2.3 The other building blocks of EMU are in place

In addition to work on technical aspects of the changeover, considerable efforts have been made towards developing the policy framework required to ensure that EMU is successful and sustainable. The Amsterdam Council of June 1997 agreed upon a resolution on the ERM2, the Stability and Growth Pact and a European Council Resolution on Growth and Employment. In addition, the design of euro coins was agreed completing an earlier accord on the design of notes.

A new exchange rate mechanism (ERM2): the new mechanism will derive from the existing ERM. Participation will be voluntary. The euro will be the anchor of the ERM 2, while "pre-in" currencies will be linked directly and bilaterally to the anchor in a "hub-and-spokes" arrangement. Accordingly, central parities will be set for the "pre-in" currencies against the euro with a relatively wide (?15%) standard fluctuation band.

Intervention support will, in principle, be automatic and unlimited at the margin. Central parities will be reviewed on a continuous basis and realignments will take place in a timely manner. The establishment of closer exchange rate links, contingent on the achievement of convergence, within the ERM 2 will only be possible subject to maintenance of the price stability objective in the euro area and in the Member State concerned.

The stability and growth pact was formally adopted by the Ecofin Council in June 1997. Sound government finances are crucial to preserving stable economic conditions in the Member States and in the Community. The emphasis is placed on the prevention of unsound budgetary positions via the establishment of early-warning procedures. Euro area Member States will be obliged to submit stability programmes and will be subject to agreed sanctions for failure to act effectively on excessive deficits. In the surveillance procedure, the other, non-euro, Member States will be obliged to submit convergence programmes only.

A resolution on Growth and Employment: the European Council Resolution on Growth and Employment responds to the need to keep employment at the top of the EU political agenda. The Resolution seeks to strengthen the links between EMU and economic growth and employment creation. The overall objective is to develop a skilled, trained and adaptable labour force while making labour markets responsive to economic change.

In this context, it is important that structural reform be comprehensive in scope rather than limited or occasional measures. Reflecting the inter-relationships between economic and social policies, structural reform will extend to national social protection systems which will be modernised so as to contribute to the achievement of employment objectives. In order to ensure that social cohesion is maintained, full use will be made of opportunities for dialogue with the social partners

 
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