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The policies of the Union


Economic and monetary policy


Introduction
The European Central Bank
Economic policy
Monetary policy
Specific measures for the euro zone
Simplification of the texts
Other provisions
Summary table

INTRODUCTION

The Constitution makes a number of changes to the Union's economic policy and monetary policy, in particular:

The economic and monetary policy was discussed, at length as a part of the work of the Convention , by the Convention and the Inter-Governmental Conference . The consensus found should allow the Union to further coordinate its economic policies. The Member States that have adopted the euro will have greater autonomy to make decisions on matters that concern them without the other Member States being allowed to vote. In this regard, the Constitution contains a new section entitled "Provisions specific to Member States whose currency is the euro", and a Protocol on the Euro Group is appended to the Constitution.
Finally, the Constitutional Treaty extends qualified majority voting to almost all areas of economic and monetary policy, with a few exceptions.

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THE EUROPEAN CENTRAL BANK

The European Central Bank has become an EU institution . Article I-30, which deals with this subject, takes certain institutional provisions from part III of the Constitution and assembles them in a single article in order to make them more accessible to citizens.

As the ECB can adopt legal acts in certain areas and is consulted with regard to any instrument of the Union in its field, it is only logical to grant it the status of an institution. However, this will not affect the missions, statutes or objectives of the European Central Bank or the European System of Central Banks (ESCB).

However, the fact that the ECB has become an EU institution does not change anything in terms of its structure, tasks, statutes or objectives or the European System of Central Banks (ESCB). The ECB thus retains its independence with regard to the other EU institutions and Member State authorities. It is the only European Institution which as legal personality (this is already the case today).

The Constitution more clearly states that the governors of the central banks of the Member States which have not adopted the euro cannot be members of the Governing Council of the ECB (Article III-382).

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ECONOMIC POLICY

Article I-15 requires Member States to coordinate their economic policies within the Union. To this end, the Council of Ministers must adopt measures, in particular broad guidelines for these policies. Specific provisions apply to those Member States whose currency is the euro.

Chapter II of Title III of Part II of the Constitution is devoted to economic and monetary policy. Article III-177 defines the activities of the Member States and of the Union in the field of economic and monetary policy.

In accordance with this article and Article III-178, the Union's economic policy will be based on the close coordination of Member States' economic policies, on the internal market and on the definition of common objectives. Member States must conduct their economic policies in order to contribute to the achievement of the Union's objectives. Economic policy must respect the principle of an open market economy with free competition. As is already the case, the Member States must regard their economic policies as a matter of common concern (Article III-179). The broad guidelines of economic policies form the central link in coordination.

The broad economic policy guidelines

The Constitution contains several innovations with regard to the broad economic policy guidelines (Article III-71):

Excessive deficits

With regard to excessive deficits, the Constitutional Treaty makes the following amendments (Article III-184):

The Inter-Governmental Conference issued a declaration, appended to the Final Act of the IGC, on the Stability and Growth Pact. In this declaration, Member States confirm their commitment to the objectives of the Pact and look forward to possible proposals from the Commission and Member States with regard to strengthening and clarifying the implementation of the Pact.

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MONETARY POLICY

The Constitution makes a number of changes as regards the Union's monetary policy. First, it officially designates the euro as the currency of the Union and makes it one of the Union's symbols (Article I-8).

The Constitution then provides a very clear distribution of the Union's powers with regard to monetary policy, with the Union being granted exclusive competence for those Member States that have adopted the euro (Article I-13). Member States that have not adopted the euro will keep their own powers over monetary policy.

The provisions governing the tasks and objectives of the European System of Central Banks (ESCB) remain unchanged overall (Articles III-77 to III- 83). The Convention proposes the creation of a new legal basis for the adoption of measures necessary for the introduction of the euro and its everyday use, to replace the temporary provisions in the current treaties (Article III-83).

As regards institutional provisions, the tasks and objectives of the European System of Central Banks (ESCB) remain unchanged overall (Articles III-185 to III-191). Article I-30 officially defines the "Eurosystem" as the European Central Bank together with the national central banks of the Member States whose currency is the euro; they together conduct the monetary policy of the Union.

The Constitution also creates a new legal basis both for the adoption of measures necessary for the introduction of the euro and, above all, for its everyday use. This new legal basis replaces the current temporary provisions in Article 123(4) of the EC Treaty.

It should also be noted that the Constitution has moved the provisions on the conclusion of monetary agreements, currently in the chapter on monetary policy in the Treaty establishing the European Community (EC Treaty), to the title on the Union's external action (Article III-326), without changing the substance.

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SPECIFIC MEASURES FOR THE EURO ZONE

The Convention proposed giving the Member States which had adopted the euro greater autonomy and the possibility of deciding themselves within the Council on questions of particular concern to them owing to the fact that they share the same currency. The IGC followed the same approach, and the Constitution therefore includes specific measures applicable only to the Member States in the euro zone (Articles III-194 to III-196). These Member States will now be able to take measures to strengthen the coordination and surveillance of their budgetary discipline and draw up more concrete guidelines for their economic policies, while ensuring that these guidelines are compatible with those adopted for the whole of the Union.

Under these Articles, the Council of Ministers can make decisions on the basis of the votes of the Member States of the euro zone, without the participation of the other Member States, with regard to the following areas:

The fact that the Member States, which have adopted the euro, can vote on these matters without the participation of the others is a major step forward which has become inevitable. When the ten new Member States join, the twelve euro zone members will be in a minority on the Council of Ministers, until the new Member States fulfil the convergence criteria for adopting the European currency themselves. This provision will therefore ensure that, during this period, decisions are taken only by the Member States concerned.

Furthermore, in the section on transitional provisions, the Constitution extends the suspension of voting rights applied to Member States outside the euro zone. In addition to the situations described above, it now applies also to recommendations made to those Member States whose currency is the euro in the framework of multilateral surveillance, and to all measures relating to excessive deficits (Article III-197, paragraph 4).

Finally, the role of the Member States in the euro zone is also enhanced in terms of admitting Member States to the euro zone. Before the Council, in its full formation, can make such a decision, it must receive a recommendation from the euro zone Member States acting on a qualified majority.

The role of the Euro group

Article II-195 refers to the Protocol on the Euro Group, which is appended to the Constitution and lays down the arrangements for meetings of Ministers of the Member States whose currency is the euro. However, although mentioned for the first time in the Treaty, the Euro Group is not an official Council formation, and the Constitution merely confirms the existing practice of informal meetings. This means that official decisions continue to be made by the Council of Ministers.

The informal meetings of the Euro Group will facilitate dialogue on questions related to the joint responsibilities of these Member States. The Commission participates in these meetings by right, and the ECB will be invited. The only innovation here is that the Euro Group will elect a chairman for two and a half years by a majority of its Member States.

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SIMPLIFICATION OF THE TEXTS

The Constitution includes a substantial shake-up of the transitional provisions (Articles 116 to 124 of the EC Treaty). All the provisions relating to the first two stages of EMU have become obsolete with the adoption of the euro and have been removed.

The Constitutional Treaty now groups together the transitional provisions in Articles III-197 to III-202. These Articles are applicable to those Member States with a derogation, i.e. those whose currency is not yet the euro. They lay down provisions relating to:

Without changing their substance, the Constitution therefore considerably simplifies these provisions, making them more readable and understandable for citizens.

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OTHER PROVISIONS

The Constitution extends the scope of qualified majority voting . Only certain areas will still require unanimity in the Council, in particular:

The Constitution also gives the European Parliamen t a greater role by extending the application of the ordinary legislative procedure to the following provisions:

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SUMMARY TABLE

Articles Subject Comments
I-8 The symbols of the Union New provisions
-
I-13 Exclusive competence
I-15 The coordination of economic and employment policies -
I-30 The European Central Bank Significant changes
III-177 Economic and monetary policy - general -
III-178 to III-184 Economic policy Significant changes
III-185 to III-191 Monetary policy -
III-192 to III-193 Institutional provisions Significant changes
III-194 to III-196 Provisions specific to the Member States in the euro zone New provisions
III-197 to III-202 Transitional provisions -

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The fact sheets are not legally binding on the European Commission. They do not claim to be exhaustive and do not represent an official interpretation of the text of the Constitution.


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