Approval of the Minutes President The Minutes of yesterday's sitting have been distributed. Are there any comments? Kellett-Bowman Mr President, in yesterday's Minutes it is recorded that I abstained on Amendment No 22 on the Oostlander report. It was my intention to vote for it. It was a case of mea culpa rather than a faulty machine. Please, could it be corrected. President It will be corrected. Wynn Mr President, yesterday I managed to reach the Chamber just as the Minutes were being agreed - I had been attending another meeting. Had I been here, I would have made a correction. Yesterday's Minutes said that we agreed Tuesday's Minutes but in fact Tuesday's Minutes were incorrect. They omitted the reference to my presentation of the discharge report on the general budget and the FED. It was a 13-minute speech. I may not be the world's greatest speaker but 13 minutes is quite a sizeable chunk to miss. I should be grateful if that could be corrected in Tuesday's Minutes. President We take note of that. (Parliament approved the Minutes) Monetary cooperation President The next item is the report (A4-0053/96) by Mr Garriga Polledo, on behalf of the Committee on Economic and Monetary Affairs and Industrial Policy, on the strengthening of world monetary cooperation to ensure better regulation of monetary and finance markets. Garriga Polledo Mr President, firstly, I regret the absence of Mr de Silguy, who kindly let me know that he could not be present; I should therefore like to welcome Mrs Wulf-Mathies. Secondly, I should like to stress the fact that I believe that I have drawn up a consensus report. I accepted a considerable number of amendments in committee, since I believe that a European Parliament resolution on a subject as important as this must be able to count on the support of a substantial majority of Members. Turning to specifics, Mr President, I wish to emphasize that the main objective of this report is to put forward a joint European Union proposal for the strengthening of world monetary cooperation, and not to present proposals for the regulation of the markets - for which reason I must announce that I cannot accept the amendments tabled by the Green Group. We take as our starting-point, ladies and gentlemen, the clear fact that the globalization of the economy and the astonishing growth of the financial markets have reduced the effectiveness of traditional economic policies and weakened the ability of national governments to define independently their macroeconomic objectives. In 1995, for example, the value of transactions on the international foreign exchange market exceeded USD 1300 billion per day - more than twice the total currency reserves of the industrialized countries. In twelve years, the value of transactions per day has multiplied by a factor of twenty. The report's general thesis is that this strengthening of the international markets is positive and beneficial to national economies and the world's economic systems as a whole, as long as the mechanisms for international economic and monetary cooperation are at the same time improved, reinforced and perfected. The international capital market enables countries with little capacity to generate domestic savings to gain immediate access to external savings - often on exceptionally favourable financial terms. This allows such countries to finance economic development policies which they would otherwise be unable to fund. And the conditions set by the markets in allocating these external savings are precisely those which are writ large in any manual of economic policy: that the beneficiary countries must maintain low inflation rates and carefully control their public deficits. When national governments depart from economic orthodoxy, the markets impose the adjustments which those governments have not dared to make. And adjustments imposed by the markets generally have an unacceptable social cost, as well as provoking a disproportionate reaction which makes the economic situation of the country in question even worse: let us recall the 'tequila effect' , or the crisis in the European Monetary System. Consequently, whilst accepting the fact that the international markets have achieved a degree of autonomy which is far greater than the ability of individual governments to influence them, the alternative which I am proposing to the House today is to strengthen international cooperation, within the existing institutional framework, and drawing on the encouraging experience of economic and monetary union. Therefore, we are calling for the current international monetary system, based on the predominance of the dollar, to be developed into a system which incorporates other currencies - including, of course, the future euro. This would serve to minimize the risks of fluctuations in the dollar and reflect far better the make-up of international trade flows. Furthermore, we are calling on governments to pursue exchange-rate stability, on the basis of sound monetary and fiscal policies, and to maintain low interest and inflation rates and levels of public deficit. We are calling explicitly - within the framework of the International Monetary Fund - for the strengthening of the multilateral monitoring procedures, the reinforcement of the means for preventing financial crises, and the full provision of information to all market participants. Finally, we are calling for the essential cooperation between the Governors of the Central Banks to be carried out under the auspices of the Bank for International Settlements. Fundamentally, Mr President, this report seeks to suggest that the European Union's experience of making progress towards economic and monetary union through economic cooperation and through the application of convergence criteria could serve as an example on a global scale of how to strengthen monetary cooperation, with a view to achieving the general conditions for sustained, noninflationary and job-creating economic growth. I should like to end by thanking my colleagues - especially Mrs Randzio-Plath and Mr Katiforis - for their contributions and amendments, and by reminding Mrs Wulf-Mathies that Parliament is making a formal request to the Commission to draw up a white paper on the role of the European Union, after the start of the third stage of EMU, in the world economic system. Harrison Mr President, this report on the strengthening of world monetary cooperation to ensure better regulation of monetary and financial markets is very timely. After all, we in Europe recognize only too well that activity one side of the world can have profound effects elsewhere, including Europe. I do not just refer to the collapse of Barings Bank in London, following dealings on the Singapore market, but also to the consequences which followed lower interest rates in the United States in 1995. The Deutschmark interest rate remained high, with enormous knock-on effects on Europe's economy and its ability to climb out of its economic pause - to borrow a phrase favoured by the Commission. If that is true in the Europe of today, imagine the situation once the Euro has entered the currency markets. What are we to do in this new environment which will be upon us shortly? We will need strong international cooperation, and the newly-fledged European Central Bank will need to quickly master its global, as well as its local, role. I would suggest that part of its and the Commission's responsibilities in this new environment is to improve not just monetary cooperation in the world but also to promote greater synergy in the fiscal and economic areas. Although the Garriga Polledo report perhaps underplays the degree of danger unleashed by liberalizing the financial markets, I believe we can support the remedies suggested by the rapporteur. He highlights the need to put in place an effective advance warning and monitoring system; he encourages prompt and appropriate political responses; he agrees with the G7's request to the IMF to establish new procedures regarding finance mechanisms and, of course, he calls again, through the G7, for strengthening international cooperation. To these suggestions I would add that the G3 or the G7 should not exclude other important global players, including Asia and ASEAN, whose parliamentary representatives are in conclave with Euro-MPs this morning here in Strasbourg. Nor should we fail to remind the financial community of their own responsibilities. The better they can regulate and monitor themselves, the better we, the politicians, will be satisfied. The sorry story of Barings' collapse reveals all too palpably human frailty at work. Whatever else is true, it is apparent that the internal checks and balances were not operating successfully between London and Singapore. That brings me back to where I started. Today's lead story in the Financial Times reports the IMF's regular world economic outlooks exhortation to Germany to cut its interest rates and so boost economic recovery. We truly live now in an interdependent world and must reform ourselves to meet these new circumstances. Giansily Mr President, ladies and gentlemen, Mr Garriga Polledo's report, which takes due account of both the advantages and disadvantages of the general liberalization of the capital movements and the globalization of the economy, recommends to the Commission and to the European Monetary Institute a package of measures or recommendations focusing on three themes, which we endorse. I recommend, in essence: closer cooperation in the field of economic policy between the 'big three' , in other words the United States, Japan and Germany; closer cooperation with regard to exchange rates, in particular between industrialized countries; and, finally, action to promote greater international financial stability in the context of a would be globalized economy. This would be implemented by the use of an early-warning system, relying on the appropriate financing mechanisms and promoting the strengthening of international cooperation. The report likewise shares the opinion of the G7 that the best way of achieving stability of exchange rates is to implement monetary and budgetary policies which are compatible with the fundamental economic parameters - and this is a good thing - for fear of exposure to the devastating and immediate effects of speculative capital movements in search of the best short-term profit. It is true that market reaction is often the logical result of the thoughtlessness or inadequacy of the economic, monetary and even budgetary policies pursued in some quarters; the result is devaluation, which imposes a direct and heavy penalty - especially in terms of employment - on the more virtuous and stricter policies pursued by other States. We must therefore congratulate ourselves on the results of the meeting held in Verona last weekend, following which the Finance Ministers of the fifteen States of the Union called upon the Commission to study the setting-up of a mechanism intended to counter any attempts at competitive devaluation. There are three main lines of approach that come into question here: strengthening the present multilateral surveillance system, making payments from the Structural Funds subject to certain conditions in the event that a country fails to move with sufficient determination towards economic convergence, and, finally, setting up a fairly complex system which would deprive the defaulting State of a 'laisserpasser premium' , guaranteeing that it would receive no more money from Brussels as long as that aid - currently paid in ecus and in future to be paid in Euros - would represent a large sum in national currency after devaluation. The operative part of the motion for a resolution contained in Mr Garriga Polledo's report, the broad lines of which we support, prompts two comments from us. First, as regards recital No 1: it is impossible to say that the present weakness of the dollar is responsible for the appreciation of the German mark, for a very good reason: the American currency has continuously gained ground against the mark for the past year. Secondly, the wording of paragraph 19 of the motion for a resolution is not acceptable to our group, because it requests that, via the Commission and the future European Central Bank, the European Union should be a full member of all the international institutions mentioned and that it should be involved as such, in the drawing up and taking of decisions. I would remind you here of the content of Article 109(4) and (5) of the Treaty: ' The Council shall, on a proposal from the Commission and after consulting the ECB, acting by a qualified majority, decide on the position of the Community at international level as regards issues of particular relevance to economic and monetary union and, acting unanimously, decide its representation in compliance with the allocation of powers laid down in Articles 103 and 105.' The Commission has been invited to the meeting of the G7 which is to be held in Lyons in June, but as far as I know it is not involved in the G7 meetings attended by the Finance Ministers. We therefore need to keep out heads and not put pressure either on the course of events or on the States. If the question should eventually arise as to whether the provisions of paragraph 19 are to be proposed and transcribed into international reality, then we shall discuss the matter again, but as far as the Treaty on European Union is concerned, this hypothetical situation cannot be taken into consideration at this stage. Hautala Mr President, the rapporteur seems to be relying too much on the assumption that the movement of capital functions best under the current international funding systems. Nor am I sure about the Social Democrats' proposal that it would be sufficient to set up an international economic council to monitor speculation. There is a need for a much more radical change to worldwide funding structures. At present the sum of money changing hands throughout the world is equivalent to three times the foreign currency reserves of many industrialized countries. Neither any national banks nor their international counterparts are capable of combating this level of speculation. Of course the Greens too support the establishment of this type of early warning system and the strengthening of cooperation on international financial policy. This, indeed, was proposed last year at the Halifax Summit and this is what the rapporteur is now proposing, but it is really not enough. There is a need for measures which will automatically prevent speculation, and the speculators must be made to pay for such measures. The proposal which is urgently needed is to bring into force an international tax on speculation capital. This was proposed as long ago as 1978 by James Tobin, who later won the Nobel Prize. Even a very low tax, of the order of 0.5 % on the quantity of capital exchanged could have a significant effect on reducing particularly short-term placements or speculation proper. It will not of course be easy to introduce such a tax, but it should be attempted, with a view thereby to achieving an entirely new system for the supervision of capital movements at global level. Hory Mr President, ladies and gentlemen, it seems to me fair to say that the system introduced at Bretton Woods, over fifty years ago now, has lost all its legitimacy today, despite the updating of the Plaza and Louvre agreements, or the Halifax declarations of intent, and yet it has continued to generate numerous effects which cause a serious imbalance for the majority of the world's States and their populations. Whatever one may think about the Bretton Woods agreements, the superiority of the dollar as a reference currency for the entire international monetary system was justified on three grounds. One was political: the United States had just won, and helped the Europeans to win, the Second World War. That was an important reason, but it was one born of circumstances, and has now become invalid. The second reason was economic: the United States were financing European reconstruction through the Marshall Plan. Here again, they seem to me to be its main beneficiaries, but this reason too has ceased to exist. As for the third reason which enabled the superiority of the dollar to become established, it was a purely technical and monetary one, and was linked to the commitment by the United States to guarantee the permanent convertibility of their currency into a fixed quantity of gold. The United States abandoned that guarantee on 15 August 1971. We even experienced American treasury officials touring Europe and saying to the European leaders: ' The dollar is our currency and this is your problem.' The fact is that, since that time, they have enjoyed a preeminent position because in point of fact it is the other nations, and especially the Europeans, which are paying off the public and private deficits accumulated by the United States of America. To put it bluntly, if my debt is expressed in my own currency and if international trade is all settled in that currency, I know that I am not going to pay my debt - it is as simple as that. Today, these imbalances have become so serious that - while paying tribute to the efforts of the rapporteur - I cannot endorse some of his conclusions, or indeed some of his premises. In the motion for a resolution, I read this: ' recognizing that the liberalization of capital movements brings enormous benefits, since a free capital market ensures that savings are assigned to the most productive investments' . Well, everyone knows that the reverse is true: the deregulation of the national markets and the liberalization of international capital movements steer the savings towards immediate profits which no longer have any relation to production, and we are operating in a 'casino' economy, where the financial flows are no longer in any way representative of the trade in goods or services. I think, therefore, that we should think carefully. After all, as has just been said, a universal capital taxation mechanism serves a speculative purpose. We also need to consider what, today, is the justification of credit, and especially short-term credit, and we need to consider a new monetary agreement. This is why the Group of the European Radical Alliance is resolutely in favour of the single currency, and I would say that even without dwelling too much on its immediate social cost, though this remains an essential point as we see it. Over and above that social cost, however, we know that the move forward to the single currency is the only way for the European Union to bring about the adoption of a new international monetary agreement which, for us, has to be the prerequisite for the conversion of the present World Trade Organization into a World Economic and Trade Organization. By subjecting the latter organization to that prerequisite this would allow the introduction of a social clause, a clause relating to the placing of export products on the internal market, an environmental clause and a democratic label. Berthu Mr President, the Garriga Polledo report supplies an excellent analysis of the international money markets and their possibilities with regard to regulation, but it also contains a considerable surprise. It hardly mentions the supposed stabilizing virtues of the single currency at world level. Yet the Commission's arguments always include, prominently faced, a paragraph from which we learn that 'the single currency will contribute to greater worldwide monetary stability' . It is hard to understand exactly what this statement is supposed to mean, and the Garriga Polledo report provides no enlightenment. The explanatory statement, in fact, contains not a single word on the subject, while the motion for a resolution itself contains one brief reference, which is expressed as a hope rather than an argument. In point of fact, as the report rightly stresses, the best way for a country to arrive at stable exchange rates is still for it to implement sound economic policies, without tolerances designed to facilitate that stability. In order to achieve that objective, there is no real need for the crutch of the single currency - all that is needed is courage and discipline. On the other hand, the report does in fact disclose a disadvantage of monetary union. By abolishing exchange rates within the Euro zone, it will cause the disappearance of an indicator and the yardstick for the quality of national administration. This indicator will have to be replaced by the instructions of the Council of Ministers, or the Stability Council, possibly backed up by sanctions, which will create problems of implementation far more difficult and conflict-ridden than the impersonal warnings of market forces. However, it may unfortunately occur that currencies are lastingly undervalued or overvalued relative to the real parities of purchasing power. In this case, international monetary cooperation should be a possibility, in order to bring the exchange rate back within an acceptable band, and it could be coordinated by the IMF, as the report rightly indicates. But we all know that the success of this method cannot be guaranteed: the major powers are not necessarily going to be prepared to subordinate their national economic policies to the objective of maintaining their exchange rate parities, and in any case the capital flows are very often stronger than any intentions that may be expressed. In these circumstances, once again, we deplore the fact that countries which are the victims of monetary dumping cannot, ultimately, protect themselves by means of compensatory monetary sums. Whether this dumping is the result of the deliberate intent of a third party or of the mechanical interplay of market forces at a given moment makes no difference. The compensatory sums would reestablish their competition and even the possibility of their implementation would surely be sufficient to produce a substantial deterrent effect. They could also be useful in relations between European States and third countries, and within a reconstructed European monetary system, as an ultimate deterrent intended to reinforce discipline. We regret the fact that the latest GATT negotiations do not include a monetary section, and we hope, Mr President, that further discussions on this subject will begin as soon as possible. Schreiner Mr President, I too am grateful to the rapporteur for this very well presented and very effective report. I should like to begin with one or two points of interest: the report contains some introductory remarks which provide information on the deregulation of domestic financial markets, the associated trend towards the globalization of financial and capital markets, and the liberalization of capital movements. It also states that a free capital market ensures that savings are assigned to the most productive investments. Some very interesting comments are made in relation to the overvaluation of the US dollar in the international economy, whereby 60 % of world currency reserves and half of all private financial wealth are invested in US dollars, even though the US economy accounts for only 20 % of total production and 14 % of world trade. This highlights the need for Europe to act. I certainly do not take the view that Europe's scope for taking action should be hampered by imposing a tax on speculation, as the Greens have once again proposed today: this would be tantamount to double taxation, since profits from such financial transactions will in any case be taxed as profit by the domestic financial institutions. To my mind, this report contains three important calls: the first is for a financial system to be established which avoids inflationary or deflationary cycles, achieves a healthy balance of payments, and leads to lower interest rates and sustained, high-quality economic growth. The second call, to curb the predominance of the US dollar, is without doubt justified, and the single currency might be of assistance here. If all the Member States take part, the convergence criteria are met, and the citizens of Europe put their trust in the new currency, the euro could perhaps become strong enough to act as a third 'international currency' . It is also important to bear in mind external debt and the developing countries. I do not think there is any point, in this context, in writing off financial positions as debts which will never be repaid. Overall, therefore, I think the report is a constructive one: it provides a good starting-point for further discussion in the various European forums. Randzio-Plath Mr President, this report is a most timely one, in that immediately prior to the April meeting of the IMF and the World Bank, it once again calls for an improvement in international monetary cooperation. The embryonic reforms of the international financial institutions have not been enough to establish an effective early-warning system, to ensure better intergovernmental harmonization, and to involve not only the G7 industrialized nations but also other countries in institutionalized cooperation. It is therefore right to make these calls now, in view of the globalization of markets and the weakness of cooperation in this area between the governments of the major industrialized nations, as well as the technical advances in communications and the massive increase in capital movements, only 4 % of which are accounted for by the real economy and real trade. It can thus be said that a new Bretton Woods system is even more urgently needed now than was the case when it was originally introduced. We are all aware that such a system is no longer possible today, but because the rules of the game have changed, I believe, like my colleagues and the rapporteur, that European monetary union could allow us to apply some kind of plan for target zones or even improve monetary cooperation in this direction, once the euro becomes the second international reserve currency, since it will then be easier to see the true value of this currency. Because after all, as the report makes clear, the US dollar accounts for 60 % of world currency reserves, which in no way corresponds to the importance of the US economy. The European Parliament has already quite rightly called on the Commission several times to produce a white paper on monetary developments. Today we are going further, and also asking for an assessment of the effects of monetary union on the stability of the international financial system. This is particularly important now that there are new financial instruments on this market which can influence monetary planning, for example the blueprint for the future European Central Bank, since these new financial instruments will mean that it becomes harder to assess and manage the money supply than has hitherto been the case. I therefore believe that we are quite right to call on the Commission to carry out further studies in this area. What is most important of all, however, is to establish a UN Economic Council along the lines of the UN Security Council, in order to institutionalize monetary cooperation. Clearly, it will otherwise be impossible to reconcile the different economic and financial interests of the large industrialized nations and the threshold countries, and this must be done if monetary policy is to take due account both of the requirements of countries and their peoples and the need for financial discipline. Rönnholm Mr President, in my opinion Parliament acted responsibly when it gave the Committee on Economic Affairs the opportunity to draw up this report. The economic cooperation which has developed has benefited nations and their citizens. The exchange of raw materials and product information has fostered development. The use of energy provides a good analogy for this process. Skill in exploiting energy, consumption of and trade in raw materials have benefitted us to a great extent. Only the excessive use of energy and its various forms are causing us problems. In the same way we may say that the liberalization of capital is positive in itself; however, the enlargement of foreign exchange markets has assumed ungovernable proportions. When markets grow twenty-fold in ten years and daily currency movements have doubled in relation to currency reserves, we may guess what type of risks this may bring. Our new technology makes it possible to carry out transactions at the speed of light and when speculations are added to this problem, we are really endangering the conditions for international free trade. Common sense dictates that a change must be made. It is also clear that the European single currency would facilitate the necessary cooperation with Japan and the United States on setting rules for the currency markets. There is frequent talk of the confidence of the citizen. This is also an essential condition for all democracy and market economy. Therefore the world democratic governments must bring the currency markets under control. There is no time to waste; regulation is needed above all to protect ordinary citizens and their jobs. Their work depends on the real economy, not on speculation. Small businesses in small countries suffer especially from uncertain currency markets. They do not have the resources or the opportunity to protect themselves. Small countries also have to increase their currency reserves many times over compared to large countries. EMU would in these circumstances be a healthy development. It would reduce the need for these reserves and yet at the same time could increase creditability. It is quite true that the regulation and taxation of capital movements need to be harmonised. If the movement of capital is free, such taxation should be made compulsory. Capital cannot be given a free ride. It must bear the social responsibility of paying tax. But if progress is to be made in this matter we must also support the Single European Currency. Only in this way will it be possible to move forward in this area. Hendrick Mr President, I start by congratulating Mr Garriga Polledo on the very comprehensive and technical report before us today. The international financial markets now play a very important role in the world economy. The deregulation of financial markets in many member countries has meant that trillions of pounds and dollars can now flow across international borders to seek a return for those investors. I congratulate Mr Garriga Polledo on identifying some of the major issues which affect the success or otherwise of those markets at the moment, in particular his reference to counter-cyclical action with respect to the booms and busts that the world economy has seen over many years. It is clear that what we need is sustainable positions across the globe whether it is in the United States, Europe, Japan or indeed in the developing world. It is clear as well that the actions of the market in the longer term will lead to lower interest rates which will make it cheaper to borrow for investment and in turn will create jobs. I also accept some of the analysis of Mr Garriga Polledo in terms of the fact that the international monetary system needs rules. I echo the words of Mr Rönnholm on that. In order to create those rules it needs an institutional framework. At the moment, as we see in Europe, the Bundesbank acts in the interest of the German economy. We are trying to create a system where we would have a European Central Bank acting in the interests of the European economy. We see a similar position with the US, the Japanese and the European markets acting to some extent on their own. What we need is a system which acts in terms of the global interest and international objectives. The only way we can do that is through rules and through international cooperation. I also accept some of the assertions by Mr Garriga Polledo about the damage that floating exchange rates can do. It can cause over-evaluation of currencies. I believe that the money markets are not necessarily the best judge of real economic performance, as we have seen with the exchange rate mechanism here in Europe. I do not necessarily believe either that intervention is the answer. What we need is a new direction. That new direction is cooperation. We need a framework which will be brought into existence after stage three of monetary union. I do not necessarily believe, as the rapporteur suggests, that the IMF and the World Bank are the best institutions to do that. But I agree that the G7 is not enough. What we need is to include the fast-growing economies of Asia in that process and, at the same time, look at how we can involve the developing world in that process. We need new multilateral procedures, we need cooperation because the success of the global economy and the livelihoods of many people around the world depend on it. Metten Mr President, at national level we accept that markets cannot function without rules imposed by national government. Whilst national markets still functioned primarily on a national scale this worked well enough. With the advent of the European Single Market the ability of national governments to continue imposing their own rules on markets was weakened. Much of the internal market programme was then targeted at reproducing at European level this ability of national governments to set the rules. On one level, however, the Member States were negligent. When capital movements were liberalized the advice of the European Parliament that instruments should be set up at European level to counter any undesired developments was ignored. With the globalization of capital movements, resulting from the predominance of liberal thinking and technological innovation, a worldwide capital market came into being which knows no rules but its own. In normal circumstances this seems to work reasonably well. But when these markets fall prey to speculation, there are manifestly no checks on the system. The tidal waves then unleashed do great damage to the economy, but governments collectively and the central banks have no power to do anything about it. The question is, should the political and nonfinancial business world resign itself to this and regard waves of speculation as merely a natural phenomenon, or not? My Group firmly believes that efforts must be made both to regulate the financial market and to create instruments whereby waves of speculation can be prevented or checked. The keys to this are closer cooperation between governments, especially those of the three main economic blocs, and the central banks and on the other hand the possible introduction of a tax on capital transactions. However tricky a tax of this kind might be, its introduction depends primarily on whether or not the necessary political will is there. Pious aspirations about reducing labour costs by taxing less can be realized in this way. It will certainly be easier than putting a man on the moon and far more useful. Katiforis Mr President, Mr Garriga Polledo has worked very conscientiously on a technically and politically difficult subject, and he deserves the congratulation of his colleagues, particularly for the broadmindedness with which he cooperated with his colleagues on the Subcommittee on Monetary Affairs. The same cannot be said about the subject of his report, the international financial markets. It is fashionable to hear, particularly from many on the opposite side of the House - though fortunately not from Mr Garriga Polledo himself - that we should be grateful to the international financial credit markets because they save us from the stupidity with which governments manage the economy. The international money markets are supposed to achieve this by penalizing governments with high interest rates, currency devaluation or the flight of capital if they pursue mistaken policies, in other words policies that seem to the markets to be inflationary, or, now that most of us are implementing anti-inflationary policies, ones that do not seem sufficiently so in the eyes of the markets. When the markets tame the budget deficits, they begin concerning themselves with broader issues such as the social state deficit forecast for the coming century, which we must also restrict or better still eliminate if they are to stop penalizing us with unjustifiably high interest rates. The rationale of the markets has almost gone too far. A few weeks ago, Wall Street started to fall, not because unemployment in the United States increased but because it fell. Think what would happen to us if unemployment began to fall in Europe! Fortunately, our conservative governments, with their employment policies, protect us from any such ill-omened development! Ladies and gentlemen, we ought to turn the picture upside down and, one day, count the disasters heaped upon the world's economy by the deregulation of the financial markets, as it is elegantly termed, or their untrammelled action as I would call it myself. They have created the Third World debt disaster. Has anyone counted how much hunger, how much backwardness, how much disease, how large an increase in infant mortality Third World countries have had to suffer in order to make up for that 'slight error' by the major banks? The deregulated money markets created the SLM scandal in the United States, a scandal involving hundreds of billions of dollars that taxpayers had to pay for. Similarly, a year ago they created the Mexico crisis even though Mexico implemented all the rules they had dictated to it. And here, European taxpayers have also had to pay their costs. Mr President, in today's political conditions the major conservative governments refuse to cooperate on monetary issues. From that point of view, it is just as well that Mr Garriga Polledo's report keeps the subject open and, in common with others among us, I too would like us to take another and more effective look at the issue of controlling the international money markets. Wulf-Mathies Mr President, the Commission welcomes Mr Garriga Polledo's report, which recommends greater international monetary and financial cooperation. This report has been perfectly timed to support the Commission in its efforts to improve international monetary cooperation. In the Commission's view, and as emphasized by the rapporteur, a stable national economic policy remains a necessary but not a sufficient condition for the stability of the international monetary system. Moreover, while the markets serve a useful purpose in imposing discipline, they can have destabilizing effects which need to be offset by international cooperation. The Commission therefore supports the proposal that monitoring procedures should be tightened up, and believes that the European Union's experience of multilateral procedures to monitor national budgets could be of assistance in this context, for example. As Mr Santer and Mr de Silguy have emphasized to the relevant international bodies, the IMF and the G7, increased cooperation on the macroeconomic policy front implies that all those concerned must agree on the objectives, and undertake to use the instruments which enable those objectives to be achieved. In the short term, this is above all a matter of improved monitoring and the creation of crisis prevention mechanisms. In the longer term, institutional reforms are needed to make it easier to step up international cooperation and enhance the coordination of macroeconomic policy. The Commission is therefore in favour of increased cooperation between the international institutions. One of the major challenges for international cooperation in the future will be to take more account of the interdependence not only between countries, but also between their policies. The House is also calling for the European Union to play a greater role in international cooperation and, via the Commission and the European Central Bank, to become a full member of the international institutions concerned. The Commission is willing to assume this role. The question of international cooperation in the monetary arena must also be considered in the light of monetary union, which will have far-reaching consequences for the international monetary system. It should be stressed here that the introduction of economic and monetary union should considerably improve international monetary cooperation. First of all, the increased role of the euro as an international currency will help stabilize the international monetary system and, secondly, monetary union should give the European Union a weight and influence more in keeping with its economic importance than has previously been the case. In this way, the Union would also be in a better position to coordinate monetary policy with its international partners and to bring about a reform of the international monetary system. To achieve this, however, the European Union must adopt a firm and steadfast attitude towards its partners. The practical details of the legal framework governing the monetary union's external responsibilities are currently being considered: clarification is needed of the monetary union's responsibility for external economic, financial and exchange-rate policy, and the functions of the relevant institutions need to be laid down. It also remains to be decided how the monetary union could and should be represented in the international institutions. The Commission's services are looking into these issues at present, and Mr de Silguy, who is unfortunately unable to be here today, will keep you informed of the progress made, as he has done in the past. Until such time as a new framework for international monetary and financial coordination has been defined, however, it would seem premature to comment on a financial support mechanism to minimize exchange-rate fluctuations. Finally, as far as financial monitoring is concerned, the Commission will continue to carry out its existing responsibilities. President The debate is closed. The vote will take place today at 12.00. Economic and Monetary Union President The next item is the report (A4-0073/96) by Mr Walter, on behalf of the Committee on Regional Policy, on Economic and Monetary Union and economic and social cohesion. Walter Mr President, Commissioner, the development of the European Union has until now revolved primarily around progress in the economic sector, and the moves towards economic and monetary union represent another important milestone on this road. And yet, if the nations of Europe are to continue to coexist in peace, they must be guided by more ambitious goals. This includes bringing the EU Member States closer together in terms of living standards and opportunities in the various regions. Despite all the efforts which have been made, regional disparities in income, infrastructure and employment levels are still substantial: by comparison with Europe's ten most prosperous regions, the ten poorest regions have an average per capita income which is three and a half times lower, and an unemployment rate which is six times higher. Economic and monetary union is a crucial and, we believe, an inalienable part of Europe's future; when it is completed, the advantages will be felt not only in prosperous regions, but in peripheral and disadvantaged ones too. It will also help to improve the effectiveness of the Structural Funds, the Union's most important instrument of economic and social cohesion. But both before and after EMU, the overarching aim - cohesion - must be borne in mind, and we must ensure that the effects of economic and monetary union and of cohesion policy are complementary, not contradictory. It is therefore necessary to draw up a cohesion strategy laying down specific stages, as happened in the case of economic and monetary union. In practice, this means that once EMU is up and running, we must first do our utmost to ensure that its foundations are stable and lasting. This will require both the participating countries and the pre-in countries to act responsibly. Secondly, however, we shall need to be supportive of those who are pressing on steadfastly with their sometimes difficult task of meeting the criteria. This could perhaps be done by means of an extended instrument of solidarity like the new Cohesion Fund. We are definitely not thinking here of financial compensation: an equal measure of solidarity must be shown by the ins and the outs. Furthermore, if economic and social cohesion is to make progress, we shall have to define more clearly and realistically than in the past what we mean by cohesion and the adaptation of living standards in the Union. We should consider using less rigid indicators than GDP, as at present: unemployment statistics should be included. However, in view of the strong trend towards migration, especially in rural areas, the economic summary should also include as a criterion the actual number of jobs in a region, in other words the rate of employment. Key factors are sustainable growth, changes in economic trends, action to prevent exclusion, and the state of infrastructure, including social and cultural infrastructure. These indicators should also be used in developing and focusing the Union's most important instrument of cohesion, the Structural Funds, and the challenges which lie ahead of them. The Structural Funds should therefore be reformed in order to support efforts to achieve cohesion; in other words, even in the event of the enlargement of the EU, the catching-up process of disadvantaged regions must still be possible and affordable. We should also have the courage to set deadlines by which tangible progress is to be made. The self-confidence shown when EMU was introduced must not be dismissed as unattainable in the case of cohesion. A true cohesion policy, designed to dovetail with economic and monetary union and to absorb any adverse effects, will entail greater coordination in all policy areas which have a bearing on economic and social cohesion. In a European Union with 17 million unemployed, employment policy must take top priority. We are therefore calling for an explicit article on employment to be incorporated into the Maastricht Treaty. An active, sustainable environmental policy must also be put in place: a healthy environment will make a major contribution to the quality of life in the regions and their attractiveness. In terms of social policy, everyone must pull together to avoid the distortions caused by social dumping - and I say everyone, to include in particular the country which has until now been opting out. If we add cross-border regional planning, a coherent European industrial and research policy, and the safeguarding of public services which are accessible to all, what emerges is a cohesion policy worthy of the name. Europe will have a bright future if it can combine solidarity with reliability. Policies to create economic and social cohesion will be the litmus test of a peaceful and united Europe. Spindelegger Mr President, ladies and gentlemen, the long-term goal must inevitably be for all Member States to take part in monetary union, and in that respect there is no conflict with the goals of greater economic and social cohesion. Problems are more likely to arise in the short to medium term, if one acknowledges the possibility that employment might be adversely affected in countries which are not yet taking part in monetary union. On the other hand, such short- and medium-term considerations may well have to take account of distortions or even disruptions of the internal market. It has to be said, however, that adverse effects on employment certainly do not occur in one direction only. We experienced this in Austria when, in 1995, our Italian neighbours devalued the lira. It was not the case that adverse effects on employment were immediately felt in Italy - far from it. Austria, a country with a hard currency, was the one to suffer, when millions of schillings' worth of purchasing power poured into Italy from Austria. All I am saying is that there is no one-way street here and no automatic response, but that the effects are of many kinds and must all be taken into account. I therefore believe that it is illogical at this stage to discuss the basis for monetary union and to ask whether the convergence criteria are correct or, as you mentioned, whether or not we need a new European industrial policy, and the inclusion of employment in the Treaty. None of this goes far enough. Our number one concern must be to forestall any distortions in the single market by creating a new European monetary system - an EMS II - which seeks to keep real exchange rates within a certain range. Secondly, when overhauling the Structural Funds, I think it is important to focus on projects which are needed in order for countries not yet taking part in monetary union to meet the convergence criteria. And thirdly, private investment must be stimulated, since this alone can create truly secure jobs. McCarthy Mr President, I am very pleased we have been able to have this debate today following the initiative of my own political group to draw up an own initiative report on EMU and economic and social cohesion. The reason we wanted this was because in all the discussions we have had on EMU and the single currency, Member States and experts simply have not dealt with the regional issues. They have only dealt with the macro-economic issues at the level of a national economy and ignored the regional impact of EMU, or have ignored the relationship between EMU and cohesion policy. People in our industrial, declining, peripheral and rural regions need to know that EMU will have some benefit for them. Cohesion is the overriding objective in our Treaty, it stands over and above EMU and that is why we believe that EMU and its processes and stages need to be scrutinized to see how they contribute to cohesion policy. In this report my group has pledged its support for EMU. We recognize the advantages due to the cuts in transaction costs, due to the harmonization of interest rates and the growth in employment potential of EMU; but we also have to say that we do not believe necessarily that EMU and social cohesion are mutually reinforcing. They are certainly not mutually exclusive, as Mr Walter has said in his report,
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