WRITTEN QUESTION E-3380/97 by Carlos Robles Piquer (PPE) to the Commission (23 October 1997)

Subject: Aftermath of the euro and enlargement

Influential media voices once hardly in favour of the single European currency now acknowledge that it will inevitably come into being. They also recognize that new Member States will join the Union. This development is to be welcomed.

However, these commentators are brutally asking a question that is also worrying many Europeans, namely whether Europe will be able to cope with the reality to come (see the article by Robert Cohen in the New York Times, reproduced in the International Herald Tribune of 20-21 September 1997).

The 'reality to come' includes, for instance, the serious risk that the countries using the euro will respond in radically different ways to the challenge of reforming the Welfare State, to quote the alleged words of Mr Hans Tietmeyer, President of the German Bundesbank. To give another example, there is a danger that the EU might become even more fragmented once the Central and Eastern European countries have been absorbed.

To carry on the good work it has done by producing Agenda 2000, will the Commission draw up a further study on the best ways of preserving the stability and unity of the Union, and the euro countries in particular, in the immediate future?

Answer given by Mr de Silguy on behalf of the Commission (15 December 1997)

Neither the euro nor enlargement will change the fact that reforming the welfare state is indeed one of the major challenges facing most Member States in the medium term. As this is an area which is entirely within the responsibility of national governments, Member States must ensure the proper balance and working of their social security systems according to their own choices and capacities. Furthermore, the provisions of Articles 104 to 104-C of the EC Treaty make sure that such an obligation is respected without affecting the stability of the euro.

The underutilisation of Europe's employment potential is a major source of current financial imbalances in social transfer schemes, as unemployment adds to claims for benefits while eroding the tax and contribution base. Also, high levels of indebtedness or deficit are a threat for social systems, since debt service crowds out other public expenditures and productive investment. Since the macroeconomic policy regime of EMU gives priority to price stability and budgetary consolidation, the resulting more balanced policy mix will favour policies designed to foster investment-led growth, thereby bringing more people into gainful employment. Thus the euro can help fulfil an essential prerequisite for restoring sound finances for social protection. As regards the impact of enlargement, positive growth and security effects are generally expected, helping to free resources for social purposes, if such a choice is made by Member States.

On both employment and welfare state reform issues, the Commission has provided assistance through analytical background studies, research work, white or green papers, and communications, details of which are forwarded direct to the Honourable Member and to the Secretariat General of the Parliament.