made overhastily or in accordance with a precise 
timetable but calls for well-considered steps. It seems 
inappropriate to schedule all the steps in advance in a 
three-phase plan as the Delors report does (point 40 et 
seq.). It would be easier to reach political agreement 
beforehand on a treaty laying down the conditions for 
the final stage of EMU provided that no commitments 
are made to transfer powers to the European Communi­
ties—the implications of which cannot yet be as­
sessed—on fixed dates. The fate of the 1971 Werner 
plan shows that publicly announcing the stages of a 
plan and then subsequently cancelling them can have 
a detrimental effect on the complicated and delicate 
preparations for monetary union. 
3.1.3. It would therefore be more realistic to speak 
of a preparatory period, which would certainly extend 
more than three or four years beyond completion of 
the internal market. After a short start-up period, which 
will be needed for the formal agreements, the actual integration process of EMU could follow immediately. 
The steps assigned to the second stage in the Delors 
report would thus have to be switched to the prepara­
tory period. This would avoid the problems mentioned 
in point 3.3.2 of having an ESCB without any powers 
of its own initially. 
3.2. The preparatory period would be determined in 
particular by completion of the internal market, which 
will require considerable economic and social adjust­
ments and restructuring and may lead to considerable 
capital movements in varying directions. It is not poss­
ible to lay down a multi-stage schedule for these adjust­
ments. 
3.2.1. The coordination of economic and monetary 
policy (point 50) must therefore be stepped up in the 
preparatory period on the basis of directives and go far 
beyond what was provided for in the 1974 convergence 
decision and in the 1964 decision on the terms of 
reference of the Committee of central bank governors, 
cf. the ESC Opinions on the Commission proposals of 
13 October 1989 for Council Decisions on the conver­
gence of economic performance during stage one of 
EMU [COM(89)] and on cooperation between the cen­
tral banks of the Member States [(COM(89)]. 
3.2.2. Approval is given to the idea put forward in 
the Delors report (point 51) that the Council of Econ­
omics and Finance Ministers should assess economic 
trends in the Community on the basis of agreed indi­
cators and national reviews and come to an agreement 
on important economic policy targets. Precise rec­
ommendations should be made for fiscal policy in the 
Member States and particularly for financing public 
budget deficits. 
3.2.3. The Committee of central bank governors 
should not merely be consulted in advance on national 
monetary policy decisions and report to the European 
Parliament and European Council on the monetary 
situation in the Community. Instead it should switch 
early on to proposing monetary policy guidelines (point 
57). These could include in particular the setting of a 
joint money supply target with a relatively wide margin 
of fluctuation at the outset. The margin could be gradu­
ally narrowed on the basis of an 'interpretative money 
supply policy' and a six-monthly review of the money 
supply target. 
3.2.4. The Committee could also begin framing a 
common monetary policy, taking account of the higher 
degree of integration of the money and capital markets 
(point 57), the impact of financial innovation and the 
development of banking centres. A start could also be 
made on aligning the monetary policy mechanisms (in 
particular minimum reserves and bank rate and open 
market policies). 
No C 329/54 Official Journal of the European Communities 30. 12. 89 
3.2.5. Part of the Member States' currency reserves-
—around 10% - could be used by the Committee of 
central bank governors for currency market interven­
tions—particularly vis-a-vis non-Community cur­
rencies—in accordance with joint guidelines. Member 
States could grant each other drawing rights for this 
purpose. The disadvantages of an established European 
Reserve Fund referred to in point 3.3.1 would thus be 
avoided. 
3.2.6. To ensure binding decision-making within the 
Committee of central bank governors, an attempt 
should be made to give national central banks before 
long the same degree of autonomy as the ESCB is to 
have. At the same time legislation should be passed at 
national level—and later for the ESCB—stipulating that 
there is to be no inflationary financing of public budget 
deficits by unlimited central bank loans. 
3.2.7. As part of the preparations it is essential that 
all EC currencies be incorporated into the EMS 
exchange rate mechanism. In the preparatory stage, 
provision for exchange rate adjustments should not 
only be retained, but used in line with the adjustment 
pressures generated by the implementation of the inter­
nal market, without this being dramatized as an 
'unusual situation'. The pressures caused by the 
implementation of the internal market in connection 
with the freeing of capital movements will in any event 
not permit the maintenance of incorrect currency par­
ities which lead to new imbalances. 
3.3. It does not seem appropriate, in addition to the 
joint market intervention described in point 3.2.5, to 
establish an independent European Reserve Fund (point 
53) with its own board of directors and permanent 
staff. 
3.3.1. An independent Community Reserve Fund 
would anticipate the ESCB and would require an 
amendment to the Treaty in advance. A coordinated 
intervention policy by the Committee of central bank 
governors seems moreover more appropriate (point 54) 
than the provision of a 'training ground' for a new 
institution designed to pave the way for the ESCB. 
3.3.2. The arguments against the advance establish­
ment of a European Reserve Fund militate even more 
so against the premature establishment of the ESCB 
(point 57). It would be wrong to introduce the ESCB 
as a type of learning process, before the monetary 
union was established. In these circumstances, the ESCB 
would have a hybrid role: 
— it would exist de facto and de jure with all its 
trappings, including the Committee of central bank 
governors which is to be incorporated into it, and 
its sub-committees and staff, 
— on the other hand, the monetary policy decisions 
which would be publicly assigned to the ESCB, and expected from it, would continue to be taken, 
implemented and justified at national level. 
An ESCB without real powers would be regarded as a 
sham because the material prerequisites for its success­
ful operation would still be lacking. This would be 
detrimental to this extremely important monetary 
union institution and the joint monetary policy to be 
decided and answered for by it. The learning process 
provided for in the Delors report in a second (intermedi­
ary) phase should be mastered in the preparatory stage, 
i.e. in a longer initial phase. It should take place exclu­
sively within existing institutions, such as the Commit­
tee of central bank governors, subject to appropriate 
extension of their terms of reference. 
3.3.3. An intermediate stage should be avoided, not 
only as regards the precursors of the ESCB, but also as 
regards a parallel currency. Approval is given to the 
reservations expressed in the Delors report (point 47) 
as regards an independent European currency which 
would be additional to the Community currencies and 
compete with them to a certain extent. Such a parallel 
currency would considerably complicate the coordi­
nation of national monetary policies in the crucial 
'learning stage'. It would also require additional legal 
arrangements which would hamper the preparations 
for monetary union. 
— This additional currency, even if it could be largely 
created step-by-step by the sale or withdrawal of 
national currency, would also generate some 
additional money and credit and would run counter 
to efforts to achieve greater price stability. 
— These risks and hazards far outweigh the possible 
benefits of the expected acceleration of progress 
towards monetary union. 
A parallel currency would also do nothing to 
enhance the prestige on which a subsequent com­
mon ECU-currency will depend. Gresham's law 
would apply, i.e. such a parallel currency would 
tend to either drive out national currencies or be 
driven out by them, depending on whether it was 
looked on as relatively 'good' or 'bad'. 
3.3.4. On the other hand the private use of the ECU 
(in the existing form of a basket of currencies) should 
not be impeded (point 49)—in fact it should be encour­
aged to an even greater extent. Above all, Community 
payments should be in ECUs and ECUs should also be 
permitted—alongside national currencies—for public 
tenders at Community level, for the payments of taxes 
and levies and for corporate balance sheets and 
accounts. The use of the ECU for balance sheets, for 
statistics, for fares—in particular by travel agents, air­
lines, railways, etc.—and for additional price indication 
30. 12. 89 Official Journal of the European Communities No C 329/55 
would also make the ECU known and demonstrate its 
advantages. This would—as is already the case in many 
border areas—enable Community citizens to compare 
prices and get used to a 'European' money. It would also 
considerably assist the subsequent switch-over when 
monetary union had been achieved—particularly in 
those countries where people have mentally got used 
to handling monetary units running into thousands or 
tens of thousands. 
3.4. The tasks described in chapter 2 (final stage) 
would be taken over in one go by the EMU to be 
implemented by a special treaty. On establishment, 
the ESCB would immediately take over all powers, in 
particular the responsibility for the common monetary 
policy and for the administration of the pooled currency 
reserves. For the participating currencies which by defi­
nition would be linked by irrevocably fixed parties, 
the ESCB would prepare the transition to a uniform 
European currency (ECU). 
3.4.1. All EC Member States might not be capable 
of completing the transition to EMU simultaneously, 
Done at Brussels, 19 October 1989. because some of them may still have to adjust their 
exchange rates. 
3.4.2. The launching of EMU should not be deter­
mined by the pace of the Member State lagging furthest 
behind in the monetary development process. Those 
Member States which, because of their degree of conver­
gence, are not likely to adjust the exchange rates for 
their respective currencies any more (a point already 
reached by some EMS members), should be able as 
a stable monetary area to launch the EMU amongst 
themselves and to transfer the agreed sovereignty rights 
to it. 
3.4.3. The non-membership of one or other Member 
State would undoubtedly create certain institutional 
problems for EMU, particularly in connection with 
Community institutions such as the Council of Minis­
ters and the European Parliament. Pending full member­
ship, consideration could be given to granting these 
countries observer status, with limited voting rights, 
within the ESCB. 
It would however be preferable—and a realistic pros­
pect after an intensive preparatory period—for all EC 
States to form the EMU. 
The Chairman 
of the Economic and Social Committee 
Alberto MASPRONE