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.

The EU presidency agenda in terms of economic and budgetary policy

Pushing on with European Economic and Monetary Union

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:

• Budgetary coordination procedures are to be applied efficiently and effectively. Stability and convergence programmes are to be assessed in a simplified procedure, by allowing several programmes to be discussed in a single package and highlighting particularities.
• It must be ensured that the Stability and Growth Pact continues to be applied in an economically prudent manner. Attention will thus be paid to the long-term sustainability of the Member States' public finances. Here, the Council will draw on the sustainability report submitted by the Commission and the Council's subsequent conclusions.
• Country-specific recommendations are to be geared towards strengthening the long-term sustainability of economic development and competitiveness in the Member States. Of no less importance, to ensure the success of structural reforms, they must be favourably sequenced and synchronised with macroeconomic policy.

Please also see: Workshop "Fiscal policy Challenges in Europe" 22.03. - 23.03.2007