Close coordination of economic policies and a single monetary policy, including a single currency, the euro, promote the aims of the European Union.
We advance from the current Treaty establishing the European Community to the Treaty of Lisbon.
***
Article 4 of the Treaty establishing the European Community (TEC) is found in the latest consolidated version, published in the Official Journal of the European Union 29.12.2006 C 321 E/45–46:
Part One – Principles
Article 4 TEC
1. For the purposes set out in Article 2, the activities of the Member States and the Community shall include, as provided in this Treaty and in accordance with the timetable set out therein, the adoption of an economic policy which is based on the close coordination of Member States' economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition.
2. Concurrently with the foregoing, and as provided in this Treaty and in accordance with the timetable and the procedures set out therein, these activities shall include the irrevocable fixing of exchange rates leading to the introduction of a single currency, the ecu, and the definition and conduct of a single monetary policy and exchange-rate policy the primary objective of both of which shall be to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Community, in accordance with the principle of an open market economy with free competition.
3. These activities of the Member States and the Community shall entail compliance with the following guiding principles: stable prices, sound public finances and monetary conditions and a sustainable balance of payments.
***
We look at the different stages of the treaty reform process.
First, we turn to the European Convention, the closest thing to a constituent assembly EU citizens have had. The corresponding Article is located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter II ‘Economic and monetary policy’.
Article III-69 of the draft Treaty establishing a Constitution for Europe, OJ 18.7.2003 C 169/39:
Article III-69 Draft Constitution
1. For the purposes set out in Article I-3, the activities of the Member States and the Union shall include, as provided in the Constitution, the adoption of an economic policy which is based on the close coordination of Member States' economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition.
2. Concurrently with the foregoing, and as provided in the Constitution and in accordance with the procedures set out therein, these activities shall include a single currency, the euro, and the definition and conduct of a single monetary policy and exchange-rate policy, the primary objective of both of which shall be to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Union, in accordance with the principle of an open market economy with free competition.
3. These activities of the Member States and the Union shall entail compliance with the following guiding principles: stable prices, sound public finances and monetary conditions and a stable balance of payments.
***
In the Treaty establishing a Constitution for Europe, ‘ratified’ by 18 member states, the introductory provisions on economic and monetary policy were located in Part III ‘The policies and functioning of the Union’, Title III ‘Internal policies and action’, Chapter II ‘Economic and monetary policy’.
Article III-177 is found in OJ 16.12.2004 C 310/76:
Article III-177 Constitution
For the purposes set out in Article I-3, the activities of the Member States and the Union shall include, as provided in the Constitution, the adoption of an economic policy which is based on the close coordination of Member States' economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition.
Concurrently with the foregoing, and as provided in the Constitution and in accordance with the procedures set out therein, these activities shall include a single currency, the euro, and the definition and conduct of a single monetary policy and exchange-rate policy, the primary objective of both of which shall be to maintain price stability and, without prejudice to this objective, to support general economic policies in the Union, in accordance with the principle of an open market economy with free competition.
These activities of the Member States and the Union shall entail compliance with the following guiding principles: stable prices, sound public finances and monetary conditions and a stable balance of payments.
***
I found no specific mention of the economic and monetary policy in the mandate of the intergovernmental conference (IGC 2007 Mandate, Council document 11218/07, 26 June 2007).
The present TEC was to become the Treaty on the Functioning of the European Union, and the innovations as agreed in the 2004 IGC were to be inserted into the Treaty by way of specific modifications in the usual manner (points 17 and 18, pages 6 and 7).
***
In Article 2, point 85 of the Treaty of Lisbon (ToL) the IGC 2007 inserted an Article 97b into the Treaty on the Functioning of the European Union (TFEU) (OJ 17.12.2007 C 306/70):
85) An Article 97b shall be inserted as the first article of Title VII, with the wording of Article 4; it shall be amended as follows:
(a) in paragraph 1, the words ‘and in accordance with the timetable set out therein’ shall be deleted;
(b) in paragraph 2, the words ‘Concurrently with the foregoing, and as provided in this Treaty and in accordance with the timetable and the procedures set out therein, these activities shall include the irrevocable fixing of exchange rates leading to the introduction of a single currency, the ecu,’ shall be replaced by ‘Concurrently with the foregoing, and as provided in the Treaties and in accordance with the procedures set out therein, these activities shall include a single currency, the euro,’.
***
The TFEU table of equivalences confirms that the new Article 97b TFEU (ToL) in the original Treaty of Lisbon was later renumbered Article 119 TFEU in the consolidated version (OJ 17.12.2007 C 306/211).
***
Article 119 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/96–97:
Part Three Union policies and internal actions
Title VIII Economic and monetary policy
Article 119 TFEU
(ex Article 4 TEC)
1. For the purposes set out in Article 3 of the Treaty on European Union, the activities of the Member States and the Union shall include, as provided in the Treaties, the adoption of an economic policy which is based on the close coordination of Member States' economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition.
2. Concurrently with the foregoing, and as provided in the Treaties and in accordance with the procedures set out therein, these activities shall include a single currency, the euro, and the definition and conduct of a single monetary policy and exchange-rate policy the primary objective of both of which shall be to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Union, in accordance with the principle of an open market economy with free competition.
3. These activities of the Member States and the Union shall entail compliance with the following guiding principles: stable prices, sound public finances and monetary conditions and a sustainable balance of payments.
***
What has been said about Article 119 TFEU?
United Kingdom
Professor Steve Peers covered the Treaty of Lisbon in a number of Statewatch Analyses. ‘EU Reform Treaty Analysis no. 3.4: Revised text of Part Three, Titles VII to XVII of the Treaty establishing the European Community (TEC): Other internal EC policies (Version 2, 24 October 2007) includes the current Title VII Economic and monetary policy.
Peers presented the text and numbering of Article 97b TFEU (ToL), to be renumbered Article 119 TFEU in the consolidated version, without comment (pages 4–5).
The analysis 3.3 and other useful Statewatch analyses are available through:
http://www.statewatch.org/euconstitution.htm
***
The Foreign and Commonwealth Office (FCO) offers a convenient source of brief annotations on Lisbon Treaty amendments in ‘A comparative table of the current EC and EU treaties as amended by the Treaty of Lisbon’ (Command Paper 7311, published 21 January 2008). It offers the following comment on Article 119 TFEU, Article 97b TFEU (ToL) in the original Lisbon Treaty (page 12):
“In substance the same as Article 4 TEC, which it updates.”
The FCO comparative table is available at:
http://www.official-documents.gov.uk/document/cm73/7311/7311.asp
***
The UK House of Commons Library Research Paper 07/86 ‘The Treaty of Lisbon: amendments to the Treaty establishing the European Community’ (published 6 December 2007) discussed ‘H. Economic and Monetary Policy’ on pages 61 to 64. The new Article 97b TFEU (ToL) was mentioned on page 61:
Article 97(b) (Constitution Article III-177) corresponds with the principles set out in Article 4 TEC in the “Principles of the Community” on the adoption of an “economic policy which is based on the close coordination of Member States’ economic policies”.
The Library Research Paper 07/86 is available at:
http://www.parliament.uk/commons/lib/research/rp2007/rp07-086.pdf
***
The House of Lords European Union Committee report ‘The Treaty of Lisbon: an impact assessment, Volume I: Report’ (HL Paper 62-I, published 13 March 2008) is a valuable resource on the Treaty of Lisbon, but it did not dwell on economic and monetary policy.
The report is accessible at:
http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeucom/62/62.pdf
***
Sweden
The consultation paper ’Lissabonfördraget’ was the first official Swedish description of the Lisbon Treaty amendments, and it is available at:
http://www.regeringen.se/content/1/c6/09/49/81/107aa077.pdf
It was followed by the Swedish government’s draft ratification bill ‘Lagrådsremiss – Lissabonfördraget’, published 29 May 2008:
http://www.regeringen.se/sb/d/5676/a/106277
The draft bill was given a green light by the Council on Legislation (Lagrådet):
http://www.lagradet.se/yttranden/Lissabonfordraget.pdf
The latest official government view is the ratification bill (Regeringens proposition 2007/08:168 Lissabonfördraget; 3 July 2008):
http://www.regeringen.se/content/1/c6/10/84/02/8c96cf3e.pdf
Economic and monetary policy (23.2 Ekonomisk och monetary politik) is discussed on pages 180 to 185.
***
Finland
Among our standard sample of Lisbon Treaty commentaries, Finland is the first Eurozone country.
The Finnish ratification bill, ‘Hallituksen esitys Eduskunnalle Euroopan unionista tehdyn sopimuksen ja Euroopan yhteisön perustamissopimuksen muuttamisesta tehdyn Lissabonin sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta’ (HE 23/2008 vp), discusses economic and monetary policy (Talous- ja rahapolitiikka) on pages 209 to 214.
The ratification bill briefly mentions that Article 97b TFEU (ToL), renumbered Article 119 TFEU, corresponds with Article III-177 of the Constitutional Treaty and Article 4 TEC (page 209):
”97 b artikla (uusi 119 artikla), jossa määritellään unionin talous- ja rahapolitiikan tavoitteet, vastaa perustuslakisopimuksen III-177 artiklaa ja SEY 4 artiklaa.”
The Finnish ratification bill is available at:
http://www.finlex.fi/fi/esitykset/he/2008/20080023.pdf
The Swedish language version of the ratification bill ‘Regeringens proposition till Riksdagen med förslag om godkännande av Lissabonfördraget om ändring av fördraget om Europeiska unionen och fördraget om upprättandet av Europeiska gemenskapen och till lag om sättande i kraft av de bestämmelser i fördraget som hör till området för lagstiftningen’ (RP 23/2008 rd), makes the same remark under ’Ekonomisk och monetär politik’ on Article 97b TFEU (ToL), the future Article 119 TFEU, on page 212:
”Artikel 97b (blivande artikel 119), där målen för unionens ekonomiska och monetära politik definieras, motsvarar artikel III-177 i det konstitutionella fördraget och artikel 4 i EG-fördraget.”
The ratification bill in Swedish can be accessed at:
http://www.finlex.fi/sv/esitykset/he/2008/20080023.pdf
***
François-Xavier Priollaud and David Siritzky offer a short introductory explanation on pages 246 and 247 of their book Le traité de Lisbonne – Commentaire, article par article, des nouveaux traités européens (TUE et TFUE) (La Documentation française, Paris, 2008).
Ralf Grahn
Tuesday, 15 July 2008
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Seachtu. The amendments to the EMU Chapter are largely technical.
ReplyDeleteThey consolidate the position of the euro and remove the transitional language inevitable in the Maastricht Treaty (as the euro was still an objective not a reality).
Their main political import is easy to discern.
The really significant changes are in the [new] Chapter 4 'Provisions specific to Member States whose currency is the euro' (Articles 115A to C = Article 136 in the Consolidated Text) and the Protocol on the Eurogroup. These provide a foundation for deepened economic integration for members of the Eurozone and for a common external representation.
The Eurogroup, on UK insistence, can still meet only informally but its role is strengthened by the Protocol.
There is also a significant change in the voting arrangements for the decision on admitting new members (Article 117A - Article 140.2 in the Consolidated Text).
In short, the fact that the euro is part of the acquis and not a form of variable geometry is confirmed. Member States that are not members have a "derogation" but with both a right and an obligation to join while two (the UK and Denmark) having "permanent derogations". (Sweden continues to "succeed" in not meeting the entrance criteria; in relation to the status of her national bank).
Seachtu,
ReplyDeleteThank you for a competent summary.
Admittedly, going through the treaty versions Article by Article means that many of the posts lack exiting novelties, but they are there for me and others for writing on additional aspects.
Another point worth mentioning is that it is not possible to separate the economic and monetary policy aspects, the two must be considered together. The procedures are opaque but the fact that the BEPG (Broad Economic Policy Guidelines)and Excessive Deficit Procedure apply to all MS underlines that you cannot run a monetary union confined solely to the EU member states that have joined it. The economic policies of all MS impact on each other.
ReplyDeleteOn the other thread dealing with the economic policy texts, the HOL Impact Assessment did not dwell on the issue of EMU as to do so would have simply underlined the growing isolation of the UK in the matter.
And Ireland! Confusion reigns. The Irish rejected Lisbon but took to the euro like a duck to water. This simply confirms that people are not emotionally attached to national currencies, only to sound ones.
Anonymous,
ReplyDeleteTo me, the monetary and economic aspects bring to mind a man with a wooden leg.
You say that the Irish took to the euro, but what is your take on frequent commentator Tapestry and others who have suggested that the downturn in the economy would either force Ireland out of the Eurozone or offer an opportunity to leave it?
No Member State can be forced out of either the EU or the euro (although Ireland would not qualify for the latter were it to try to join now, excessive inflation being the main problem).
ReplyDeleteThe following explanation for economic developments within the Euro Area is generally accepted, at least by the commentators that I have been reading.
The interest rates in the early days of the euro were too low because the main economy - Germany - was skirting recession. This fueled a property boom, in Spain and Ireland in particular. This is now unwinding at a dramatic rate in both countries. But the fault lies with the two governments, who failed to rein in the boom, not the euro.
Everybody thought they were making money because house prices were rising. The US set the pattern with the catastrophic results we are all now trying to deal with.
It would, in summary, be true to say tha Germany conducted an export-led economic policy (trade surplus of $811 billion at the moment, matched almost exactly by deficits in the other major economies), France a consumer-led one and Spain a construction-led one (with Italy, as usual, as it is several economies rather than one, muddling through). It is hard to know which government to fault most but all are to blame.
What recent events have shown is that, whatever the economic pain, membership of the Euro Area is an enormously important anchor. (Ask any UK citizen who has seen Sterling fall by 20% vis-a-vis the euro and who has to pay 1-2% interest premium for London to hold funds and prevent the pound falling further).
In short, the pain of staying in is outweighed by the certain greater pain of leaving. In any case, Ireland's public debt situation is very sound, second only to Luxembourg as against being one of the worst 15 years ago. Unfortunately, this improvement in public debt has been counterbalanced by an enormous surge in private borrowing (see above) with Irish banks, in the view of some investors at least, dangerously exposed to construction lending.
The "confusion", or contradiction if you like, is that the euro is the most powerful expression, in terms of both symbolism and reality, of European integration and the Irish electorate still voted no. In other words, populations are evidently indifferent to the political implications of a common currency area. That was my point.
As I have mentioned in various postings, states pursue their interests. What the EU provides is a framework governed by the rule of law within which they can do so withou going to war with one another. To assume that their relations have become innocent would be the biggest mistake of interpretation anyone could make. No tears would be shed either in the City of London or Wall Street were a member state of the Euro Area to be laid low. The Irish electorate was blissfully unaware of this. Not some of the participants on the no side. Seachtu.
Anonymous (Seachtu),
ReplyDeleteThank you for your reasoned comment.
I agree that ordinary people seem to reflect on the euro mostly when they travel abroad. Convenience, not symbolism or effects on trade and lending, are the things experienced by people in general.
Being on the geographical fringe of the EU (Eurozone) means that you have go farther to appreciate the convenience of using the same money.
For Ireland the closest country is Great Britain with its pound. Finland has as its closest neighbours Russia completely out, the Baltic states and Poland not yet qualified, Denmark with its opt-out, Sweden out without an opt-out, and Norway outside the EU as a whole.
Only Germany along the Baltic coast has the euro today.
What you say about the governments brings us back to the question of economic policy coordination.
President Sarkozy chooses to lambast the European Central Bank, but electoral expediency seems to dictate the fiscal and economic policies of member states' governments.
Despite the coordination exercises a number of governments seem to achieve more divergence than convergence.
The strains on a unitary monetary area with decentralised economic policies are considerable.
Coincidentally, there is s very lenghty and highly informative interview with Jean-Claude Trichet in some of Europe's leading newspapers of 18 July. A full transcript is to be found in the Irish Times. www.irishtimes.com.
ReplyDeleteDouble take. Surely Finland is on the Baltic?
ReplyDeleteAnonymous,
ReplyDeleteThank you, I will try to find the interview.
Your question on geography may be more subtile than I understand, but the Gulf of Finland and the Gulf of Ostrobothnia are, as I understand it, parts of the Baltic Sea.
Your post reads "Only Germany along the Baltic has the euro today".
ReplyDeleteAnonymous,
ReplyDeleteThank you for your comment. In my view the texts about Ireland and Finland were parallel constructions, where I started with the euro countries (without specifically mentioning the fact)and then went on to describe their neighbours.
Perhaps I should have shown more care.
Anonymous,
ReplyDeleteThank you for the suggestion to read the interview with Jean-Claude Trichet.
After the various snippets reported here and there, it was interesting to read a more or less consistent whole.
In fact, for the record, I wrote my contributiosn before I read what M. Trichet had to say. Either great minds think alike (which is doubtful in my case) or some of the facts are so self-evident that anyone with a little knowledge could write them down. However, few could match M. Trichet's turn of phrase e.g. "We have a primary mandate enshrined in a treaty which has been negotiated, signed and ratified - either by parliaments or by the people, by 27exemplary democracies, 25 without an opting-out clause". Quelle delicatesse!
ReplyDeleteAnonymous,
ReplyDeleteOne gets the impression that Trichet's phrase has been honed for a while - not what you would call impulsive.
The truths you you find to be more or less self-evident seem to be less so in a plebiscitary democracy.