SYNCHRONIZATION OF NATIONAL BUDGETARY AND MONETARY POLICY TIMETABLES HAS TO BE FURTHER IMPROVED IN SOME COUNTRIES . THE LINK AT THE COMMUNITY LEVEL IN THE DECISION-MAKING PROCESS BETWEEN THE TECHNICAL AND POLITICAL LEVELS HAS IMPROVED IN THE COURSE OF THE WORK THAT LED TO THE 1978 CONCERTED ACTION DECISION , AND THIS PROGRESS NEEDS TO BE BUILT ON FOR THE FUTURE . MOREOVER THE EUROPEAN MONETARY SYSTEM WILL ITSELF ( AS INDICATED FURTHER BELOW ) STRENGTHEN THE NEED FOR PROGRESS IN THE AREA OF HARMONIZATION OF BUDGETARY AND MONETARY POLICY .
4 . EUROPEAN MONETARY SYSTEM
MONETARY STABILITY IS A PRIORITY OBJECTIVE IN ITSELF . BUT IT IS ALSO THE ROUTE THROUGH WHICH TO RESTORE EFFECTIVENESS TO THE INSTRUMENTS OF MACROECONOMIC POLICY . NOTHING IS MORE DAMAGING TO THE EFFECTIVENESS OF DEMAND MANAGEMENT POLICY AND GROWTH THAN TO HAVE TO TRY TO OPERATE ON A DISTURBED BASIS OF DOMESTIC OR EXTERNAL MONETARY INSTABILITY .
MEMBER STATES WITH REVALUING AND DEVALUING CURRENCIES , ESPECIALLY WHERE THERE HAVE BEEN OVERSHOOTING OR EXAGGERATED MOVEMENTS , HAVE THE COMMON EXPERIENCE OF RECENT YEARS OF BEING UNABLE TO OBTAIN FULL SATISFACTION FROM DEMAND MANAGEMENT POLICY IN THE PREVAILING CONDITIONS OF DOMESTIC AND/OR EXTERNAL MONETARY INSTABILITY . COUNTRIES WITH REVALUING CURRENCIES HAVE FOUND BUSINESS INVESTORS UNRESPONSIVE TO EXPANSIONARY POLICY MOVES WHERE GREAT UNCERTAINTY HAS SURROUNDED THEIR INTERNATIONAL COMPETITIVE SITUATION AND THE PROSPECTS FOR DEMAND ABROAD . COUNTRIES WITH DEVALUING CURRENCIES HAVE EXPERIENCED HOW STRONGLY AND QUICKLY EXCHANGE-RATE DEPRECIATION CAN AGGRAVATE DOMESTIC INFLATION AND ALSO CREATE A CLIMATE OF UNCERTAINTY AND INSTABILITY DETRIMENTAL TO THE OBJECTIVE OF INDUCING A STRONG FLOW OF NEW , COMPETITIVE INVESTMENT .
THESE ARE THE ECONOMIC REASONS WHICH HAVE LED THE COMMUNITY TO ESTABLISH A EUROPEAN MONETARY SYSTEM AS OF 1 JANUARY 1979 .
THE ECONOMIC POLICY IMPLICATIONS OF THE EUROPEAN MONETARY SYSTEM ENVISAGED CAN BE INDICATED IN BROAD TERMS .
THE SYSTEM WILL PROVIDE A MORE CLEAR-CUT FRAME OF REFERENCE FOR DOMESTIC MONETARY STABILIZATION POLICY , ALTHOUGH THE CHOICE OF INSTRUMENTS OF STABILIZATION POLICY WILL NO DOUBT CONTINUE TO DIFFER AS BETWEEN MEMBER STATES . HOWEVER , THE SYSTEM WILL IN ANY CASE NEED , IN SPITE OF THE DIFFICULTIES IT INVOLVES , A COORDINATION OF MONETARY POLICIES IN THE COMMUNITY FRAMEWORK , WHICH TAKES ACCOUNT NOT ONLY OF THEIR DIRECT EFFECTS ON FINANCIAL MARKETS BUT ALSO OF THEIR CONTRIBUTION TO THE OVERALL MACROECONOMIC POLICIES OF INDIVIDUAL COUNTRIES .
THE AVAILABILITY OF LARGER VOLUMES OF CREDIT IMPLIES THAT THERE WILL BE A LARGER RECOURSE WITHIN THE COMMUNITY TO THE COLLECTIVE NEGOTIATION OF ECONOMIC POLICY CONDITIONS ACCOMPANYING CREDITS OF RELATIVELY LONG MATURITY .
THE SUCCESSFUL FUNCTIONING OF THE SYSTEM WILL ALSO REQUIRE THAT THE COMMUNITY AS A WHOLE STRIKES THE RIGHT BALANCE IN POLICIES FOR STABILIZATION AND GROWTH , I.E . TO AIM AT CONVERGENCE ON A LOW RATE OF INFLATION AND STRONGER GROWTH . TO THIS END ALL MEMBER STATES MUST ACCEPT OBLIGATIONS TO MANAGE THEIR ECONOMIC POLICIES ACCORDINGLY .
IN THESE RESPECTS THE FUNCTIONING OF THE EUROPEAN MONETARY SYSTEM WILL