Economic policy is coordinated between the Member States. In particular against the background of the Single Market and Economic and Monetary Union, it is important that economic policy be viewed as a shared concern and be closely coordinated.
One of the major instruments in this policy area is the so-called Lisbon Strategy. This strategy seeks to enhance growth and employment and strengthen the European Union's competitiveness through reforms at national and Community level.
Further central instruments are the Broad Economic Policy Guidelines and the employment policy guidelines. These define the medium-term priorities for the European Union and its Member States.
The Member States have undertaken to pursue a stable and responsible budgetary policy. The EC Treaty and the Stability and Growth Pact together provide the appropriate legal framework for such fiscal policy.
These stipulate namely that the Member States’ annual budget deficit may not exceed three per cent of their gross domestic product. In March 2005, the European Council decided to develop the Pact further in order to strengthen the link between the Pact and growth and employment. The amended Pact now takes into account country-specific factors such as economic and structural reforms. Another new feature is the obligation to use periods of positive economic performance to consolidate the budget in order to create room for manoeuvre during less favourable periods.
Enlarging the euro area
Slovenia introduced the euro at the beginning of 2007. The Council will oversee the implementation of all measures necessary for the smooth introduction of the common currency. It may be that some Member States apply for membership of the European Exchange Rate Mechanism (ERM II), while others could fulfil the requirements for adopting the euro.
The German presidency will provide close support to all of the EU Member States in the run up to their adoption of the euro. It will ensure, in particular, a rigorous and prompt appraisal of any convergence reports and applications for participation in ERM II by the Commission and the ECB on the basis of the criteria set out in the EC Treaty, including those relating to stable macroeconomic development and to a high degree of sustainable convergence.
Towards a targeted fiscal and economic policy in the European Union
An enlarged European Union needs sleek and well mapped-out processes for efficient fiscal and economic policy coordination. Moreover, these processes must be transparent and understandable for the greater public. In light of this, the German presidency will be guided by the following considerations:
Please also see: Workshop "Fiscal policy Challenges in Europe" 22.03. - 23.03.2007