91997E3578

WRITTEN QUESTION E-3578/97 by Klaus Lukas (NI) to the Commission (13 November 1997)

Subject: The euro and price transparency

The introduction of the euro will result in a marked increase in price transparency throughout Europe. Normally, improvements in price transparency have an impact on competitiveness and on trade and production flows.

In this connection, what is the Commission's assessment of the introduction of the euro and its impact on employment?

How does the Commission intend to assess the requirement for a two-year membership of the EMS and what fluctuation margins are considered 'normal' in this context? (Can the Commission provide the relevant percentage fluctuations?)

Answer given by Mr de Silguy on behalf of the Commission (23 January 1998)

The establishment of economic and monetary union (EMU) and the introduction of the euro will increase price transparency in the internal market. For consumers and enterprises it will be easier to compare prices of goods and services displayed in different Member States. This should lead to an increase of competition between producers and greatly facilitate trade inside the euro area.

The increase of competition, the reduction of transaction costs for cross border transactions and the creation of an integrated euro area capital market with the prospect of low interest rates will improve the conditions for investment in Europe. The single currency is therefore one of the main elements in the strategy of the Community to improve European competitiveness and to create the necessary conditions for long-lasting, non-inflationary growth and for employment creation.

As the establishment of EMU implies a single monetary and exchange rate policy inside the euro area, the link between wage settlements and employment will become more stringent. National monetary or exchange rate policies will no longer be able to accommodate wage and price developments which are not in line with the macroeconomic framework in Europe.

Concerning the convergence criteria 'exchange rate stability' it should be noted that Article 109 j (1) of the EC Treaty refers to 'the observance of the normal fluctuation margins provided for by the exchange rate mechanism of the European Monetary System, for at least two years, without devaluing against the currency of any other Member State'.

In August 1993, the ministers and the central bank governors of the Member States decided to widen temporarily the obligatory marginal intervention thresholds of the participants in the exchange rate mechanism of the European monetary system (EMS) to ± 15% around the bilateral central rates. At the same time, they reaffirmed their support for the procedures and criteria laid down in the EC Treaty with respect to the attainment of a sufficient degree of convergence in order to allow the realisation of EMU.

The Commission will base its assessment of this criterion on these bases when recommending in March 1998 the list of Member States which will have reached a high degree of sustainable convergence.