Resolution on the communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions, 'The EU economy at the arrival of the euro: promoting growth, employment and stability' (1999 annual economic report) (COM(99)0007 C4-0043/99)
Date: 1999-03-11
Institutions: Committee on Economic and Monetary Affairs, European Parliament
Subjects: monetary policy













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51999IP0102

Resolution on the communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions, 'The EU economy at the arrival of the euro: promoting growth, employment and stability' (1999 annual economic report) (COM(99)0007 C4-0043/99)  


Official Journal C 175 , 21/06/1999 P. 0296 





A4-0102/99Resolution on the communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions, 'The EU economy at the arrival of the euro: promoting growth, employment and stability' (1999 annual economic report) (COM(99)0007 - C4-0043/99)The European Parliament,- having regard to the communication from the Commission COM(99)0007 - C4-0043/99,- having regard to Articles 103 and 104c of the Treaty on European Union,- having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies ((OJ L 209, 2.8.1997, p. 1.)),- having regard to Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure ((OJ L 209, 2.8.1997, p. 6.)),- having regard to the resolution of the European Council on the Stability and Growth Pact adopted at Amsterdam on 17 June 1997 ((OJ C 236, 2.8.1997, p. 1.)),- having regard to the resolution of the European Council on growth and employment adopted at Amsterdam on 16 June 1997 ((OJ C 236, 2.8.1997, p. 3.)),- having regard to the conclusions of the Presidency at the extraordinary summit in Luxembourg on 20 and 21 November 1997,- having regard to the conclusions of the ECOFIN Council of 1 December 1997 concerning fiscal policy,- having regard to the resolution of the European Council of 12 and 13 December 1997 on the coordination of economic policies during the third stage of Economic and Monetary Union and Articles 109 and 109b of the Treaty,- having regard to its resolution of 3 December 1998 ((Minutes of that date, Part II, Item 12.)) on the world monetary and financial crisis and its effects on the economy of the EU,- having regard to the conclusions of the European Council on employment, economic growth and stability, and in particular on the development of a European Employment Pact, adopted in Vienna on 12 December 1998,- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinion of the Committee on Employment and Social Affairs (A4-0102/99),A. whereas the annual economic report by the Commission constitutes an indispensable contribution to the debate which must be held concerning the political options for the broad outlines of the economic and employment policies of the Member States and the Community, and in which the European Parliament, as the elected assembly representing the peoples of the Union, has a particular responsibility to bear,B. whereas, now that Economic and Monetary Union has entered its third stage, the 11 countries of the euro zone are engaged in a new process of intensified European cooperation that will require a delicate period of initiation, which will constitute a challenge for the economic and social future of the European Union and for the proper functioning of Monetary Union,C. whereas, however, the Commission has failed to enhance the usefulness of its annual economic report through the inclusion of alternative growth scenarios for the European economy, as had been called for by Parliament in its resolution of 30 April 1998 on the (annual economic report) ((OJ C 152, 18.5.1998, p. 72.)),D. whereas monetary policy is pursued in the light of the general conditions prevailing in the euro zone and not those specific to certain countries, and whereas the Community budget is not sufficient to regulate economic trends, so that national economic policies and their coordination will be essential elements in Europe's economic strategy,E. whereas according to the Commission 20% of the world economy may be regarded as being in recession and 10% as close to it,F. whereas EMU reinforces the protection of the euro zone against external financial crises and turbulence, but does not completely eliminate the impact of external shocks, particularly as regards the European Union as a whole; whereas the European Union will continue to suffer adverse consequences in terms of external demand, the increased fragility of banks with liabilities in countries with emerging economies, and loss of confidence on the part of managers of undertakings,G. whereas external shocks will affect the Member States of the European Union in different ways, depending on their degree of dependence on the countries hardest hit by the crisis,H. whereas the European economy continues to reap the benefits of sound economic fundamentals: good returns on investment, historically low inflation and interest rates, and budget restructuring,I. whereas the countries which have good rates of public investment are those which, in general, have the smallest budget deficits,J. whereas despite the sustained growth enjoyed by the European Union in 1998, unemployment has not been reduced sufficiently and the European economy seems to have become used to functioning with an inadequate level of employment which clearly shows that new political measures have to be added to a pure growth-oriented policy,K. whereas, in order to reduce unemployment, growth which generates many jobs is needed,L. whereas a substantial and lasting reduction in unemployment will depend on substantial structural reforms in the field of economic and employment policy coordination differentiated according to the national situation, and must remain the main objective of European economic policy,M. whereas a substantial and lasting reduction in unemployment will only be possible through strong and sustained growth, as shown by Commission estimates indicating that a growth performance similar to that achieved in the United States in 1991/98 could have resulted in the creation of 10 million additional jobs in the European Union,N. whereas the synergy now sought between the broad outlines of economic policy and the guidelines for employment could constitute an effective strategy, on condition that priority is assigned to creating productive and lasting jobs,O. whereas likewise the introduction of the single currency ought to accelerate structural reforms through its numerous effects on financial markets and markets for goods, services and labour,P. whereas the Commission's 'Cardiff I' and 'Cardiff II' reports on structural policies, which are not yet available, will be taken into account only in the next resolution on the broad outlines of economic policy,as regards the development of the international financial and economic situation1. Is concerned about the trend in the world economic situation, the prospects as regards the associated financial risks and the difficulty of forecasting their extent;2. Considers in particular that Asia is taking a long time to recover from the crisis which has afflicted it for nearly two years, due to the lack of determination on the part of the national authorities to complete the necessary structural reforms, and notes on the other hand that, according to the Commission, the economic crisis in Russia is likely to result in a further 10% fall in GDP and a risk of hyperinflation;3. Is concerned at the persistent character of the financial crisis in Brazil and the risk of contagion throughout the Latin American bloc and even in the North American economy, and is astonished that a more thorough analysis has not been made of the latter risk;4. Welcomes, on the other hand, the fact that the countries of Central and Eastern Europe are likely to continue to enjoy strong economic growth, together with a significant improvement in their fundamentals and increasing integration of trade with the European Union;5. Considers that this development should encourage the Union firstly to support the efforts of these countries and secondly to pursue the accession negotiations effectively;6. Recalls that the international financial crisis requires particular vigilance in the field of prudential supervision in order in particular to prevent contraction of the credit supply (a 'credit crunch'), and calls, therefore, on the competent European national authorities to cooperate closely in the field of banking supervision;7. Is concerned at the tendencies towards overvaluation of stock markets, especially of the New York Stock Exchange, and the risk inherent in any associated asset price bubbles, which, combined with the risk of a reversal of the dissaving currently practised by consumers in the United States, raise the spectre of a collapse of equity prices dragging the real economy into deep recession worldwide;8. Calls, in connection with the introduction of the single currency, for a new culture of political cooperation between those responsible for fiscal, monetary and wage-rate policy at European level in order to improve the efficiency of EU decision-making and ensure employment, growth and stability, and stresses that the burdens of adjustment arising from the risks inherent in trends in the world economy must be borne jointly on the basis of a coordinated macroeconomic strategy;as regards the economic situation and the prospects of the Union9. Considers that, although the euro zone now comprises a fully-fledged monetary entity, there is not enough convergence between the economies of the member countries for them to constitute a homogeneous economic bloc; considers therefore that an excessively general analysis of the situation of the European Union may mask contrasting national economic and social realities;10. Stresses that, in addition to the Commission's annual economic report, the European institutions should also receive annual reports on the state of the European Union from recognised European economics institutes;11. Stresses in particular the existence of institutions, structures, market characteristics and regulations which remain specific to the Member States, despite the progress made towards creating the single market;12. Observes that Europe itself should generate growth of a kind which creates employment by means of an adequate policy mix of budgetary and monetary policies and wage trends;13. Considers that, although the consequences of the international financial crisis give cause for concern, it is important not to neglect the impact of domestic economic factors, particularly trends in business confidence, which could affect the level of productive investment, nor the long-term stagnation of private investment which persists despite the profitability of investment reaching levels unprecedented since the 1960s and even higher than those;14. Stresses that, if the economy slows more abruptly, the impact of the automatic stabilisers will largely have to be accepted and a sound fiscal policy will have to reduce the structural budget deficit, but at the same time does not consider a short-term procyclical budgetary policy appropriate as it accentuates tendencies towards cyclical weakening through additional consolidation;15. Stresses that the monetary conditions for macroeconomic strategy are particularly important; considers it necessary to pursue a monetary policy designed to promote growth, in view of the cyclical risks arising from international economic trends;16. Shares the concern expressed by the Commission and the Ecofin Council at its meeting of 18 January 1999 that a better statistical system should be available, for the countries of the euro zone in particular, to monitor changes in the economic, budgetary and social situation quarterly;17. Hopes, in this context, that the Commission's resources and capacities for analysis, as well as those of the European Parliament, will be enhanced so as to improve their contributions to economic proposals and debates;18. Would indeed have liked to have at its disposal more precise and thorough analyses, country by country, sector by sector, or region by region, of medium-term prospects in order to be able to identify interdependences between Member States, so as to obtain a clearer picture of the dynamics of the European economy;19. Welcomes the fact that the introduction of the euro is creating a European capital market which will accelerate the necessary reform of this market and improve businesses' access to finance; considers that, in this context, significant reforms should be introduced in the interests of growth and employment;20. Would likewise have liked to have at its disposal analyses of the process of convergence between the pre-in countries and analyses of their monetary policies;21. Is concerned at the current levels of public deficits and those forecast for 1999, which exceed or are equal to 2% of GDP in the three economically most important countries in the euro zone - Germany, France and Italy; in the event of a crisis, these countries might not have sufficient budgetary margin for manoeuvre to support economic activity, which, in view of their economic importance within the euro zone, would have serious consequences for their partners;22. Calls on the European Council to pursue a policy based on rational macroeconomic principles combining a stable currency and effective budgetary consolidation with the need to guarantee adequate purchasing power;as regards economic policy responsibilities23. Recalls that the objective of the Stability and Growth Pact is to secure budgetary equilibrium in the medium term, and considers therefore that continuing efforts are needed to reduce public deficits, while taxes and other levies must not rise, and must if possible be reduced; shares the view expressed by the Commission that the fall in public investment expenditure which has occurred in recent years has to be reversed; urges, in this respect, the Commission to conform to its full Treaty obligation as formulated in Article 104c(3), when assessing national stability and convergence programmes;24. Recognises, however, the need to pursue public investment, while ensuring that it is economically viable or socially justified; recalls the importance of investing in human resources, i.e. education and training, and in intra-Community infrastructure, in which context it draws attention to the importance of the Structural Funds and the trans-European networks;25. Stresses the desirability of performing an analysis with a view to a harmonised and consistent definition of public investment throughout the European Union;26. Stresses that rises in public investment may entail a reorganisation of public spending with the aim of simultaneously reducing the budget deficit;27. Calls on the Commission to include in its presentation of the Member States' budgetary positions a consideration of the comparison between the levels of public deficits and of public investment expenditure, as it would for a report under Article 104c(3) of the Treaty on European Union, and a consideration of all other factors deemed relevant, including an analysis of the dynamics and the causal relationship between rises in deficits and the decline in public investment;28. Considers the level of private investment inadequate and urges the private sector, in view of such favourable conditions as high returns on investment, large profits, low rates of inflation and low interest rates, to undertake productive investment and projects through public-private partnerships and thereby help to increase employment in Europe;29. Urges Member States to work for the implementation of a substantial European Employment Pact, entailing benchmarking for employment policies;30. Calls for better and systematic coordination of taxation of enterprises, capital and energy in order at long last to reduce taxation of labour;31. Would have liked the report to contain more information about the economic policies arising from the introduction of the euro, and take greater account thereof in its analyses;32. Welcomes the fact that, in its analysis, the Commission links reform of the labour market to reform of the markets for goods and services and financial markets;33. Recognises that the competitive functioning of markets for goods and services could be improved by greater flexibility of prices, by modernising rules and regulations, by promoting the spirit of enterprise and by means of appropriate competition policies;34. Calls on the Commission to pay greater attention to the need for greater adaptability on the part of businesses in order to cope with technological structural change; in this respect minimum standards of information and consultation at European and national level need to be ensured;35. Believes that a reduction in consumption of non-renewable resources, the development of new services and the Third System offer considerable perspectives for additional job creation in the framework of the information society and the development of new technologies;36. Regards support for the creation of new businesses and the provision of risk capital and new forms of financing, in particular for small and medium-sized businesses, as an appropriate means of substantially increasing jobs;37. Deplores the conduct of banking and financial institutions in Europe with regard to bank charges within the euro zone since 1 January 1999, which is reducing the gains arising from the adoption of the single currency and eroding citizens' confidence in the euro; calls on the Commission, therefore, to take all necessary measures, if necessary including legislation, to remedy the situation;38. Calls on the two sides of industry, when negotiating wages, to take account of likely productivity gains in order to create optimum conditions for job creation;39. Calls for a more active labour market policy to give job-seekers the opportunity of retraining and upgrading their qualifications;40. Repeats its call for implementation of the concept of lifelong learning in order to meet future requirements on the labour market and to improve the prospects for older workers;41. Calls on the Member States and the European Union to coordinate adequate measures to facilitate the reintegration of the population groups exposed to social exclusion;42. Calls for on-going and comprehensive monitoring of unit labour costs in the context of the annual economic report and quarterly statements in order to counter any undesirable developments which prevent an appropriate and balanced policy mix;43. Draws attention, once again, to the need to reduce labour costs in the case of less skilled workers by reducing levies on their wages, without jeopardising the funding of social security systems and/or applying the reduced rate of VAT to labour-intensive services throughout the European Union, in order to promote growth and employment while ensuring that an adequate training policy is pursued to help them to become more skilled and productive;44. Expects, therefore, the Member States, the European Union and the private sector to invest in the areas of education, vocational training and retraining and research and development in order to improve Europe's competitiveness on the world market;45. Endorses the commitment of the Member States to better coordination of fiscal policy in the interests of reducing economic distortions and perfecting the operation of the internal market;46. Considers that monetary policy is appropriate to the economic situation which currently prevails in Europe and internationally, but that it should, if necessary, be adjusted in the event of a significant deterioration in the economic situation in the euro zone or if a risk of deflation arises there;47. Considers also that the more appropriate the trends in wages and budgets are, the more monetary policy - in the context of a good policy mix - will favour growth and employment, while ensuring price stability;48. Stresses the need to analyse the transmission mechanisms for monetary policy in the various countries in the euro zone and to take account of them in implementing economic policies;49. Recalls that a twofold analysis needs to be carried out in order to optimise the broad guidelines of economic policy for the euro zone and the European Union; considers that it is therefore necessary to think about the formal or informal institutional framework which could meet this need; considers, at all events, that it would be appropriate to merge the procedures relating to the broad guidelines of economic policy and to the employment guidelines;50. Reiterates its proposal, made in its abovementioned resolution of 30 April 1998, to include an analysis of scenarios, if appropriate based on econometric instruments, in order more effectively to anticipate the risks and appropriate measures in the event of forecasts proving inaccurate due to changing economic trends;51. Considers that the uncertainties attendant upon the international economic situation should encourage the Commission to consider, both in procedural terms and with regard to substantive policy, establishing crisis management arrangements to make a rapid and coordinated response, particularly within the euro zone, to any severe slowing of economic growth and to the risks of an economic shock;52. Expects the Commission's recommendation on the broad outlines of economic policy to be based on a critical analysis, which must not be lenient, of the stability and convergence programmes, accompanied by recommendations country by country, and, in this context, reminds the Commission of its responsibilities under Article 103(3) of the Treaty on European Union;53. Regrets the delays in the formal adoption of the employment guidelines for 1999 and calls on the Commission to inform Parliament of the Council's amendments to its draft for the Jumbo Council of 1 December 1998;54. Calls on the Commission to ensure that the broad guidelines of economic policy are coordinated with employment strategy;55. Calls on the Council and Commission to remedy the democratic deficit with regard to economic and employment policy by means of an interinstitutional agreement which fully involves the European Parliament in decision-making on the outlines of economic policy and economic-policy guidelines;56. Instructs its President to forward this resolution to the Council, the Commission and the parliaments of the Member States.