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1 July 1998
PE 227.118/fin. A4-0263/98
on the 1997 annual report of the European Monetary Institute (EMI)
Committee on Economic and Monetary Affairs and Industrial Policy
Rapporteur: Mr André Fourçans
By letter of 25 May 1998 the European Monetary Institute forwarded its annual report for 1997 to the European Parliament.

 By letter of 25 May 1998 the European Monetary Institute forwarded its annual report for 1997 to the European Parliament.

At the sitting of 15 June 1998 the President of Parliament announced that COMIT1he had referred this report to the Committee on Economic and Monetary Affairs and Industrial Policy as the committee responsible.

The committee had appointed Mr André Fourçans rapporteur at its meeting of 21 January 1998.

It considered the draft report at its meetings of 24 and 25 June and 29 and 30 June 1998.

At the latter meeting it adopted the motion for a resolution unopposed with one abstention.

The following were present for the vote: Secchi, vice-chairman, acting chairman.; Fourçans, rapporteur; Anttila (for Gasòliba i Böhm), Areitio Toledo, Argyros (for Christodoulou), Berès, Cassidy (for Arroni), Caudron, Cox, de Lassus (for Castagnède), Donnelly, Ettl (for Billingham), Gallagher, García Arias, Glante, Harrison, Hendrick, Herman, Ilaskivi, Kestelijn-Sierens, Konrad, Kuckelkorn, Langen, Larive, Lukas, Malerba (for de Brémond d'Ars), McCarthy (for Imbeni), Metten, Miller, Murphy, Paasilinna, Pérez Royo, Pomés Ruiz (for Hoppenstedt), Read, RiisJørgensen, de Rose, Rübig, Santini (for Lulling), Tappin (for Rapkay), Thyssen, Torres Marques, W.G. van Velzen (for Mather), Watson and Wolf (for Hautala).

The report was tabled on 1 July 1998.

The deadline for tabling amendments will be indicated in the draft agenda for the relevant partsession.


Resolution on the 1997 annual report of the European Monetary Institute ( EMI)


The European Parliament,

- having regard to Article 109f of the EC Treaty,

- having regard to Protocol No 4 of that Treaty on the Statute of the EMI,

- having regard to the 1997 annual report of the EMI which was prepared and addressed to the European Parliament and to the other institutions in accordance with Article 11.3 of the Statute of the Institute (C4-0313/98),

- having regard to the EMI report on convergence of 25 March 1998,

- having regard to the decision of 2 May 1998 of the Council, meeting in the composition of Heads of State or Government, on the countries which will join the single currency,

- having regard to the establishment of the European Central Bank on 1 June 1998 and the liquidation of the EMI with effect from that date,

- having regard to its resolution of 6 May 1994 on the supervision of commercial banks and financial institutions and monetary stability(1),

- having regard to its previous resolutions on the annual reports of the EMI,

- having regard to its resolution of 10 June 1997 on the coordination of fiscal and taxation policy in the Monetary Union (2),

- having regard to its resolution of 13 January 1998 on electronic money and economic and monetary union (3),

- having regard to its resolution of 16 June 1997 on the EMI's report on single monetary policy in stage three - specification of the operational framework (4),

- having regard to its resolution of 4 December 1997 on economic policy coordination in stage 3 of EMU (5),

- having regard to its resolution of 2 April 1998 on democratic accountability in the 3rd phase of EMU(6)

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy (A4-0263/00),

A. whereas the publication of this last annual report by the EMI is a further stage in the historic process leading up to the introduction of the euro on 1 January 1999, and hence to the institution of a single monetary policy which will underpin a change in the economic policies of those Member States who will adopt the euro,

B. having regard to the responsibility, both economic and political, that the ECB and ESCB will have to assume, and the operation of which in the early years will depend to a great extent on the satisfactory performance by the EMI of the tasks that were entrusted to it,

C. whereas the purpose of this resolution on the EMI's annual report, prior to its liquidation, is to examine the way in which the EMI has performed overall the tasks and functions entrusted to it by the Treaty with the aim of helping to bring about the requisite conditions for moving to the third stage of economic and monetary union and whereas, accordingly, the report is particularly important as regards the establishment of the ECB's monetary policy,

D. having regard to the importance which it has always attached to transparency in the activities of the EMI and, a fortiori, of the ECB, in order to engender a favourable perception of these new institutions and to give them credibility with the public, so as to ensure acceptance of the euro and of the future European monetary policy,

E. whereas the European Parliament is the only democratic body elected by universal suffrage to which the EMI was required to render account, and to which the ECB will be required to do the same,

F. whereas, without prejudice to the objective of price stability, the ESCB will support the general economic policies in the Community and whereas, to that end, the decisions taken by the European Council on 13 December 1997 - enabling the Ministers of the States participating in the euro area to meet informally to discuss issues connected with their shared specific responsibilities for the single currency - will make it easier to arrive at a situation where a single monetary policy and economic policies which will remain national, albeit coordinated, complement each other,

G. whereas it is nevertheless necessary to develop a genuine economic policy at European Union level through the more effective coordination and surveillance of the Member States' economic policies,

1. Welcomes with interest the publication of the EMI's fourth annual report, for 1997, in so far as this document represents the final report on the preparation of European monetary structures prior to the introduction of the euro, as well as the preparation of the ECB's future European monetary policy;

2. Considers that the decision to remain at the level of generalities which is evident throughout the report is insufficient to clarify the type of monetary policy to be pursued by the future ECB;

3. Appreciates, however, the informative nature of the document, which provides a useful summary of the characteristics, definitions and decisions relating to the operation of the future ESCB;

As regards the economic, monetary and financial situation in the European Union

4. Considers that, following the publication of the EMI's report on convergence in March 1998, the material concerning macroeconomic assessments is repetitive to some extent, but is nonetheless keen to stress the value of highlighting the impact of the international environment on the rate of growth in Europe; feels that separate reports on the countries wishing to accede to the EU should be produced in the future so that the stage they have reached in their preparations for monetary union may be assessed;

5. Agrees with its finding that investment remains relatively weak in the European Union (especially in France, Germany and Italy) and that gradual labour market reforms are needed to hold out the prospect of reducing unemployment substantially;

6. Also shares the view that short-term interest rates in the euro area will continue to converge until the end of 1998 towards a common level consistent with the objective of price stability, but stresses the importance of increased coordination of monetary policies during the remaining months of Stage Two;

7. Regrets the fact that the EMI has declined to address the general issue of the coordination of fiscal and taxation policies in the European Union, which will nonetheless be one of the major foreseeable consequences of the process of Economic and Monetary Union;

8. Notes that the EMI's assessment of the consequences of the Asian crisis differs fairly markedly from that made by the Commission in its annual economic report: the EMI appears to favour the hypothesis of new knock-on effects depending on the manner in which and speed with which macroeconomic adjustments and financial reforms take place;

9. Calls on the ECB to consider the trend in the international financial and money markets in greater depth in its future quarterly and annual reports and, in this context, to take account of the interdependence of financial and economic crises in view of globalization;

As regards the preparatory work for Stage Three of Economic and Monetary Union on the ultimate and intermediate objectives and on monetary policy instruments

10. Welcomes the fact that the EMI appears to have made good progress with its important technical task of preparing the instruments and procedures necessary for implementing the single monetary policy in Stage Three;

11. Regrets the fact, however, that where monetary policy is concerned the report limits itself to reproducing the material already included in the EMI's document on the specification of the operational framework for the single monetary policy in Stage Three, which was published in January 1997, i.e. a very general strategy based on an ultimate objective of price stability, accompanied by specific complementary objectives making it possible to assess whether monetary policy is broadly pursuing the right course;

12. Considers that, given the changes in monetary, financial and, more generally, economic structures that the existence of the euro is bound to bring about, a judicious choice of intermediate objectives (money supply, interest rates, credit, etc.) should be made and adjusted over time to take account of those changes in the conduct of monetary policy;

13. Points out that the monetary policy of the euro area must be conducted according to general conditions prevailing in the area, and not according to conditions specific to individual Member States;

14. Also considers that while the ECB has to establish its economic credibility, this must not be done by increases in interest rates which are not justified by the economic fundamentals of the euro area;

15. Points out that monetary policy, as defined in Article 105(1) of the Treaty, is based on an objective of price stability which respects the Treaty's fundamental principles of sustainable growth, prosperity and employment, and takes the view that the monetary policy of the euro area is indissociable from the introduction of a Union economic policy based on the coordination of the Member States' economic policies;

16. Is accordingly particularly interested in the development of the multi-country macroeconomic model for the ESCB, and the specifications and assessment thereof, and wishes to have more comprehensive information thereon, so as to ascertain its potential effect on the monetary policy pursued in Stage Three;

17. Is surprised that the links between the ECB and the national central banks (NCBs) in the implementation of monetary policy are not spelt out in greater detail, particularly with regard to the quantitative implementation of the respective open market operations to be carried out by the various NCBs once the overall volume of operations has been decided at ECB level;

18. Reiterates its concern about the setting up of the information and communications systems which, as from 1 January 1999, will be essential for carrying out the operational functions of monetary policy within the ESCB, so as to ensure reliable and secure transmission, given the magnitude and complexity of the problems involved;

19. Welcomes, moreover, the progress made in 1997 with regard to payment systems - TARGET and securities settlement systems - and also with regard to the gathering of statistical data;

20. Stresses the decisive role that the TARGET system (providing automated transfers of funds between banks) will be required to play in furthering integration of the money market in the euro area, and appreciates the new information about the implementation of the TARGET system, noting with satisfaction the particular attention being paid by the EMI to the level of the fee to be charged for transactions, which will be a key factor determining its use and hence its success;

21. Expresses its approval of the progress made regarding the arrangements for the introduction of euro banknotes, and in particular of the fact that a majority of the national central banks has undertaken, in the case of small transactions, to exchange non-national euro area banknotes for national banknotes free of charge at the counters of the national central banks;

22. Calls on the ECB to remove the doubts about protection against counterfeiting and the ability of the blind and others to recognize the banknotes and the uncertainty associated with this by issuing public statements that go beyond the EMI's comments;

As regards the other tasks of the EMI

23. Calls on the ECB, given the prospects for the development of electronic money, to concern itself more actively with this question, with regard to both the regulatory framework of the single currency and the problems posed by its more widespread use within the euro area, and recalls its resolution of 13 January 1998 on electronic money;

24. Endorses wholeheartedly the EMI's realistic analysis of the situation of the European Union's banking systems, which must continue their process of restructuring, in particular in view of the reduction in foreign exchange activity and the increased competition from the financial markets and other financial intermediaries;

25. Considers, therefore, that the major changes which are under way must lead to enhanced supervision of banks with the aim of detecting institutions in difficulty, and believes that the idea of a macro-supervisory analysis at European Union level is extremely interesting;

26. Believes, therefore, that while prudential supervision will continue to be the responsibility of the national supervisory authorities during Stage Three, the need for financial stability within the euro area requires the ECB to be actively involved in the cooperation between national authorities, the provision of information by the ESCB and the implementation of the ECB's consultative role as provided for by Article 25 of the Statute of the ESCB and of the ECB and by Article 105 of the Treaty;

27. Points out, however, that the ESCB's role where prudential supervision is concerned must not be to the detriment of the principal objective of price stability;

28. Considers the EMI's comments on EMS II completely inadequate, since the benefit of an EMS II is questionable if the only participants are Denmark and Greece, and would also like to see some kind of prospect for the Central and Eastern European countries and associate EMS II membership as part of the EU's pre-accession strategy;

29. Believes that the European Central Bank's financial report needs to be less sweeping and more precise in its breakdown than the EMI's report;

As regards relations with the European Parliament and the ECB

30. Declares its overall satisfaction with the relations that it has had with the EMI, particularly in the context of its regular exchanges of views with the EMI's two Presidents, although it considers that it has not been kept informed on a sufficiently systematic basis about the studies carried out by the EMI, and that the responses (where provided) to some of the calls made in its resolutions have sometimes been dealt with rather off-handedly;

31. Hopes that, in accordance with the statements made by members of the Executive Board during their hearings before the Committee on Economic and Monetary Affairs and Industrial Policy, a permanent and fruitful dialogue will be established with the ECB from the outset;

32. Refers, in general terms, to all the calls made in its resolution of 2 April 1998 on democratic accountability, in particular as regards the establishment of a more formalized framework than has been the case with the EMI to ensure that its competent committee is kept fully informed, including the holding of quarterly meetings to monitor economic and monetary developments in addition to the debate on the annual report of the ECB; also expresses the wish that the ECB should take part in the debates on the broad guidelines for the general economic policies of the Member States and of the Community;

33. Instructs its President to forward this resolution to the Council, the Commission, the ECB, the governors of the national central banks, and the governments and parliaments of the Member States.

(1)() OJ C 114, 25.4.1994, p. 3
(2)() OJ C 200, 30.6.1997, p. 38
(3)() OJ C 34, 2.2.1998, p. 35
(4)() OJ C
(5)() OJ C
(6)() OJ C



The 1997 annual report is the fourth and final report of the European Monetary Institute, which was set up for a transitional period at the beginning of the second stage of economic and monetary union on 1 January 1994, on which date it took over the tasks of the Committee of Governors of the Central Banks.

Further to the decisions taken on 2 May 1998 determining the list of countries which will adopt the single currency on 1 January 1999, the European Central Bank was established on 1 June 1998, thereby liquidating the European Monetary Institute.

This EMI report, which has specific symbolic significance in the historic process leading to the introduction of the euro, confines itself to considerations of a general nature. The publication, on 25 March 1998, of the EMI report on convergence removed from the annual report discussion of what used to constitute its backbone, namely the trend towards convergence in the Member States. As for monetary policy, this had already been covered in a major document published in early 1997 and in which the operational framework of the future single monetary policy in stage III had been defined.

Having thus been stripped of these more precise data concerning the policy which the ECB intends to pursue, this report cannot but be found somewhat frustrating by your rapporteur.

Nevertheless, the document does contain some information concerning the characteristics, definitions and decisions relating to the operation of the future European system of central banks.


The EMI is rightly concerned to highlight the structural weaknesses of the European economy, in particular the insufficient increase in investment, notably in France, Germany and Italy. It again underlines the need for wage restraint, more intensive efforts to reduce public spending and the gradual reform of the labour market.

It comes as no surprise that the EMI urges that monetary policies be coordinated at the end of stage II in order to make it possible to press ahead with the convergence of interest rates.

It is regrettable that the EMI has not tackled the problem of the coordination of fiscal and taxation policies, which will also be one of the major problems of our common economic future.

As far as the international environment is concerned, one would also have welcomed somewhat more detailed assessments, for example as regards the applicant countries and the financial situation in Russia. Serious consideration is given to the Asian crisis, with due account being taken of the possible 'delayed' effects of this crisis, especially if the necessary economic and financial reforms are not carried out with sufficient energy and speed.


It would appear that the EMI has discharged the main tasks with which it was entrusted, and in particular the technical preparation of the intruments and procedures necessary for the application of monetary policy in stage III. The report, out of a concern not to anticipate the introduction of monetary policy by the ECB, confines itself to reproducing the material already included in its document on the monetary strategy of the euro area.

Although during the hearings of the nominees for the ECB Executive Board, some hints were given by individual candidates about the inflation rate range (the figure mentioned was between zero and 2%), the report itself remains silent on this point. Similarly, the intermediate objectives of monetary policy (monetary aggregates, interest rates, credit etc.) and their relative importance are still very imprecise, though your rapporteur does not underestimate the difficulties involved in this exercise since the choice of intermediate objectives must be made in a new economic framework, which will undergo changes of structures, and it can be assumed that these objectives will have to be adapted in the course of time depending on changes in the structures concerned.

The main problem which both the Executive Board and the governors of the central banks will have to resolve is that of formulating a common monetary policy for the euro area, a policy which will depend on the general conditions prevailing in that area and not on the specific conditions in the individual Member States. By the same token, the monetary credibility of the ECB will depend on its ability to take account of the fundamental economic conditions in the euro area without implementing interest rate increases which are not justified by the economic fundamentals in the single-currency area. The success of the euro must be economic as well as monetary. It is by that yardstick that the European citizen will judge his new currency.

It is a pity that the European Monetary Institute has not explained in greater detail the manner in which the single monetary policy is to be implemented by the central banks of the various Member States. Of course, implementation of that policy will still be heavily decentralized, but we should have liked to know how that decentralization will oeprate in concrete terms. Take the open market operations, for example. On what bases and for what amounts will these operations be carried out by the national central banks? In this context it is essential that genuinely operational information and communications systems be set up within the prescribed time limits. According to the data supplied, the TARGET system (for the transfer of funds between credit establishments) should operate satisfactorily.

As regards the transitional period from 1 January 1999 to 1 January 2002 we welcome the fact that the majority of the national central banks have made a gesture towards the general public by agreeing to exchange the banknotes of the various euro countries free of charge in the case of small transactions.


In this chapter the European Monetary Institute raises the crucial issue of the changes that have already taken place and which will become increasingly far-reaching as regards the financial and banking structures of the euro countries. For over a year now we have been seeing, across Europe, mergers between financial establishments in preparation for the forthcoming introduction of the euro. Objective factors such as the reduction in the volume of currency exchange transactions but above all competition between financial markets will lead to major changes which will have to be watched with the utmost attention.

Under the statutes of the ESCB and the ECB prudential supervision will fall within the purview of the national authorities. However, in order to identify institutions in difficulty, macro-prudential analysis might very well be justified. Financial stability within the euro area will depend upon it. The ECB might therefore be called upon to play a more important role in this area than the Treaty, as it stands at present, might lead one to expect. This must not of course be to the detriment of its objective of price stability.


For many years now, and today more than ever before, the European Parliament has attached overriding importance to the dialogue which it needs to establish with the European Central Bank, while taking scrupulous care to respect the latter's independence.

In previous reports, and in particular in the report on the democratic accountability of the ECB, we looked into the procedures for making the senior officials of the ECB more accountable to the general public and their elected representatives : hearing of the ECB President before the competent parliament committee four times a year, publication of the minutes, content of the annual report.

But the dialogue with the ECB must not be confined to monetary policy. It must embrace economic policy too, and for that purpose it would be highly desirable for the President of the ECB to take part in our debates on the annual economic report and on the main economic policy guidelines of the Community's Member States.

Our debate with the ECB constitutes a major aspect of the democratic guarantee of the operation of economic and monetary union. That is why it must be carried out thoroughly and with the professionalism required when dealing with monetary policy concepts. Our committee should thus have the option, whenever necessary, of calling on the services of independent experts to enable it to exercise its democratic responsibility in ideal conditions.

Last updated: 27 March 1999Legal notice