European Council resolution on economic policy coordination

 

SUMMARY OF:

Resolution of the European Council on economic policy coordination in EMU

WHAT IS THE AIM OF THE RESOLUTION?

• It demonstrates the formal commitment of the European Council to respecting the provisions of the Treaty in terms of the surveillance and coordination of economic policies.
• It also strengthens coordination in practice, both between the European Union (EU) countries which share the single currency (among other things by setting-up an informal Euro Group) and between these countries and those that are not participating.

KEY POINTS

• The countries in the euro area will share a single monetary policy and a single exchange rate, while the other aspects of economic policy will remain national issues. To the extent that national economic developments influence monetary conditions in the euro area, closer surveillance and coordination of economic policies among euro-area countries will be necessary.
• All EU countries, including those remaining outside the euro area (Denmark, Sweden and the United Kingdom (1)) must be included in the coordination of economic policies, as they all participate in the single market and may also participate in the exchange rate mechanism.
• Enhanced surveillance and coordination should cover the following areas:
  • macroeconomic developments in EU countries and the development of the exchange rate for the euro;
  • budgetary positions and policies;
  • structural policies in labour, product and services markets, as well as cost and price trends.
• Coordination must adhere to the principle of subsidiarity.
• To ensure the smooth functioning of economic and monetary union (EMU), the broad economic policy guidelines should provide more concrete and country-specific guidelines and focus more on measures to improve growth potential and create jobs.
• EU countries should commit themselves to a comprehensive and speedy exchange of information on economic developments and policy intentions with a cross-border impact, even if there is no threat of a deterioration in the budgetary situation. For its part, the Council could show more inclination to address recommendations to countries whose economic policies are not consistent with the broad guidelines.
• The Economic and Financial Affairs Council (ECOFIN) occupies the defining position at the centre of the economic coordination and decision-making process. Whenever matters of common interest are addressed, they will be discussed by the ministers of all EU countries. However, the ministers of the countries participating in the euro-area may meet informally among themselves to discuss issues connected with their shared specific responsibilities for the single currency (this formation of ministers normally meets the day before the ECOFIN Council meeting).
• As the Council must monitor the development of the euro exchange rate, it is important for it to be able to exchange views and information with the European Central Bank (ECB). It may, in exceptional circumstances, formulate general guidelines for exchange-rate policy in relation to non-EU currencies. These must respect the independence of the European System of Central Banks (ESCB) and be consistent with the primary objective of the ESCB, which is to maintain price stability.
• The Council should decide on the EU’s position on issues of particular relevance to EMU, in connection with both bilateral relations with non-EU countries and proceedings in international organisations or informal international groupings. Only euro-area countries will participate in votes.
• The Council and the European Central Bank will represent the EU at international level in compliance with the allocation of powers laid down in the Treaty. On elements of economic policy other than monetary and exchange-rate policy, EU countries should continue to present their policies outside the Community framework, while taking full account of the EU’s interest.
• Representation in international organisations should take account of those organisations’ rules. For example, only countries can be members of the International Monetary Fund.
• In the light of the allocation of responsibilities laid down in the Treaty, the EU’s harmonious economic development will necessitate continuous dialogue between the Council and the ECB, involving the European Commission and respecting all aspects of the independence of the ESCB.
• The Economic and Financial Committee will provide the framework within which the dialogue can be prepared and pursued at senior official level.

MAIN DOCUMENT

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 (OJ C 35, 2.2.1998, pp. 1–4)

last update 21.02.2017

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(1) The United Kingdom withdraws from the European Union and becomes a third country (non-EU country) as of 1 February 2020.