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Important points 1994-1999

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THE EUROPEAN PARLIAMENT - THE DEMOCRATIC VOICE OF MONETARY UNION

 

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The European Parliament has played a highly active part in the preparations for the single European currency - the euro - throughout its fourth term of office (1994-1999). As the only Community institution directly elected by the people of Europe, the task of providing democratic input into economic and monetary union has fallen to Parliament. It has therefore worked long and hard to ensure that the policy decisions taken on EMU were subject to proper democratic scrutiny.

Parliament has also played a key role in the legislative process leading up to economic and monetary union. The Maastricht Treaty stipulates that the European Parliament must be consulted on a broad range of issues, in particular on which countries qualify for membership of the single currency. This applies both to the first wave in 1999, and to any country seeking to join subsequently. At a special session on 2 May 1998 Parliament approved by an overwhelming majority the Commission's recommendation that eleven countries should join the first wave.

 

Democratic accountability

The European Central Bank (ECB), which was set up in June 1998, enjoys an unprecedented degree of independence in determining monetary policy for the euro area. To balance this operational independence, the EP has seen its most important task within EMU as being to ensure that the ECB is held accountable for its actions to the directly-elected Parliament. Independence and accountability are ultimately two sides of the same coin; the more open the procedure and the more effective the controls exercised by Parliament, the greater public confidence in the Bank will be.

 

This democratic supervision of the Central Bank takes many forms; in May 1998 Parliament conducted public hearings with the six nominees for the first Executive Board of the ECB. Following two days of intensive questioning by the Economic Affairs Committee, the candidates were confirmed by the full Parliament. Any subsequent candidates to the ECB Executive Board will have to be approved in the same way.

 

Turning to the ongoing democratic control of the ECB, the Treaty simply requires its President to present an annual report to Parliament's plenary. However, Parliament has consistently argued that policy decisions must be transparent and accountable, and that the ECB should be no exception to this rule. It has therefore reached agreement with the ECB that its President will appear before Parliament's competent committee at least four times a year to discuss quarterly reports on the Bank's activities. Each side can request additional meetings should these be deemed necessary. Parliament has also committed itself to assessing the ECB's performance in terms of maintaining price stability and against the various other policy targets used by the Bank.

 

The euro and the public

Replacing well-known, existing currencies with a new common currency will place considerable strain on the ordinary public and businesses alike. Although consumers will benefit in the medium term, Parliament has stressed that in the short term they may be sensitive to any disadvantages. In particular, they may be worried that the price scales they are familiar with will disappear and that the costs of introducing the euro will be passed on to them in the shape of price increases. For this reason Parliament has, throughout the process leading up to the introduction of the euro, emphasised the need for specific measures to allay the public's concerns and prepare it for the arrival of the new currency.

 

As early as 1995, the EP called for measures to ensure that the changeover to the euro would be simple and transparent enough for every member of the public to grasp. It then took the initiative in launching an extensive EMU information campaign in the Member States and has consistently supported well-funded information and education projects, such as the PRINCE programme. It has also advocated the greatest possible use of dual pricing to enable consumers to familiarise themselves with prices in euros. While it believes dual pricing should be introduced - as soon as possible - on a voluntary basis, Parliament also feels it should be made compulsory if the retail sector's response proves inadequate.

 

The EP has called for free conversion between national currencies and the euro as well as effective monitoring to ensure that retailers do not use the changeover as a smokescreen for unjustified price increases. To minimise confusion amongst consumers, it believes that the period in early 2002 during which national and euro banknotes are in simultaneous circulation should be as short as possible. Finally, it has paid special attention to the needs of the elderly, low-income groups and people with disabilities, especially as regards the design of euro coins and banknotes.

 

Shaping tomorrow's policies

Although the Treaty only gives Parliament limited powers in the formulation of economic and monetary policy at European level, the EP has nonetheless over the last few years developed into an important institutional partner at all stages of the procedure. By cooperating closely with the other EU institutions, as well as with the fifteen national parliaments, the European Parliament has managed to influence key policy decisions in this area and give voice to public concerns.

 

In thus building on the powers conferred on it by the Treaties, Parliament has managed to establish itself as a central player in EMU, thereby guaranteeing that citizens of all Member States can participate equally in legislative procedures and in democratic monitoring of decisions taken on their behalf. The euro is already with us but Parliament will remain vigilant in its scrutiny of the central bank, as it is determined to make monetary union work for the EU and all its citizens.

 

Further information: Anders Gantén tel. (32-2) 284-6234 or e-mail aganten@europarl.eu.int

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