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 draft Constitutional Treaty proposed by the Convention includes some significant improvements to the Union's economic and monetary policy, in particular:

strengthening the capacity of the Union and of the euro zone in particular, to act;
establishing the European Central Bank (ECB) as an EU institution;
considerably simplifying the texts.

The economic and monetary policy has been discussed, at length, by the Convention and the working group dealing with this subject. 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 Convention proposes a new section concerning the Member States in the euro zone and a Protocol on the Euro Group annexed to the Constitution.
Finally, the members of the Convention propose extending qualified majority voting to almost all areas of economic and monetary policy, with a few exceptions.

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THE EUROPEAN CENTRAL BANK

It has been proposed, by the Convention, that the European Central Bank become an EU institution. Article I-29, 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 members of the public.

As the Council of the ECB can adopt legal acts in certain areas and is consulted with regard to any draft instrument of the Union in its field, it is only logical to grant the ECB 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).

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ECONOMIC POLICY

The Union's powers in the promotion and coordination of Member States' economic policies are established in Article I-14. The adoption of broad economic policy guidelines is mentioned in particular, and the fact that specific provisions apply to Member States of the euro zone is emphasised.

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

the Commission will be able to address warnings to any Member State whose economic policy contravenes the broad guidelines or risks jeopardising the proper functioning of EMU;
when the Council of Ministers addresses a recommendation to a Member State, the latter will not take part in the vote.

With regard to excessive deficits, the draft Treaty proposes the following amendments (Article III-76):

decisions of the Council of Ministers concerning excessive deficits and the relevant recommendations will be based on a proposal from the Commission. This means that the Council will not be able to depart from the proposal unless it acts unanimously, thus reinforcing the role of the Commission in the process;
the Member State in question will not participate in the vote on the existence of an excessive deficit;
the qualified majority no longer has to represent two thirds of the Member States, but rather a simple qualified majority of Member States.

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MONETARY POLICY

The draft Treaty 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-12). 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).

It should also be noted that the Convention has moved the provisions on the conclusion of an agreement on exchange rates, currently in the chapter on monetary policy of the Treaty establishing the European Community (EC Treaty), to the title on the Union's external action (Article III-228), without changing the substance of the provisions.

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SPECIFIC MEASURES FOR THE EURO ZONE

The draft Treaty proposes specific measures applicable only to the Member States of the euro zone in Articles III-88 to III-90. These Member States will now be able to take measures to strengthen the coordination 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 entire 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:

measures to strengthen the coordination and surveillance of budgetary discipline;
measures concerning the economic policy guidelines for the euro zone;
common positions within the international financial institutions and conferences;
measures to ensure unified representation within these institutions and conferences.

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.

The members of the Convention propose annexing, to the Constitution, a protocol on the Euro Group, laying down the arrangements for meetings of ministers from the Member States in the euro zone. The informal meetings of the Euro Group will facilitate dialogue on questions related to the joint responsibilities of these Member States. The Commission and the ECB will be invited to these meetings. The ministers from the euro zone Member States will elect a chairman Translator's note: the draft uses the term "president" but "chairman" or "chair" seems more appropriate. for two and a half years based on a majority of these Member States' votes.

This protocol therefore confirms an existing practice for the holding of meetings, and only the creation of the post of chairman of the Euro Group represents a real innovation. Although the Treaty refers directly, in Article III-89, to this protocol, the Euro Group has not yet been formally created. For this reason, official decisions are still taken by the Council of Ministers.

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SIMPLIFICATION OF THE TEXTS

The Convention proposal is for a substantial shake-up of the transitional provisions (Articles 116 to 124 of the EC Treaty), with the repeal of all those that have become obsolete with the adoption of the euro. The draft Treaty includes these transitional provisions in Articles III-91 to III-96. These Articles establish provisions applicable to those Member States with a derogation, i.e. those that have not yet adopted the euro. They lay down provisions relating to:

the definition of a Member State with a derogation and the provisions of the Constitution that do not apply to these Member States (Article III-91);
the procedure for the subsequent adoption of the euro by a Member State (Article III-92);
specific provisions applicable to Member States with a derogation (Articles III-93 to III-96).

Without changing their substance, the Convention is therefore proposing that these provisions be considerably simplified, making them more readable and understandable for members of the public.

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OTHER PROVISIONS

The Convention proposes extending the scope of qualified majority voting. Only certain areas will still require unanimity in the Council of Ministers, in particular:

the adoption of measures to replace the existing protocol on excessive deficits which defines the convergence criteria for adoption of the euro (Article III-76);
the appointment of members of the ECB's Executive Board (Article III-84);
establishing the substitution rate between the euro and the national currency of the Member State adopting the euro (Article III-92).

The Convention is in favour of the European Parliament having a greater role in extending the application of the ordinary legislative procedure to the following provisions:

the multilateral surveillance of economic policy (Article III-71);
the specific tasks assigned to the ECB (Article III-77);
amending the Statute of the ESCB and the ECB (Article III-79);
the measures necessary for the use of the euro (Article III-83).

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SUMMARY TABLE

Articles	Subject	Comments
I-12	Exclusive competence	-
I-14	The coordination of economic and employment policies	-
I-29	The European Central Bank	Significant changes
III-69	Economic and monetary policy - general	-
III-70 to III-76	Economic policy	Significant changes
III-77 to III-83	Monetary policy	-
III-84 to III-87	Institutional provisions	Significant changes
III-88 to III-90	Provisions specific to the Member States in the euro zone	New provisions
III-91 to III-96	Transitional provisions	-
Protocol on the Euro Group	-	New 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 Convention.