Resolution of the European Council of 13 December 1997 on economic policy coordination in stage 3 of EMU and on Treaty Articles 109 and 109b of the EC Treaty
Date: 1997-12-13
Institutions: European Council
Subjects: European Central Bank, coordination of EMU policies, euro, exchange rate, third stage of EMU

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I

(Information)

COUNCIL

RESOLUTION  OF  THE  EUROPEAN  COUNCIL

of  13  December  1997

on  economic  policy  coordination  in  stage  3  of  EMU  and  on  Treaty  Articles  109  and  109b  of
the  EC  Treaty

(98/C  35/01)

THE  EUROPEAN  COUNCIL,  meeting  in  Luxembourg  on
13  December  1997,

Having  regard  to  the  Treaty  establishing  the  European
Community,

Recalling  the  conclusions  of  the  Amsterdam  European
Council,  notably  on  improving  economic  coordination
and  on  effective  ways  on  implementing  Articles  109  and
109b  of  the  Treaty,

Recalling  the  Amsterdam  European  Council  Resolution
on  the  Stability  and  Growth  Pact,

Recalling  the  Amsterdam  European  Council  Resolution
on  Growth  and  Employment,  and

Taking  note  of  the  report  of  the  Council  of  1  December
1997,

HAS  RESOLVED  AS  FOLLOWS:

I.  Coordination  of  economic  policies  in  stage  3  of

economic  and  monetary  union  (EMU)

1.  EMU  will  link  the  economies  of  the  euro-area
Member States more closely together. They will

share  a  single  monetary  policy  and  a  single
exchange  rate.  Cyclical  developments  are  likely
to  converge  further.  Economic  policies,  and
wage  determination,  however, 
remain  a
national responsibility, subject to the provisions
of  Article  104c  of  the  Treaty  and  the  Stability
and  Growth  Pact.  To  the  extent  that  national
economic  developments  have  an  impact  on
inflation  prospects  in  the  euro-area,  they  will
influence monetary conditions in that area. It is
for  this  basic  reason  that  the  move  to  a  single
currency  will 
closer  Community
surveillance  and  coordination  of  economic
policies  among  euro-area  Member  States.

require 

functioning  of 

2.  Economic  and  monetary  interdependence  with
non-participating  Member  States  will  also  be
strong; they all participate in the single market.
The  need  to  ensure  further  convergence  and  a
the  single  market
smooth 
therefore  requires  all  Member  States  to  be
in  the  coordination  of  economic
included 
policies.  Moreover, 
interdependence  will  be
especially  strong  if  non  euro-area  Member
States  participate  in  the  new  exchange  rate
mechanism,  as  countries  with  a  derogation  are
expected  to.

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full  attention 

3.  Enhanced  economic  policy  coordination  should
give 
to  national  economic
developments  and  policies  which  have  the
potential  to  influence  monetary  and  financial
conditions  throughout  the  euro  area  or  the
smooth functioning of the internal market. This
includes:

—  close  monitoring 

of  macroeconomic
developments  in  Member  States  to  ensure
sustained convergence, and of exchange-rate
developments  of  the  euro,

—  surveillance  of  budgetary  positions  and
policies  in  accordance  with  the  Treaty  and
the  Stability  and  Growth  Pact,

—  monitoring  of  Member  States’  structural
policies  in  labour,  product  and  services
markets, as well as of cost and price trends,
the
particularly 
chances 
sustained
non-inflationary  growth  and  job  creation,
and

insofar  as 
of 

they  affect 

achieving 

—  the 

fostering  of 

efficiency  and 
harmful  tax  competition.

tax  reform 

to  raise
the  discouragement  of

of 

the 

Enhanced  economic  policy  coordination  must
adhere  to  the  Treaty  principle  of  subsidiarity,
respect 
national
prerogatives 
governments in determining their structural and
budgetary  policies  subject  to  the  provisions  of
the  Treaty  and  the  Stability  and  Growth  Pact,
independence  of  the  European
respect  the 
System of Central Banks (ESCB) in pursuing its
primary  objective  of  price  stability  and  the  role
central
of 
decision-making 
economic
body 
coordination,  and  respect  national  traditions
and  the  competences  and  responsibilities  of  the
social  partners  in  the  wage  formation  process.

the  Ecofin  Council  as 

the 

for 

an  effective  instrument  for  ensuring  sustained
convergence  of  Member  States.  They  should
provide  more  concrete  and  country-specific
guidelines  and  focus  more  on  measures  to
improve  Member  States’  growth  potential,  thus
increasing 
employment.  Therefore,  more
attention  should  henceforth  be  paid  in  them  to
improving  competitiveness,  labour-,  product-
and  services-market  efficiency,  education  and
training,  and  to  making  taxation  and  social
protection  systems  more  employment-friendly.

Enhanced  coordination  should  be  aimed  at
securing  consistency  of  national  economic
policies  and  their  implementation  with  the
broad  economic  policy  guidelines  and  the
proper  functioning  of  EMU.  Economic  policies
and  development  in  each  Member  State  and  in
the  Community  should  be  monitored  in  the
framework 
surveillance
of  multilateral 
according  to  Article  103(3)  of  the  Treaty.
Particular  attention  should  be  paid  to  giving
threatening
early  warning,  not  only  of 
budgetary  situations  in  accordance  with  the
Stability  and  Growth  Pact,  but  also  of  other
developments  which, 
if  allowed  to  persist,
might  threaten  stability,  competitiveness  and
future  job  creation.  To  this  end,  the  Council  is
expected  to  be  more  ready  to  make  the
necessary  recommendations  in  accordance  with
Article  103(4)  of  the  Treaty  to  a  Member  State
economic  policies  are  not
whenever 
consistent  with  the  broad  economic  policy
guidelines.  For  its  part,  the  Member  State
concerned  should  commit  itself  to  take  timely
and efficient measures which it deems necessary
to  respond  to  the  Council’s  recommendations.
Moreover,  the  Member  States  should  commit
themselves  to  a  comprehensive  and  speedy
exchange 
economic
information 
of 
developments  and  policy 
intentions  with  a
cross-border  impact.

on 

its 

4.  To  ensure  the  smooth  functioning  of  EMU,  the
Council,  the  Commission  and  the  Member
States  are  called  upon  to  apply  the  Treaty
instruments  for  economic  policy  coordination
fully  and  effectively.

this  end, 

To 
the  broad  economic  policy
guidelines  adopted  in  accordance  with  Article
103(2)  of  the  Treaty  should  be  developed  into

5.  Monitoring  of  the  economic  situation  and
policy discussions should become a regular item
on  the  agenda  of  informal  Ecofin  sessions.  In
order  to  stimulate  an  open  and  frank  debate,
the  Ecofin  Council  should  from  time  to  time
meet  in  restricted  sessions  (minister  plus  one),
particularly  when 
conducting  multilateral
surveillance.

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6.  Under  the  terms  of  the  Treaty,  the  Ecofin
Council (1)  is  the  centre  for  the  coordination  of
the  Member  States’  economic  policies  and  is
empowered  to  act  in  the  relevant  areas.  In
particular,  the  Ecofin  Council  is  the  only  body
empowered  to  formulate  and  adopt  the  broad
economic policy guidelines which constitute the
main  instrument  of  economic  coordination.

The  defining  position  of  the  Ecofin  Council  at
the  centre  of  the  economic  coordination  and
decision-making  process  affirms  the  unity  and
cohesion  of  the  Community.

informally 

The  Ministers  of  the  States  participating  in  the
euro-area  may  meet 
among
themselves  to  discuss  issues  connected  with
their  shared  specific  responsibilities  for  the
single  currency.  The  Commission,  and  the
European  Central 
(ECB)  when
appropriate,  will  be  invited  to  take  part  in  the
meetings.

Bank 

Whenever  matters  of  common 
interest  are
concerned they will be discussed by Ministers of
all  Member  States.

Decisions  will  in  all  cases  be  taken  by  the
Ecofin  Council 
the
procedures  determined  by  the  Treaty.

in  accordance  with 

II. 

the
Implementing 
and
exchange-rate 
representation of the Community (Article 109 of the
Treaty)

the  Treaty  provisions  on 
position 
external 
policy, 

7.  The 

recognises 

European  Council 

in  strict  accordance  with 

the
responsibility  which  will  fall  to  the  Community
with  the  introduction  of  the  euro,  one  of  the
major currencies in the world monetary system.
The  contribution  of  the  Community  through
the  ESCB, 
the
competences  and  procedures  established  by  the
Treaty,  will  be  to  provide  a  centre  of  price
stability.  For  its  part,  the  European  Council  is
resolved  to  play  its  full  part  in  helping  to  lay
the  foundations  for  a  prosperous  and  efficient
economy in the Community, in accordance with
the  principle  of  an  open  economy  with  free
competition, favouring an efficient allocation of

(1)  Declaration  No  3  to  the  Treaty  on  European  Union  affirms
that  for  the  purpose  of  applying  the  provisions  set  out  in
Title  VI  on  economic  and  monetary  policy  of  the  Treaty
establishing  the  European  Community,  the  usual  practice,
according  to  which  the  Council  meets  in  the  composition  of
Economic and Finance Ministers, shall be continued, without
prejudice in Article 109j(2) to (4) and Article 109k(2) of the
Treaty.

resources, and in compliance with the principles
set  out  in  Article  3a  of  the  Treaty.  The
European  Council  is  convinced  that  this  will
provide the bases for a currency which is strong
and  respected.

8.  The  Council  should  monitor  the  development
of the exchange rate of the euro in the light of a
wide  range  of  economic  data.  The  Commission
should provide analyses to the Council, and the
Economic  and  Financial  Committee  should
prepare the Council’s reviews. It is important to
make full use of the Treaty provisions to ensure
an  exchange  of  information  and  views  between
the  Council  and  the  ECB  on  the  exchange  rate
of  the  euro.  While  in  general  exchange  rates
should  be  seen  as  the  outcome  of  all  other
economic  policies, 
in
exceptional  circumstances,  for  example  in  the
case  of  a  clear  misalignment,  formulate  general
orientations for exchange-rate policy in relation
to non-EC currencies in accordance with Article
109(2) of the Treaty. These general orientations
should  always  respect  the  independence  of  the
ESCB  and  be  consistent  with  the  primary
objective  of 
to  maintain  price
stability.

the  Council  may, 

the  ESCB 

9.  The  Council  should  decide  on  the  position  of
the Community at international level as regards
issues  of  particular  relevance  to  economic  and
monetary  union,  in  accordance  with  Article
109(4)  of  the  Treaty.  These  positions  will  be
relevant  both  to  bilateral  relations  between  the
European  Union  and  individual  third  countries
and to proceedings in international oranizations
or  informal  international  groupings.  The  scope
of  this  provision  is  necessarily  limited  as  only
euro-area  Member  States  vote  under  Article
109.

10.  The  Council  and  the  European  Central  Bank
will  carry  out  their  tasks  in  representing  the
Community at international level in an efficient
manner  and  in  compliance  with  the  allocation
of powers laid down in the Treaty. On elements
of  economic  policy  other  than  monetary  and
exchange-rate policy, the Member States should
continue  to  present  their  policies  outside  the
framework,  while 
Community 
full
interest.  The
account  of 
the  Community 
in  external
Commission  will  be 

involved 

taking 

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representation  to  the  extent  required  to  enable
it  to  perform  the  role  assigned  to  it  by  the
Treaty.

to 

they 

regard 

particular 

Representation  in  international  organizations
should  take  account  of  those  organizations’
rules.  With 
the
Community’s  relations  with  the  International
should  be
(IMF), 
Monetary  Fund 
predicated  upon  the  provision  in  that  Fund’s
Articles  of  Agreement  that  only  countries  can
be  members  of  that  institution.  The  Member
States,  in  their  capacities  as  members  of  the
to  establish  pragmatic
IMF,  should  help 
the
arrangements  which  would 
conduct  of 
the
presentation of Community positions, including
the  views  of  the  ESCB,  in  IMF  fora.

facilitate 
and 

surveillance 

IMF 

12.  The  Council  should  therefore  play  its  full  part
in  exploiting  the  channels  of  communication
provided  by  the  Treaty.  The  President  of  the
Council,  using  his  position  under  Article  109b
of  the  Treaty,  should  report  to  the  Governing
Council of the ECB on the Council’s assessment
of  the  economic  situation  of  the  Union  and  on
economic  policies  of  the  Member  States  and
could  discuss  with  the  ECB  the  views  of  the
Council  on  exchange-rate  developments  and
prospects.  The  Treaty  provides  in  turn  for  the
ECB  President  to  attend  Council  meetings
whenever  the  Council  is  discussing  matters
relating to the objectives and tasks of the ESCB,
for  instance  when  the  broad  economic  policy
guidelines are being developed. Importance also
attaches  to  the  annual  reports  which  the  ECB
will  make  to  the  European  Parliament,  the
Council  and  the  Commission,  as  well  as  to  the
European  Council.

III.  Dialogue  between  the  Council  and  the  ECB

11.  In  the  light  of  the  allocation  of  responsibilities
laid  down 
in  the  Treaty,  the  harmonious
economic  development  of  the  Community  in
Stage  3  of  EMU  will  call  for  continuous  and
fruitful  dialogue  between  the  Council  and  the
ECB,  involving  the  Commission  and  respecting
all  aspects  of  the  independence  of  the  ESCB.

The Economic and Financial Committee, which
will  bring  together  senior  officials  from  the
national  central  banks  and  the  ECB  as  well  as
from 
the
framework  within  which  the  dialogue  can  be
prepared  and  continued  at  the  level  of  senior
officials.

finance  ministries,  will  provide