MADRID EUROPEAN COUNCIL
15 and 16 DECEMBER 1995
PRESIDENCY CONCLUSIONS

ANNEXES 1 - 5

CONTENTS

• ANNEX 1: THE SCENARIO FOR THE CHANGEOVER TO THE SINGLE CURRENCY
  • ANNEX TO ANNEX 1: CHRONOLOGICAL SEQUENCE OF EVENTS
• ANNEX 2: EMPLOYMENT
• ANNEX 3: TERRORISM: LA GOMERA DECLARATION
• ANNEX 4: COMBATING RACISM AND XENOPHOBIA
• ANNEX 5: FRAUD

ANNEX 1: THE SCENARIO FOR THE CHANGEOVER TO THE SINGLE CURRENCY

1. At its meeting in Cannes on 27 June 1995, the European Council requested the Ecofin Council to define, in consultation with the Commission and the European Monetary Institute (EMI), a reference scenario for the changeover to the single currency and to report back to the European Council at its meeting in December 1995 in Madrid with a view to its adoption.
2. Since the entry into force of the Treaty on European Union ("Maastricht Treaty"), particularly since the start of Stage 2 of the process of moving to an Economic and Monetary Union, the Member States, the European bodies and representatives of many private organizations have been studying the different aspects of the changeover. Preparations have now reached a level which allows the presentation of a reference changeover scenario containing clearly defined measures to be implemented within pre-set dates or deadlines.
3. The preparations underway are guided by the overriding Treaty objective to create a stable single currency. One precondition for this is to achieve a high degree of convergence of economic performance before locking exchange rates irrevocably. A strict application of the convergence criteria in assessing which Member States fulfil the necessary conditions for the adoption of a single currency will establish confidence in the new currency and convince the public at large as well as markets that it will be strong and stable. After moving to Stage 3 of Economic and Monetary Union, convergence will have to be maintained. In particular public finances must be kept on a sound track in line with Treaty obligations. Therefore work has to be done on ways to secure budgetary discipline among participants in the Euro area in accordance with the procedures and the principles of the Treaty. In addition, the future relationship between the Member States participating in the Euro area and the others will need to be defined prior to the move to Stage 3 with a view, inter alia, to safeguarding monetary stability within the single market.
4. The removal of uncertainties requires careful technical preparation of the move to Stage 3. This preparation will also contribute to public acceptability of the new currency. The changeover scenario presented below has been defined in consultation with the Commission and the EMI and has benefitted from the Commission's Green Paper and the EMI report on the changeover to the single currency. It is in line with the timetable, procedures and criteria laid down in the Treaty. It provides for transparency, strengthens credibility and underlines the irreversibility of the process. It is technically feasible and aims to provide for the necessary legal certainty, to minimize adjustment costs and to avoid competitive distortions. The changeover scenario, by announcing concrete measures to be taken within a clear timetable, offers the users of money the information necessary for them to adapt to the introduction of the single currency. The scenario is compatible with the EMI report on the changeover.
5. This changeover scenario is based on 1 January 1999 as the starting date for the third stage. The steps to be taken during the different stages of the changeover process are presented below and summarized in the annexed tables which set out the timing and the various dates and deadlines for the participating Member States.
6. The Council in the composition of Heads of State and Government will confirm which Member States fulfill the necessary conditions for the adoption of the single currency. The date of this decision marks the beginning of an interim period prior to the entry into Stage 3, during which decisions are to be taken to complete the preparations. On the one hand, the magnitude of the workload would suggest that this interim period lasts for about one year; but, on the other, the Heads of State and Government should base their decision on participating Member States on the most recent and reliable actual data for 1997. Thus, special efforts will be made so that the Heads of State and Government make their decision as soon as possible in 1998. Advance preparation will help to ensure that all the necessary measures will be in place for the start of Stage 3 of Economic and Monetary Union. Several of these measures fall within the competence of the European Central Bank (ECB).
7. The ECB will have to be created early enough so as to allow preparations to be completed and full operation to start on 1 January 1999. Therefore, as early as possible in this interim period, the Council and the participating Member States will have to adopt a number of legal provisions and to appoint the Executive Board of the European Central Bank (ECB). As soon as the Executive Board of the ECB is appointed, the ECB and the European System of Central Banks (ESCB) will be established. The decision-making bodies of the ECB will decide on, implement and test the framework needed for the ESCB/ECB to perform its task in Stage 3 of Economic and Monetary Union.
8. Stage 3 of Economic and Monetary Union will start on 1 January 1999, with the irrevocable fixing of conversion rates among currencies of participating countries and against the Euro and with the single monetary policy which will be defined and implemented by the ESCB in Euro. The ESCB will encourage the use of the Euro in the foreign exchange markets; its operations in these markets will be effected and settled in Euro. The payments system's infrastructure needs to be in place so as to ensure the smooth functioning of an area-wide money market based on the Euro. National central banks could provide conversion facilities for those financial institutions which have not been able to equip themselves with such facilities to translate amounts from Euro into national monetary units and vice-versa.
9. A Council regulation entering into force on 1 January 1999 will provide the legal framework for the use of the Euro. From that date, the Euro will be "a currency in its own right" and the official ECU basket will cease to exist. This Regulation will have the effect that the national currencies and the Euro will become different expressions of what is economically the same currency. As long as different national monetary units still exist, the Council Regulation will establish a legally enforceable equivalence between the Euro and the national currency units ("legally enforceable equivalence" means that each monetary amount is assigned, in a legally enforceable way, an unchangeable countervalue in terms of the Euro unit at the official conversion rate and vice versa). For the period before the deadline set for the completion of the changeover, the Regulation will ensure that private economic agents will be free to use the Euro; at the same time they should not be obliged to do so. As far as possible, they should be allowed to develop their own mechanisms of adjustment to the changeover; however, the implementation of these principles should take into account market practices in terms of standardization. The Regulation will also provide that national banknotes will continue to remain legal tender within the boundaries of the respective national territories until the completion of the changeover to the single currency. The technical preparatory work for this Regulation shall be completed at the latest by the end of 1996.
10. The substitution of the Euro for national currencies should not of itself alter the continuity of contracts; amounts expressed in national currency will be converted into Euro at the rate of conversion laid down by the Council. In the case of fixed interest rate securities and loans, this substitution will not of itself alter the nominal interest rate payable by the debtor unless otherwise provided in the contract. In the case of contracts denominated by reference to the official ECU basket of the European Community, in accordance with the Treaty, substitution by the Euro will be at the 1:1 rate , subject to the particular terms of individual contracts.
11. New tradeable public debt - particularly debt coming to maturity after 1 January 2002- will be issued in Euro by the participating Member States as from 1 January 1999. By 1 July 2002 at the latest, public debt denominated in the former national currencies will be redeemable only in the single currency.
12. The generalization of the use of the Euro for public sector operations will occur in all participating Member States at the latest when the Euro banknotes and coins are fully introduced. The time frame will be laid down in Community legislation and might leave some freedom to individual Member States.
13. The public authorities are invited to set in hand the arrangements for planning the adaptation of their administration to the Euro.
14. By 1 January 2002 at the latest, Euro banknotes and coins will start to circulate alongside national notes and coins. Euro notes and coins will have legal tender status. In line with the increasing circulation of Euro notes and coins, national notes and coins will be withdrawn. Member States should endeavour to keep this period of dual circulation of national and Euro notes and coins to the minimum. In any event, national notes and coins will cease to be legal tender at the latest 6 months after the introduction of Euro notes and coins. By that deadline, the changeover will be complete. Thereafter, national banknotes and coins may still be exchanged free of charge at the national central banks.

ANNEX TO ANNEX 1: THE CHANGEOVER TO THE SINGLE CURRENCY CHRONOLOGICAL SEQUENCE OF EVENTS

ANNEX 2: EMPLOYMENT

Implementation of the European Union's approach in the employment field

The fight against unemployment must remain the top priority for the EU

As restated by the European Councils in Essen and Cannes, the fight against unemployment and for equal opportunities remains the most important task facing the European Union and its Member States.

This report from the Council and the Commission is intended to fulfil the mandate given to the latter by the European Council to report on measures taken and progress made by the Member States in implementing the Essen guidelines. Recent developments in terms of policy and coordination have demonstrated the value of the agreements reached at the 1994 Essen and 1995 Cannes Summits, which have led to major efforts being deployed by Member States as far as both macro-economic and structural policies are concerned.

Unemployment in the EU has come down from its mid-1994 record level of 11,4% and is now 10,5%, concerning nearly 18 million people. This unacceptably high level of unemployment affects almost all Member States. It is the result mainly of a lack of sustained economic growth over a number of years, rigidities in the product and services markets due to over-regulation and insufficient competition, and a mismatch between the skills offered by the labour force and the changing needs of the labour market due to technological and productivity developments, causing a disparity between total labour cost and productivity.

The European Council in Essen 1994 agreed to a common effort to launch and strengthen a structural reform process to improve the functioning of labour markets. In this way the capacity of the economy to create new jobs and new resources should be enhanced. The structural policies themselves have a role in creating growth and employment by making higher levels of employment possible without adverse inflationary pressures. However, such structural policies will have their full effect only when supported by a stability-oriented macro-economic policy that stimulates investment and new jobs. Satisfactory economic growth is necessary to reduce unemployment.

There are clear indications that a large part of unemployment is becoming structural in nature, characterized by a lengthening of unemployment periods, and by its particularly severe impact on certain categories: the low-skilled, young people and women. The Council and the Commission therefore believe that it is now time to consider a further concentration of efforts, in the framework of the Essen employment strategy, on:

— integrating young people into working life,

— preventing long-term unemployment,

— achieving equal opportunities for men and women in working life.

The current economic context offers a window of opportunity

A process of macro-economic recovery has been under way for the last few years. The overall performance of the main factors affecting economic activity is generally positive and offers a window of opportunity for pursuing employment policies:

— Europe now has inflation averaging 3% — better than in recent decades — and inflation expectations are low;

— nominal wage increases are below 4% and real unit labour costs are clearly decreasing;

— Europe's industry is performing well on world markets. Exports are now stronger than imports. Extra-EU trade gives a surplus of about 1% of GDP. Over the last few years the EU has maintained or strengthened its position on fast growing markets;

— the profitability of Europe's industry is now back at levels not registered since the 60s, but real interest rates continue to be high in most countries;

— public finances have improved thanks both to economic growth and to decisions taken in the framework of the convergence programmes; public deficits are expected to be reduced further in 1996.

The present temporary slowdown in activity shows the need to pursue fully the strategy of a stability-oriented macro-economic policy. At present, economic fundamentals for continued and stronger growth are in place and should be fully exploited to undertake the structural reforms that are needed to improve the EU's employment performance.

The Essen guidelines for employment have led to major efforts at all levels

At the level of the Member States, major efforts have recently been deployed, resulting in multiannual national programmes being adopted which give a coherent presentation of the principal existing or planned measures for implementation of the employment strategy provided for at Essen.

The multiannual programmes have been the subject of wide-ranging internal debates. Their preparation encouraged dialogue between administrations responsible, respectively, for employment or social affairs and for economic and budgetary policy. In some cases management and labour were involved. This broad consultation process is in itself a major achievement of the Essen strategy.

A variety of measures have been taken to implement the five priorities for labour market policy identified at Essen. These were the subject of detailed reports by the Commission and the Council. The efforts made in the following areas were particularly significant:

— the initial training of young people, special training for the unemployed and the encouragement of continuing training;

— making the legal framework of the organization of work more flexible, and measures which link flexibility or reduction of working time to the maintenance or creation of jobs;

— taking into account the geographical dimension of employment by mobilizing local actors and promoting local employment initiatives;

— decentralizing the wage-negotiation process;

— reducing indirect labour costs, particularly for certain categories and for the low-paid;

— reinforcing the effectiveness of the public employment services;

— revising the unemployment benefit systems and their relationship with support schemes, in order to strengthen the incentive to work;

— setting up arrangements to help young people without basic training or experience to catch up through access to appropriate training or work experience;

— occupational reinsertion for the long-term unemployed through training, placement guidance, promoting local employment opportunities or recruitment subsidies.

Management and labour reiterated their support both for the broad economic policy guidelines as well as for the priorities laid down in the field of structural labour market policy. They played a key role in the implementation of the recent measures in these areas, in particular through agreements on training, the organization of work and working time, wage moderation and the occupational insertion of particular categories in difficulty, and they have committed themselves to strengthening their efforts in those directions.

The added value of the European Union in the implementation of the Essen strategy is illustrated by the intensification of exchanges of information and experience between Member States, within the framework of the Economic and Financial Questions Council and the Social Affairs Council, in collaboration with the Commission. Progress has been made towards enhanced coordination of macro-economic and structural policies.

Moreover, programmes adopted in partnership between Member States and the European Commission to make use of structural funds in the 1994-1999 period provide a useful contribution to the implementation of the Essen priorities.

There has been a more thorough approach to understanding certain specific aspects of employment policies

In response to the requests of the European Council, the Council and the Commission undertook a thorough examination of certain aspects of employment policies.

The effects of tax and support systems on the readiness both to create and to take up jobs and the relationship between economic growth and the environment were examined by the Ecofin Council and the Commission.

At the Cannes Summit, the European Council emphasized the fact that the European Union, as an economic entity, offered an additional margin for manoeuvre and specific added value to permit permanent employment to be created. An initial analysis of the mutual benefits which could accrue from closer coordination of macro-economic and structural policies was undertaken by the Commission and a final report will be presented to the European Council in 1996.

The European Council also emphasized the contribution of small and medium-sized enterprises to employment and asked for an examination of the policies applied to them and ways of improving their effectiveness. The Commission has prepared a report on this subject.

CONCLUSIONS AND POLICY GUIDELINES

1. The Madrid European Council should give new impetus to, and make further progress in developing and putting into practical effect, the strategy defined at Essen and confirmed in Cannes.
2. This employment strategy, in particular with respect to the five main areas of action on the labour market, provides and will continue to provide the framework for Member States' multiannual programmes and for the development of their employment policy.
3. The implementation of this strategy is well underway in Member States. Its success depends to a large extent on the mobilization of institutional and economic partners, and management and labour, at all levels, and in particular on the development of an integrated local approach to employment policy.

The involvement and contribution of management and labour in this process is fundamental at all levels, and is welcome at every stage of the implementation of the Essen strategy.

4. An integrated approach to employment policy, based in particular on the link between macro-economic and structural employment policies, should be pursued and reinforced in such a way as to maximize the mutually beneficial effects of these policies.

5. The reforms taking place must be pushed forward if the current economic recovery is to deliver a decisive improvement in the employment situation in the European Union. The favourable climate created by economic expansion offers a unique opportunity for further progress to be made, with a view both to an increase in the level of employment and to a substantial reduction in structural unemployment. Action must be pursued and strengthened in particular in the following areas:

Supporting the achievement of sound and sustainable growth

— It is necessary to implement the broad economic policy guidelines with continuity and determination. In particular, wage increases should respect the conditions for price stability and profitability of investment, and budget deficits should be further reduced, dropping in the medium term to well below the Maastricht reference value of three per cent of GDP. Such policies should create the conditions for further reductions in real interest rates and an increase in job-creating investments.

Ensuring a better operation of the product and services markets, promoting entrepreneurship and preserving a healthy environment

— The completion of the internal market must be supported by a vigorous competition policy in order to eliminate excessive rigidities on the product and services markets (for example, on the telecommunications and energy markets). A number of structural constraints must be removed in order to let the potential for enterprise and employment creation, in particular in the services sector, be exploited to the full.

— Under stable conditions of economic growth, the contribution of small and medium-sized enterprises to improving the employment situation must be maximized by adjusting the existing legal, fiscal and financial environment better to their specific needs, and by encouraging them to invest in training.

— In order to exploit the job-creation potential of environmental protection, these policies should — to a greater extent than at present — rely on market-based instruments, including fiscal ones. Public authorities should also promote long-term investment in environment friendly technologies in major sectors such as energy, transport and agriculture.

Implementing the five Essen priorities for the reform of labour markets

The implementation of the five Essen priorities will be pursued and reinforced through the multiannual programmes, with emphasis being placed on the following:

— Further improvements to investment in training should be made: priority should be given to enhancing the employability of unemployed persons, in particular low-skilled, inexperienced labour, and to reducing the skill mismatch on the labour market by providing training better adapted to the changing needs of the labour market and promoting in-company training. A relatively stable workforce in the enterprise will contribute to enhancing the efficiency of these measures.

— Good practices in reorganizing work and working hours should be better developed and disseminated. They should lead to an increase in employment, and measures should be taken to upgrade the jobs concerned.

— Local development initiatives should be encouraged, by seeking the active involvement of local authorities and local players, and by improving the legal, tax and financial conditions for the development of new areas of employment.

— Maintaining wage moderation, encouraging the present trend for more flexible wage bargaining and making wage structures more closely related to productivity has been possible as a result of the efforts of management and labour. It is advisable to maintain and intensify this effort within the framework of the broad economic policy guidelines in order to create the highest possible number of jobs.

— Governments, within the available margin of manoeuvre to preserve fiscal stability, should aim to reverse the tendency of the last few years to increase the taxation of labour. The tax regime on lower income levels should be reviewed in order to remove unwarranted barriers to work resulting from regressive tax schedules in both income tax and social security contributions.

The impact on employment of targeted reductions in social security contributions should be evaluated. Targeting should be used primarily to promote the hiring of disadvantaged labour, to foster the creation of jobs, especially in the new social and local domains, and to encourage businesses to recruit more staff.

— The transformation of passive labour market policies into active ones should be pursued and strengthened, especially for particularly disadvantaged categories, in order to improve their employability and the incentive for employers to hire them. To that end, employment services should be enhanced in order to better perform their job brokerage function, in which elements of competition can be helpful. The provision of information to jobseekers and employers should be intensified. Technical or financial assistance for the active search for work should be provided.

In addition, unemployment benefit systems must continue to be improved in order to remove undue disincentives to work, while maintaining a high level of social protection. Closer controls on peoples' availability for work should be enforced. Welfare schemes neighbouring unemployment protection schemes should be reviewed in order to prevent hidden transfers of unemployed persons across welfare schemes.

— Efforts should be intensified regarding action in favour of groups particularly hard hit by unemployment:

• young people: Member States and management and labour should ensure a proper pathway to their integration on the labour market. All young people should be provided with the level of education, training and work experience needed to make them employable;
• the long-term unemployed: Member States and management and labour should engage in a more active policy for the prevention of long-term unemployment. All unemployed people should have the opportunity of retraining or reintegration before reaching the point of long-term unemployment.

Older workers should be given a chance to make full use of their work experience and potential. They should have the opportunity to undertake training and be encouraged to do so.

· women: through the promotion of equal opportunities in the context of all public policies affecting employment, an active policy of desegregation of the labour market using a renewed approach to part-time working as a transitional measure, and the reconciliation of family and working life for men and women.

6. The Structural Funds should be used more systematically as a support mechanism for promoting the Essen strategy.

Follow-up

7. The exchanges and cooperation which have developed at Community level in the follow-up to the Essen conclusions demonstrate the added value of a community strategy and of dialogue on employment.

In order to facilitate this approach, a stable structure should be established to assist the Social Affairs Council on employment matters, in partnership with the Economic Policy Committee.

The analysis of employment-related policies is an essential tool in this process and it is recommended that a series of common indicators, based on harmonized statistical data and on further qualitative criteria, should be developed from 1996 to support this analysis.

This process should be further developed in the coming years, in particular through the national multiannual programmes.

The European Council meeting to be held at the end of 1996 should be an opportunity to review the progress made on the above policy recommendations, on the basis of a joint report from the Ecofin and Social Affairs Council and the Commission, with a view to further enhancing cooperation in this area. Special attention should be given in this respect to young people, the long-term unemployed and equal opportunities.

ANNEX 3: TERRORISM

LA GOMERA DECLARATION

THE COUNCIL OF THE EUROPEAN UNION,

RECALLING the informal meeting of the Ministers for Justice and Home Affairs of the Member States, held in La Gomera on 14 October 1995,

NOTES that terrorism:

— constitutes a threat to democracy, to the free exercise of human rights and to economic and social development, from which no Member State of the European Union can be regarded as exempt;

— has stepped up its activity, more specifically as a result of fundamentalist action;

— is operating on a transnational scale, which cannot be dealt with effectively solely by means of isolated action and using each individual State's own resources;

— is developing strategies and using methods of international organized crime;

— might take advantage of any differences in legal treatment in different States to try to gain impunity;

CONSIDERS that combating terrorism, one of the most serious forms of crime, has been established in the Treaty on European Union as a priority objective among the matters of common interest;

DECLARES that in order to prevent and combat terrorist action effectively, there is a need for thorough coordination between Member States by way of improved machinery for police and judicial cooperation, through:

— an increase in exchange of operational information about terrorist groups, to bring about a better knowledge of their methods of operating, in particular arms trafficking, financing and money laundering,

— improvement of coordination and cooperation between judicial authorities so as to eliminate any risks of impunity;

— the handing over to the judicial authorities with jurisdiction of those responsible for terrorist acts, to stand trial and serve any sentences imposed, by means of extradition, having regard to the provisions of international Treaties.

ANNEX 4: COMBATING RACISM AND XENOPHOBIA

1. Proceedings of the Consultative Commission on Racism and Xenophobia

The Consultative Commission was instructed by the European Council to go on from its discussions to study, in close cooperation with the Council of Europe, the feasibility of a European Monitoring Centre on Racism and Xenophobia.

At four meetings over the second half of 1995, the Consultative Commission, chaired by Mr J. KAHN, looked into both the scientific and technical and the legal and institutional aspects of the prospective European Monitoring Centre.

Following its proceedings, the Consultative Commission has submitted an interim report to the European Council meeting in Madrid (12008/95 RAXEN 58). The report outlines the tasks of a Monitoring Centre and the arrangements envisaged as regards the possible legal basis for it. The Consultative Commission hopes to complete its study for the European Council meeting in June 1996.

2. Proceedings in the Justice and Home Affairs Council

(a) Judicial cooperation

Acting on a proposal from the Presidency, the Council considered a draft joint action on the basis of Article K.3 of the TEU, concerning action to combat racism and xenophobia. The draft sets out to facilitate international judicial cooperation in combating racism and xenophobia with provision either for certain racist or xenophobic behaviour to be made a criminal offence or, failing that and pending any adoption of the necessary legislation, for the principle of double criminality to be waived. The issue of the form of legal instrument and its binding nature and the other issues still outstanding will be referred to the European Council in Madrid (12089/95 JUSTPEN 163).

(b) Police cooperation

On the basis of the conclusions of the Toledo seminar on police training as regards racism and xenophobia (from 6 to 8 November 1995), the JHA Council instructed the appropriate bodies to prepare an instrument, under Title VI of the TEU, in order to improve the training of instructors at police training colleges, improve basic police training and make possible a continuing training module aimed at a better understanding and an analysis of racism and xenophobia so as to prepare suitable responses on the ground (11727/95 ENFOPOL 148).

In early December, a European conference on multicultural society is to be held in Amsterdam.

3. Proceedings in the Labour and Social Affairs Council

Acting on a proposal from the Presidency, on 5 October 1995 the Council and the Representatives of the Governments of the Member States, meeting within the Council, adopted the Resolution on the fight against racism and xenophobia in the fields of employment and social affairs (9935/95 SOC 310 RAXEN 42).

The Resolution calls upon Member States to take measures so as better to:

— protect persons against discrimination;

— fight employment discrimination;

— stimulate cooperation and the exchange of experience between Member States on working methods and arrangements to promote social cohesion;

— develop respect for diversity and equality of human beings as well as the spirit of tolerance;

— develop instruments of self-regulation, such as codes of conduct, for media professionals.

4. Proceedings in the Education Council

Acting on a proposal from the Presidency, on 23 October 1995 the Council and the Representatives of the Governments of the Member States, meeting within the Council, adopted the Resolution on the response of educational systems to the problems of racism and xenophobia (10621/95 EDUC 76 RAXEN 49). The Resolution highlights the leading role to be played by education in preventing and eliminating prejudice and racist and xenophobic attitudes.

Member States are called upon, inter alia to promote educational and curricular innovations which contribute to the development of concepts such as peace, democracy, respect and equality between cultures, tolerance and cooperation.

The Commission, in cooperation with the Member States, is called upon to:

— ensure coherence among all Community programmes which promote education and training aspects of the struggle against racism and xenophobia;

— exploit the parts of the SOCRATES programme involved with the problems concerned in order to encourage schools partnerships, exchanges of experience on intercultural matters and teacher training;

— ensure that, in the field of education, appropriate cooperation in combating racism and xenophobia is achieved between the Community and international organizations, especially the Council of Europe.

ANNEX 5: FRAUD

ECOFIN Council conclusions on the comparative analysis of the reports supplied by the Member States on national measures taken to combat wastefulness and the misuse of Community resources

A. On the basis of the reports drawn up by the Member States in accordance with the conclusions of the Essen European Council, and further to the request by the Cannes European Council and to the request made by the ECOFIN Council on 11 July 1994, the Commission has taken stock of progress in applying Article 209a EC and made a comparative analysis of national measures taken to combat wastefulness and the misuse of Community resources.

The Council thanks the Commission for the substantial comparative-analysis and summarizing work it has carried out and emphasizes the fact that this constitutes a progress report to be used as a basis for further discussions.

Although the principle of assimilation has been affirmed in most of the Member States' reports, this comparative analysis does indicate lines of study for future discussions in a number of areas where progress still seems to be needed.

B. To achieve such progress, and in keeping with the ECOFIN Council's conclusions of 19 June 1995, the Council considers that the discussion should proceed in 1996 in accordance with the following guidelines, having due regard for the respective powers of the Community and the Member States and for the Member States' constitutional structures:

1. At Member State level

— ensure suitable protection for Community expenditure and revenue, in the context of an overall approach to the fight against the waste and misuse of Community resources (where necessary, strengthening prevention by, among other things, improving the organization of administrative departments, effectively applying administrative penalties, incorporating into national law the Convention on the Protection of the European Communities' financial interests);

— examine the possibility of developing specialized anti-fraud structures that are multidisciplinary and independent of the managers of appropriations;

— assess the reliability of national monitoring systems by means of regular and systematic audits;

— improve the density and homogeneity of information on the results of the anti-fraud campaign, including information on the recovery of Community resources, in order to meet the notification requirements laid down in Community legislation;

— take the necessary measures to ensure that the inspections carried out by the Member States and the penalties they impose make it possible to achieve a level of protection for the Communities' financial interests that is identical throughout the territory of the Community;

— improve administration cooperation, operational links between departments responsible for investigating serious and complex fraud, the resources and powers of inspection of the relevant departments, and mutual assistance in the matter of recovery;

— reinforce the procedures for recovering amounts involved in fraud.

2. At Community level

— ask the Commission to study with the Member States the points on which the analysis of national reports could usefully be supplemented (for example, the "prevention" aspect, the question of transactions, the results of inspections and the action taken where fraud is detected, including recovery);

— encourage the introduction of inspection arrangements that will ensure a level of protection for the Communities' financial interests that is identical throughout the territory of the Community and in all areas covered by the Community budget, in the framework of the Council's common approach concerning protection of the financial interests of the European Communities;

— improve and augment the arrangements for Community administrative penalties in the context of the aforementioned common approach;

— study the necessary simplifications and adjustments to the relevant legislation so as to define more precisely the conduct required of economic operators (for example, consolidation of legislation);

3. In partnership

— analyse in more detail the fraud and irregularities that have been detected, in consultation between the Commission and the Member States, so as to give focus to the action and create operational data bases;

— step up the cooperation provided for in the second paragraph of Article 209a by making best use of the evaluative and incentive skills of the Advisory Committee for the Coordination of Fraud Prevention (COCOLAF), inter alia by making it responsible for the additional work necessary for the follow-up to the national reports and the comparative analysis with regard to the aspects covered by the EC Treaty;

— make financial management more rigorous by continuing the work already begun by the Commission under its programme to improve financial management;

— in the context of greater cooperation between Member States and the Court of Auditors, give an appropriate response to the Court's observations;

— in the context of cooperation between Member States and the Community institutions, encourage the consistency of inspections and avoid any unjustified duplication of inspections concerning the same facts, in compliance with the principle of "cost-effectiveness", among other things through the adoption of protocols between the Member States and the Commission.

NOTES

1. The Commission and EMI reports under Article 109j(1) shall include an examination of the compatibility between each Member State's national legislation, including the statutes of each national central bank, and Articles 107 and 108 of the Treaty and the Statute of the ESCB (Article 108 provides that national legislations must be compatible with the Treaty and the Statute of the ESCB at the latest at the date of the establishment of the ESCB).

2. In the composition of Heads of State or Government (Article 109j(4)).

3. Governments of participating Member States at the level of Heads of State or government by common accord (Article 109l(1)).

4. Participating Member States (Article 105a (2) and 109k (4)).

5. The Council shall act with the unanimity of the participating Member States.

6. Participating Member States.

© European Parliament: 1998