WRITTEN QUESTION E-1549/00

by Vitaliano Gemelli (PPE-DE) to the Commission

(18 May 2000)

Subject: Economic and monetary policy

The continuing decline in the value of the Euro in relation to the dollar is causing serious concern in many quarters in Europe. The political, economic, social services and financial sectors are calling for a clear explanation of the EU's economic and monetary strategy, while the Commission continues to send out reassuring messages and the Council simply turns its back on the problem.

The ECB has confined itself to ordering a series of interest rate rises, a clear indication of the absence of any economic and monetary strategy, as the authorities are evidently resorting to mere technical measures that do not address the broader economic context. For while interest rate rises might limit the risk of inflation, they will undoubtedly also reduce the prospect of firms using the euro to finance investment. Yet such investment is absolutely essential to help speed up the modernisation of the economy and solve the problem of Europe's massive unemployment, which can hardly be regarded as cyclical, as it is the result of the continuing structural rigidities in many areas and the Member States' failure to harmonise their economic, financial, fiscal and social policies. Up to now their respective policies have been notable for their scepticism, protectionism, short-sightedness and attachment to outdated ideologies, which stands in the way of measured discussion of means of improving the EU's competitive position on world markets.

This being so:

- What economic and monetary strategy does the Commission intend to follow?

- Which political authority at European level determines the EU's economic and monetary policy, without prejudice to the ECB's independence in technical and operational matters?

- What measures do the EU and the Member States intend to adopt to modernise and develop the European economy?

- How does the Commission intend to solve the problem of Europe's massive unemployment, while retaining and upholding the rules governing the movement and residence of non-Community nationals?

- What role does the Commission envisage the candidate countries playing to ensure that enlargement is achieved as smoothly and swiftly as possible, and that the enlarged EU guarantees favourable economic conditions and creates a climate of security and stability, thus improving the quality of life of Europe's citizens?

- What proposals does the Commission intend to submit to the United States, Canada, Japan, Russia, China and all the international economic powers to persuade them to embark on a new round of negotiations aimed at stabilising the financial and currency markets and protecting the general public, investors and savers from the risk of economic collapse, the disastrous effects of which might ultimately represent a threat to civil peace throughout the world?

Answer given by Mr Solbes Mira on behalf of the Commission

(11 July 2000)

The Commission has developed a comprehensive and coherent economic policy strategy that aims at generating high rates of sustained, non-inflationary growth and thereby contributes to meeting key challenges like restoring full employment. The strategy consists essentially of growth and stability-oriented macroeconomic policies, including monetary policy that aims at maintaining price stability in accordance with the Treaty, and economic reforms to enhance the functioning of product, capital and labour markets.

The overall strategy is laid out in the Commission's recommendation for the 2000 broad economic policy guidelines of the Member States and the Community (BEPGs). It covers all major policy areas while the Cardiff and Luxembourg processes deal with their respective subject matters in greater detail. It is for those concerned to implement the strategy in line with the policy assignments, competencies and prerogatives as set out in the Treaty.

The policy assignment in the Community follows clear rules. Monetary policy for the euro area is conducted by the European System of Central Banks (ESCB). In pursuit of its tasks set out in Article 105 of the EC Treaty, the ESCB is independent from instructions of third parties, whilst central bank representatives participate actively in economic policy dialogues in various fora, including a regular exchange of views with the Parliament. Monetary policy outside the euro area remains a national responsibility. Budgetary policy and most other economic policies are determined at the national level, in line with subsidiarity. However, in conducting their policies, Member States have to respect the Treaty as well as the stability and growth pact obligations and the principle of close co-ordination.

This implies in particular that they conduct and co-ordinate policies in the context of the BEPGs mentioned above. The BEPGs are adopted by the Ecofin Council, which is at the centre of the co-ordination process, upon a recommendation by the Commission and in the light of the priorities established by the European Council as well as possible comments of other Council formations on the Commission's recommendation. Co-ordination of policies and reforms in the labour markets are governed in more detail by the employment guidelines established in the employment title of the Treaty, while the political process decided by the European Council in Cardiff ensures a review of reforms in product and capital markets. Both these processes observe the overall framework determined in the BEPGs.

This allocation of responsibilities calls for continuous and fruitful dialogue between those concerned. The dialogue between the European central bank (ECB) and the Ecofin Council is conducted in various forms and at different levels, involving the Commission and respecting all aspects of the independence of the ESCB. The channels of communication provided by the Treaty are exploited. Informal discussions take place within the Euro-11 Group, in the meetings of which the ECB regularly takes part. The dialogue between ministers and monetary authorities is prepared and continuous at the level of senior officials within the economic and financial committee. Moreover, the macroeconomic dialogue, established under the European employment pact, brings together all concerned, including the social partners. This regular dialogue is based on mutual trust and respects the independence and autonomy of participants in their areas of responsibility.

The Commission, with a view to modernising the Community economy and to foster sustainable development in line with the new strategic goal set by the Lisbon European Council, has presented in its recommendation for the 2000 BEPGs a comprehensive and consistent set of policies. It provides operational content to the Lisbon Council conclusions and targets to improve the quality and sustainability of public finances, foster a knowledge-based economy, ensure efficient product markets, promote better integrated capital markets and invigorate labour markets. All are called upon to proceed in their respective domains. The Commission will fully assume its responsibilities in monitoring progress in implementing these policies.

The Luxembourg and Cardiff processes will develop the economic and social agenda within their respective domains. According to the Lisbon European Council, the approach of open policy co-ordination at Community level will be extended to new domains such as education and training, the promotion of the information society and innovation, and social protection and social inclusion.

Every spring, a special European Council will review the strategy and its progress, in particular on the basis of a synthesis report prepared by the Commission based on structural performance indicators of employment, innovation, economic reform and social cohesion.

The Commission, as already noted, has developed an economic policy strategy for growth and employment that is set out in the BEPGs and the employment guidelines, which present in greater detail how to make progress with the invigoration of labour markets. The strategy targets an endogenous economic growth process, underpinned by a well functioning labour market. The objective is to arrive at a significant increase in the overall employment rate in Europe on a lasting basis. The overall aim should be to raise the employment rate from an average 61 % today to as close as possible to 70 % by 2010, and to increase the number of women in employment from an average of 51 % today to more than 60 % by 2010.

In order to invigorate the labour markets, as stipulated by the BEPGs, the employment guidelines have set out concrete objectives and steps. The focus is on improving employability, developing entrepreneurship, encouraging adaptability and strengthening equal opportunities. This does not include a change in rules governing migration in and out of the Community.

Implementation of the overall economic strategy set out in the BEPGs and the policy action advocated in the employment guidelines is making progress. Employment is responding positively and unemployment is declining. A thorough assessment of the impact of the Luxembourg process is foreseen for 2002.

The central European candidate countries already achieved marked progress in their transition to competitive market economies. Growth prospects have brightened in view of the positive effects of domestic adjustment programmes and the improved external environment. The Commission considers that the candidate countries must continue to pursue their reform efforts, within the framework of the pre-accession programmes and as set out in more detail in the economic policy strategies as well as the employment policy reviews jointly prepared by the candidate countries and the Commission. This is preparing the ground for accession in due time, under conditions conducive to growth and prosperity in both the accession countries and the present Community.

The Commission has already taken a number of initiatives to strengthen the efficiency and stability of the Community financial system. These measures include the financial services action plan, which should be implemented by 2005 (Lisbon European Council) and the recent review of the Community capital adequacy framework.

Progress has also been made on the reform of the architecture of the international monetary system. Discussions on these issues have been taking place in different fora, including the International monetary fund (IMF) and the Group of seven most industrialised nations (G7). In order to accommodate the reality of new emerging markets and of Economic and monetary union (EMU), the Commission is prepared to play an active role in preparing and negotiating common positions, both internally and with G7 partners. Until now, however, Member States have been reluctant to allow the Community dimension to become more visible at international level.