Resolution on the communication from the Commission on the impact of currency fluctuations on the internal market (COM(95)0503 - C4-0011/96)
Date: 1996-06-18
Institutions: Committee on Economic and Monetary Affairs, European Parliament
Subjects: devaluation, exchange rate, floating rate, single market













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51996IP0181

Resolution on the communication from the Commission on the impact of currency fluctuations on the internal market (COM(95)0503 - C4-0011/96)  


Official Journal C 198 , 08/07/1996 P. 0049 





A4-0181/96Resolution on the communication from the Commission on the impact of currency fluctuations on the internal market (COM(95)0503 - C4-0011/96)The European Parliament,- having regard to the communication from the Commission 'The impact of currency fluctuations on the internal market¨ (COM(95)0503 - C4-0011/96),- having regard to the study from the Commission 'The impact of exchange-rate movements on trade within the single market¨ (( No 4 1995 - ISSN 0379-0991)),- having regard to the hearing of its Subcommittee on Monetary Affairs held on 26 March 1996, with representatives of the European Automobile Industry, on currency fluctuations,- having regard to its resolution of 6 May 1994 on the impact of currency fluctuations on intra- and extra-Community trade (( OJ C 205, 25.7.1994, p. 456.)),- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy (A4-0181/96),A. whereas since the first exchange-rate mechanism crisis in September 1992 several currencies (the Italian lira, the Swedish krona, the Spanish peseta, the Greek drachma, the British pound and the Portuguese escudo) have depreciated by 15 % or more against the German mark,B. whereas, during the years before 1992 (1987-1992), a large degree of stability was maintained between the nominal exchange rates of various European currencies (particularly those belonging to the EMS), despite the clear differences in the economic policies of the various countries and their effects on economic fundamentals,C. whereas these clear differences in the functioning of the different countries' economies seriously affected real exchange rates, which were at variance with the stability of nominal rates, and whereas this was the main reason for the exchange-rate speculation which led to the depreciations mentioned above,D. whereas these devaluations served to bring nominal exchange rates into line with real ones, although in some cases (particularly in Italy) the devaluation was so extensive as to produce an important advantage in terms of the competitiveness/cost of the country's exports,E. whereas, despite the fresh tensions which arose in 1995, the trends that have been recorded until now, and particularly the progress made towards convergence by a number of countries, have served to restore balance to real exchange rates, providing a more solid foundation for exchange rate stability,F. noting that, without disregarding the impact of dollar fluctuations on the single market which are analyzed in the Commission's Annual Economic Report for 1996 (COM(96)0086 - C4-0193/96), the intra-European currency movements are of special importance, taking into account that exports to EU partner countries account for 62% of their total exports, the share being a low of 53% for the UK to a high of 80% in the case of Portugal,G. noting that currency fluctuations are only momentarily advantageous for those countries whose currencies depreciate, but that this advantage is of short duration, accompanied by inflation, and at the same time causes serious disruption to the functioning of the internal market,H. whereas an important cause of currency fluctuations within the Union is deficient macroeconomic coordination,I. whereas globalisation of the financial markets and the increase of speculation are possible sources of short-term exchange-rate instability,J. whereas exchange-rate stability is a necessary precondition for the transition to the single currency,K. bearing in mind that, despite the establishment of bands of +/- 15% in 1993, most of the currencies of the Member States belonging to the EMS are actually within much narrower fluctuation bands, closer to those in force prior to the 1993 reform,L. whereas currency fluctuations can, on the microeconomic level, lead to substantial reductions of profit margins for some enterprises and imply high hedging costs especially for export-orientated SMEs,M. whereas some sectors like the textile and clothing industry, cars and certain agricultural products are particularly sensitive to currency fluctuations,N. whereas the Commission's Annual Economic Report for 1996 supports the conclusions of the communication from the Commission,1. Affirms that the completion of the internal market through Economic and Monetary Union, and especially the introduction of the single European currency, are in the long run the only real answers to the problems arising from exchange-rate turbulence within the European Union;2. Calls on the Commission to submit specific sectoral analyses and assessments of the effects of currency fluctuations;3. Stresses that a credible policy aimed at stability, together with progress in the convergence process, are essential to avoid currency turmoil;4. Supports the main conclusions of the Commission document that, in addition to currency fluctuations, other factors, including structural factors, political factors and investment in 'human capital¨, play a decisive role for the success of the internal market at world economic level;5. Calls on those Member States which have not yet improved their fiscal situation to increase their efforts to reduce the public deficit and to pursue a consistent and stable fiscal policy, without endangering the functioning of services of common interest and the European Social Model as a whole;6. Stresses that - in the long term - exchange-rate instability is damaging for the functioning of the single market, since it creates an unpredictable environment which damages business confidence and discourages investment;7. Takes the view that the effective coordination of fiscal and currency policies by all the Member States is necessary to achieve this objective;8. Considers necessary the coordination and monitoring of economic and monetary policies at international level to which Economic and Monetary Union is an important contribution;9. Considers that to keep currency fluctuations in the third stage of EMU at a minimum level, to prevent competitive devaluations by Member States with a derogation and to guarantee the functioning of the Single Market, the necessary political initiatives and decisions defining the relations between the Euro and the currencies of the Member States with a derogation must be taken as soon as possible;10. Considers that, for political and practical reasons, the common exchange rate system governing relations between Member States with and without a derogation should be based on the Euro with a wide fluctuation band, without excluding the possibility for those Member States wishing to do so to establish narrower bands and provide for intervention mechanisms to offset speculative pressures;11. Considers an explicit call for the prompt participation in the exchange rate mechanism of those currencies now floating outside the ERM to be desirable;12. Expresses concern that as a reaction to exchange-rate turbulence consideration has been given to applying corrections going as far as reintroducing some sort of counter-protective measures and strongly opposes those measures as they imply a major step back on the way to completing the single market;13. Considers inappropriate the suggestion to compensate affected regions and sectors by financial means out of the Structural Funds, since the Structural Funds were established to facilitate the transition of sectors or regions with structural difficulties;14. Is nevertheless of the opinion that appropriate measures should be taken to help small and medium-sized companies (especially in the service sector) of border regions affected by a sharp currency devaluation in the neighbouring country;15. Instructs its President to forward this resolution to the Council, the Commission, the European Monetary Institute and the governments and parliaments of the Member States.