PARLIAMENT AND EMU
The European Parliament will carry out tasks within EMU at three levels:
- Legislative
- Supervisory
- Deliberative
Parliament's Legislative Role
Parliament's Supervisory Role
Parliament's Deliberative Role
Parliament's view of EMU
The Stability and Growth Pact
The Euro and the citizen
The European Parliament must be consulted, and a parliamentary vote taken, on:
- which countries qualify for membership of the Single Currency, both for the "first wave" in 1999, and afterwards;
- the appointment of the President, Vice-President and other Executive Board members of the European Central Bank;
- legislation preparing for the Single Currency, including implementation of the "golden rules", and any new tasks to be carried out before 1999 by the European Monetary Institute;
- the arrangements for introducing Euro coins by Member States (Euro banknotes are the responsibility of the ECB);
- legislation implementing the "excessive deficit" procedure, including the Stability and Growth Pact;
- agreements on exchange-rates between the Euro and non-EU currencies;
- changes to the Statute of the European Central Bank, and powers given to the Bank to supervise financial institutions
(1) In the latter case, and on most changes to the Statute, Parliament's "assent" is needed.
Parliament's most important role within EMU will be in relation to the European Central Bank.
Under the Treaty, the Bank will enjoy full independence in determining monetary policy. It alone will have responsibility for setting short-term interest rates and for using other monetary instruments necessary to preserve the stability of the Euro.
But this operational independence of the ECB will be balanced by accountability for its actions to the directly-elected European Parliament.
- Parliament has instituted detailed procedures under its own Rules (see Rule 36 following) for its part in the appointment of the ECB President, Vice-President and other members of the ECB Executive Board. The first President of the European Monetary Institute, A. Lamfalussy, and the second, W. Duisenberg, were both approved in this way.
- Each year, the President of the ECB will be required to present a report to the European Parliament , meeting in plenary session. This will cover the conduct of monetary policy in both the current and the previous years.
- The President of the ECB and other members of the Executive Board will from time to time appear before the competent committee of the European Parliament . A request for such an appearance may come from either side.
*Rule 36
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Parliament's Deliberative Role
Commission and Council must report to Parliament on all major decisions and developments in the field of general economic policy. These may form the basis of
- reports by a Committee of the Parliament;
- a debate by Parliament as a whole, in public;
- a resolution adopted by Parliament as a whole.
In particular, Commission and Council must report to Parliament in the framework of
- the " broad guidelines " procedure, under which recommendations are made on the general direction of economic policy;
- the " excessive deficits procedure ", under which national levels of deficit and borrowing are monitored. In the case of countries participating in the Single Currency, recommendations for action can be made and sanctions imposed as a last resort. The Stability and Growth Pact fills out the details.
- the " multilateral surveillance " procedure, under which the policies of the Member States are monitored, and under which recommendations for action by a particular country can also be made. At first, such recommendations will be confidential. In the last resort, they may be made public.
When a recommendation for action by a particular country has been made public, the President of the Council may be required to appear before the competent committee of Parliament.
Parliament must also be informed of:
- the composition of the Economic and Financial Committee; and
- any decisions taken by the Council if a Member State, in exceptional circumstances, suspends the free movement of capital with third countries.
The European Parliament has consistently supported the achievement of Economic and Monetary Union within Europe. A delegation from the Parliament's Committee on Economic and Monetary Affairs and Industrial Policy participated in the negotiations which preceded the drafting of the Maastricht Treaty. Numerous resolutions of Parliament have since
"reaffirmed the contribution of monetary union to the deepening of the European Union, the completion of the internal market, prosperity and employment, and hence greater political and economic security".
Parliament has also given specific support in its debates and resolutions to the primary objective of sustainable price stability ; and, in consequence, to the need for independent national and European Central Banks.
More recently Parliament has drawn attention to the wider economic context of monetary union and above all to the continuing high rates of unemployment. Though Parliament has supported the limitations on national public deficits and borrowing, it has also supported Commission's 1993 proposals for increased public investment at Community level. For example, its resolution in May 1996 on the Commission's Economic Report for 1996 declared that
"the expansion of Community financial instruments such as the EIB and EIF, as well as the creation of Community bonds, for the financing of Community investment projects, is vital for a successful transition to EMU".
In the context of applying the qualifying criteria for Single Currency membership, Parliament has also drawn attention to the Treaty provisions which require account to be taken of "whether the government deficit exceeds government investment expenditure" - that is, distinguishing between current and capital expenditure.
A further concern of Parliament has been the need for a high level of public support for, and understanding of, the transition to a Single Currency. A resolution of November 1995 observes that this needs to be
"so simple and transparent that every citizen will grasp how the currency change-over will work".
On the original initiative of Parliament's Monetary Sub-Committee, a joint Parliament/Commission EMU information campaign in Member States has now been launched. Parliament has also itself established a Monetary Union Task Force within its own secretariat.
The Stability and Growth Pact The European Parliament voted on the draft Growth and Stability Pact Regulations on 28 November 1996. The report proposed a number of amendments, reflecting the general approach of Parliament to the Pact as a whole. These covered
- strict adherence to the provisions of the Treaty requiring Parliament to be informed of action taken by the Council;
- the importance of taking into account, when assessing national budget deficits, the level of public investment (as required by the Treaty); and to ensure that budgetary policy is set to allow adequate public investment. This provision has now been fully incorporated into the final version of the Pact.
- a requirement that the Regulations should be regularly reviewed;
- maintenance of the Cohesion Fund following the start of EMU Stage 3 to provide financial help for less wealthy countries;
- exclusion from consideration as public expenditure of any deposit or fines payable under the Pact when assessing budget deficits.
At Parliament's insistence, the final version of the Pact provides that any fines and any interest on deposits made by Member States will be paid into the Community Budget.
Proposed Regulations on the introduction of the Euro as a Single Currency were voted on by Parliament on 28 November 1996. The report proposed a number of amendments, in particular measures to help the ordinary citizen adapt to the new currency. These included:
- legal protection for consumers against abuses and fraud which might be committed on the introduction of the Euro;
- the banning of clauses in a standard contract which might enable one of the parties to avoid obligations in the event of the Euro replacing the national currency;
- conversion software should be made available at the outset to financial institutions by Central Banks to enable any debtor to discharge his debt in the currency of his choice;
- conversion between a currency in a participating Member State and the Euro should be free of charge. Conversion between participating currencies should be based on the official conversion rates, and any transaction costs separately identified;
- Member States should take measures to ensure that, during the critical period when the Euro is being introduced as legal tender, the display of prices in Euro should not mislead consumers as to the actual value of goods or service purchased.
On 18 February 1997 Parliament also voted on a draft Directive on consumer protection and proposed an amendment so that
- in the transitional period following the introduction of the single currency, the following three prices might be indicated:
(1) the selling price in the national currency;
(2) the selling price in the single currency; and
(3) the price per unit in the single currency.