Extracts from the Treaty establishing the European Community

Author:Secretariat General
Profession:Council of the European Union
Pages:10-31
SUMMARY

Part One Principles- Article 2- Article 4- Article 8- Part Three Community Policies- Title VII Economic and Monetary Policy- Chapter 1 Economic Policy Article 98- Article 99- Article 100- Article 101- Article 102- Article 103- Article 104 Chapter 2 Monetary Policy- Article 10s- Article 111,- Article 106- Article 107- Article 108- Article 109 Article 110- Article 111- Chapter 3 Institutional Provisions- Article 112- Article 113- Article 114- Article 115 Chapter 4 Transitional Provisions- Article 116- Article 117- Article 118- Article 119- Article 120- Article 121 Article 122- Article 122- Article 124-

 
INDEX
CONTENT

Page 10

Part One Principles
Article 2

The Community shall have as its task, by establishing a common market and an economic and monetary union and by implementing common policies or activities referred to in Articles 3 and , to promote throughout the Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a high degree of competitiveness and convergence of economic performance, a high level of protection and improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.

Article 4
  1. For the purposes set out in Article 2, the activities of the Member States and the Community shall include, as provided in this Treaty and in accordance with the timetable set out therein, the adoption of an economic policy which is based on the close coordination of Member States' economic policies, on the internal market and on the denition of common objectives, and conducted in accordance with the principle of an open market economy with free competi tion.

  2. Concurrently with the foregoing, and as provided in this Treaty and in accordance with the timetable and the procedures set out therein, these activ ities shall include the irrevocable xing of exchange rates leading to the intro duction of a single currency, the ecu, and the denition and conduct of a single monetary policy and exchange rate policy the primary objective of both of which shall be to maintain price stability and, without prejudice to this object ive, to support the general economic policies in the Community, in accordance with the principle of an open market economy with free competition.

  3. These activities of the Member States and the Community shall entail compliance with the following guiding principles: stable prices, sound public nances and monetary conditions and a sustainable balance of payments.Page 11

Article 8

A European system of central banks (hereinafter referred to as 'ESCB') and a European Central Bank (hereinafter referred to as 'ECB') shall be established in accordance with the procedures laid down in this Treaty; they shall act within the limits of the powers conferred upon them by this Treaty and by the Statute of the ESCB and of the ECB (hereinafter referred to as 'Statute of the ESCB') annexed thereto.

Part Three Community Policies
Title VII Economic and Monetary Policy
Chapter 1 Economic Policy
Article 98

Member States shall conduct their economic policies with a view to contributing to the achievement of the objectives of the Community, as dened in Article 2, and in the context of the broad guidelines referred to in Article 99(2). The Member States and the Community shall act in accordance with the principle of an open market economy with free competition, favouring an ecient allocation of resources, and in compliance with the principles set out in Article .

Article 99
  1. Member States shall regard their economic policies as a matter of common concern and shall coordinate them within the Council, in accordance with the provisions of Article 98.

  2. The Council shall, acting by a qualied majority on a recommendation from the Commission, formulate a draft for the broad guidelines of the eco nomic policies of the Member States and of the Community, and shall report its ndings to the European Council. The European Council shall, acting on the basis of the report from the Council, discuss a conclusion on the broad guidelines of the economic policies of the Member States and of the Community.Page 12 On the basis of this conclusion, the Council shall, acting by a qualied majority, adopt a recommendation setting out these broad guidelines. The Council shall inform the European Parliament of its recommendation.

  3. In order to ensure closer coordination of economic policies and sustained convergence of the economic performances of the Member States, the Council shall, on the basis of reports submitted by the Commission, monitor economic developments in each of the Member States and in the Community as well as the consistency of economic policies with the broad guidelines referred to in paragraph 2, and regularly carry out an overall assessment.

    For the purpose of this multilateral surveillance, Member States shall forward information to the Commission about important measures taken by them in the eld of their economic policy and such other information as they deem necessary.

  4. Where it is established, under the procedure referred to in paragraph 3, that the economic policies of a Member State are not consistent with the broad guidelines referred to in paragraph 2 or that they risk jeopardising the proper functioning of economic and monetary union, the Council may, acting by a qualied majority on a recommendation from the Commission, make the necessary recommendations to the Member State concerned. The Council may, acting by a qualied majority on a proposal from the Commission, decide to make its recommendations public.

    The President of the Council and the Commission shall report to the European Parliament on the results of multilateral surveillance. The President of the Council may be invited to appear before the competent committee of the European Parliament if the Council has made its recommendations public.

  5. The Council, acting in accordance with the procedure referred to in Article 252, may adopt detailed rules for the multilateral surveillance procedure referred to in paragraphs 3 and 4 of this Article.

Article 100
  1. Without prejudice to any other procedures provided for in this Treaty, the Council, acting by a qualied majority on a proposal from the Commission, may decide upon the measures appropriate to the economic situation, in par ticular if severe diculties arise in the supply of certain products.

  2. Where a Member State is in diculties or is seriously threatened with severe diculties caused by natural disasters or exceptional occurrences beyond its control, the Council, acting by a qualied majority on a proposal from the Commission, may grant, under certain conditions, Community nancialPage 13 assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision taken.

Article 101
  1. Overdraft facilities or any other type of credit facility with the ECB or with the central banks of the Member States (hereinafter referred to as 'national central banks') in favour of Community institutions or bodies, central govern ments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the ECB or national central banks of debt instruments.

  2. Paragraph i shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the ECB as private credit institutions.

Article 102
  1. Any measure, not based on prudential considerations, establishing privil eged access by Community institutions or bodies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States to nancial institutions, shall be pro hibited.

  2. The Council, acting in accordance with the procedure referred to in Article 252, shall, before 1 January 1994, specify denitions for the application of the prohibition referred to in paragraph 1.

Article 103
  1. The Community shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual nancial guarantees for the joint execution of a specic project. A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State, without prejudice to mutual nancial guarantees for the joint execution of a specic project.Page 14

  2. If necessary, the Council, acting in accordance with the procedure referred to in Article 252, may specify denitions for the application of the prohibition referred to in Article 101 and in this Article.

Article 104
  1. Member States shall avoid excessive government decits.

  2. The Commission shall monitor the development of the budgetary situation and of the stock of government debt in the Member States with a view to identi fying gross errors. In particular it shall examine compliance with budgetary discipline on the basis of the following two criteria:

    (a) whether the ratio of the planned or actual government decit to gross domestic product exceeds a reference value, unless:

    - either the ratio has declined substantially and continuously and reached a level that comes close to the reference value,

    - or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value;

    (b) whether the ratio of government debt to gross domestic product exceeds a reference value, unless the ratio is suciently diminishing and approaching the reference value at a satisfactory pace.

    The reference values are specied in the Protocol on the excessive decit procedure annexed to this Treaty.

  3. If a Member State does not full the requirements under one or both of these criteria, the Commission shall prepare a report. The report of the Com mission shall also take into account whether the government decit exceeds government investment expenditure and take into account all other relevant factors, including the medium-term economic and budgetary position of the Member State.

    The Commission may also prepare a report if, notwithstanding the fullment of the requirements under the criteria, it is of the opinion that there is a risk of an excessive decit in a Member State.

    4 . The Committee provided for in Article 114 shall formulate an opinion on the report of the Commission.

    5 . If the Commission considers that an excessive decit in a Member State exists or may occur, the Commission shall address an opinion to the Council.

  4. The Council shall, acting by a qualied majority on a recommendation from the Commission, and having considered any observations which the MemberPage 15 State concerned may wish to make, decide after an overall assessment whether an excessive decit exists.

  5. Where the existence of an excessive decit is decided according to para graph 6, the Council shall make recommendations to the Member State con cerned with a view to bringing that situation to an end within a given period. Subject to the provisions of paragraph 8, these recommendations shall not be made public.

  6. Where it establishes that there has been no eective action in response to its recommendations within the period laid down, the Council may make its recommendations public.

  7. If a Member State persists in failing to put into practice the recommenda tions of the Council, the Council may decide to give notice to the Member State to take, within a specied time limit, measures for the decit reduction which is judged necessary by the Council in order to remedy the situation. In such a case, the Council may request the Member State concerned to submit reports in accordance with a specic timetable in order to examine the adjustment eorts of that Member State.

  8. The rights to bring actions provided for in Articles 226 and 227 may not be exercised within the framework of paragraphs 1 to 9 of this Article.

  9. As long as a Member State fails to comply with a decision taken in accord ance with paragraph 9, the Council may decide to apply or, as the case maybe, intensify one or more of the following measures:

    - to require the Member State concerned to publish additional information, to be specied by the Council, before issuing bonds and securities,

    - to invite the European Investment Bank to reconsider its lending policy towards the Member State concerned,

    - to require the Member State concerned to make a non-interest-bearing deposit of an appropriate size with the Community until the excessive decit has, in the view of the Council, been corrected,

    - to impose nes of an appropriate size.

    The President of the Council shall inform the European Parliament of the decisions taken.

  10. The Council shall abrogate some or all of its decisions referred to in para graphs 6 to 9 and 11 to the extent that the excessive decit in the Member State concerned has, in the view of the Council, been corrected. If the Council has previously made public recommendations, it shall, as soon as the decision under paragraph 8 has been abrogated, make a public statement that an excess ive decit in the Member State concerned no longer exists.Page 16

  11. When taking the decisions referred to in paragraphs 7 to 9,11 and 12, the Council shall act on a recommendation from the Commission by a majority of two thirds of the votes of its members weighted in accordance with Art icle 205(2), excluding the votes of the representative of the Member State con cerned.

  12. Further provisions relating to the implementation of the procedure described in this article are set out in the Protocol on the excessive decit pro cedure annexed to this Treaty.

    The Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the ECB, adopt the appropriate provisions which shall then replace the said Protocol.

    Subject to the other provisions of this paragraph, the Council shall, before 1 January 1994, acting by a qualied majority on a proposal from the Commission and after consulting the European Parliament, lay down detailed rules and denitions for the application of the provisions of the said Protocol.

Chapter 2 Monetary Policy
Article 10s
  1. The primary objective of the ESCB shall be to maintain price stability. Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community as laid down in Article 2. The ESCB shall act in accordance with the principle of an open market economy with free competition, favouring an ecient allocation of resources, and in compliance with the principles set out in Article .

  2. The basic tasks to be carried out through the ESCB shall be:

- to dene and implement the monetary policy of the Community,

- to conduct foreign-exchange operations consistent with the provisions of

Article 111,

- to hold and manage the ocial foreign reserves of the Member States,

- to promote the smooth operation of payment systems.

  1. The third indent of paragraph 2 shall be without prejudice to the holding and management by the Governments of Member States of foreign-exchange working balances.Page 17

  2. The ECB shall be consulted:

    - on any proposed Community act in its elds of competence,

    - by national authorities regarding any draft legislative provision in its elds of competence, but within the limits and under the conditions set out by the Council in accordance with the procedure laid down in Article 107(6).

    The ECB may submit opinions to the appropriate Community institutions or bodies or to national authorities on matters in its elds of competence.

  3. The ESCB shall contribute to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the nancial system.

  4. The Council may, acting unanimously on a proposal from the Commission and after consulting the ECB and after receiving the assent of the European Parliament, confer upon the ECB specic tasks concerning policies relating to the prudential supervision of credit institutions and other nancial institutions with the exception of insurance undertakings.

Article 106
  1. The ECB shall have the exclusive right to authorise the issue of banknotes within the Community. The ECB and the national central banks may issue such notes. The banknotes issued by the ECB and the national central banks shall be the only such notes to have the status of legal tender within the Community.

  2. Member States may issue coins subject to approval by the ECB of the volume of the issue. The Council may, acting in accordance with the procedure referred to in Article 252 and after consulting the ECB, adopt measures to harmonise the denominations and technical specications of all coins intended for circulation to the extent necessary to permit their smooth circulation within the Community.

Article 107
  1. The ESCB shall be composed of the ECB and of the national central banks.

  2. The ECB shall have legal personality.

  3. The ESCB shall be governed by the decision-making bodies of the ECB which shall be the Governing Council and the Executive Board.

  4. The Statute of the ESCB is laid down in a Protocol annexed to this Treaty.

  5. Articles 5.1, 5.2, 5.3,17,18,19.1, 22, 23, 24, 26, 32.2, 32.3, 32.4, 32.6, 33.1(a) and 36 of the Statute of the ESCB may be amended by the Council, acting either by a qualied majority on a recommendation from the ECB and after consult-Page 18ing the Commission or unanimously on a proposal from the Commission and after consulting the ECB. In either case, the assent of the European Parliament shall be required.

  6. The Council, acting by a qualied majority either on a proposal from the Commission and after consulting the European Parliament and the ECB or on a recommendation from the ECB and after consulting the European Parliament and the Commission, shall adopt the provisions referred to in Articles , .,19.2, 20, 28.1, 29.2, 30.4 and 34.3 of the Statute of the ESCB.

Article 108

When exercising the powers and carrying out the tasks and duties conferred upon them by this Treaty and the Statute of the ESCB, neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any Government of a Member State or from any other body. The Community institutions and bodies and the Governments of the Member States undertake to respect this principle and not to seek to influence the members of the decisionmaking bodies of the ECB or of the national central banks in the performance of their tasks.

Article 109

Each Member State shall ensure, at the latest at the date of the establishment of the ESCB, that its national legislation including the statutes of its national central bank is compatible with this Treaty and the Statute of the ESCB.

Article 110
  1. In order to carry out the tasks entrusted to the ESCB, the ECB shall, in accordance with the provisions of this Treaty and under the conditions laid down in the Statute of the ESCB:

    - make regulations to the extent necessary to implement the tasks dened in Article 3.1, rst indent, Articles 19.1, 22 and 25.2 of the Statute of the ESCB and in cases which shall be laid down in the acts of the Council referred to in Article 107(6),

    - take decisions necessary for carrying out the tasks entrusted to the ESCB under this Treaty and the Statute of the ESCB,

    - make recommendations and deliver opinions.Page 19

  2. A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States. Recommendations and opinions shall have no binding force.

    A decision shall be binding in its entirety upon those to whom it is addressed.

    Articles 253, 254 and 256 shall apply to regulations and decisions adopted by the ECB.

    The ECB may decide to publish its decisions, recommendations and opinions.

  3. Within the limits and under the conditions adopted by the Council under the procedure laid down in Article 107(6), the ECB shall be entitled to impose nes or periodic penalty payments on undertakings for failure to comply with obligations under its regulations and decisions.

Article 111
  1. By way of derogation from Article 300, the Council may, acting unan imously on a recommendation from the ECB or from the Commission, and after consulting the ECB in an endeavour to reach a consensus consistent with the objective of price stability, after consulting the European Parliament, in accordance with the procedure in paragraph 3 for determining the arrange ments, conclude formal agreements on an exchange rate system for the ecu in relation to non-Community currencies. The Council may, acting by a qualied majority on a recommendation from the ECB or from the Commission, and after consulting the ECB in an endeavour to reach a consensus consistent with the objective of price stability, adopt, adjust or abandon the central rates of the ecu within the exchange rate system. The President of the Council shall inform the European Parliament of the adoption, adjustment or abandonment of the ecu central rates.

  2. In the absence of an exchange rate system in relation to one or more non- Community currencies as referred to in paragraph 1, the Council, acting by a qualied majority either on a recommendation from the Commission and after consulting the ECB or on a recommendation from the ECB, may for mulate general orientations for exchange rate policy in relation to these cur rencies. These general orientations shall be without prejudice to the primary objective of the ESCB to maintain price stability.

  3. By way of derogation from Article 300, where agreements concerning monetary or foreign-exchange regime matters need to be negotiated by the Community with one or more States or international organisations, the Coun cil, acting by a qualied majority on a recommendation from the Commission and after consulting the ECB, shall decide the arrangements for the negotiation and for the conclusion of such agreements. These arrangements shall ensurePage 20 that the Community expresses a single position. The Commission shall be fully associated with the negotiations. Agreements concluded in accordance with this paragraph shall be binding on the institutions of the Community, on the ECB and on Member States.

  4. Subject to paragraph 1, the Council, acting by a qualied majority on a proposal from the Commission and after consulting the ECB, shall decide on the position of the Community at international level as regards issues of particular relevance to economic and monetary union and on its representation, in compliance with the allocation of powers laid down in Articles 99 and 105.

  5. Without prejudice to Community competence and Community agreements as regards economic and monetary union, Member States may negotiate in international bodies and conclude international agreements.

Chapter 3 Institutional Provisions
Article 112
  1. The Governing Council of the ECB shall comprise the members of the Executive Board of the ECB and the Governors of the national central banks.

  2. (a) The Executive Board shall comprise the President, the Vice-President and four other members.

(b) The President, the Vice-President and the other members of the Executive Board shall be appointed from among persons of recognised standing and professional experience in monetary or banking matters by common accord of the Governments of the Member States at the level of Heads of State or Government, on a recommendation from the Council, after it has consulted the European Parliament and the Governing Council of the ECB.

Their term of oce shall be eight years and shall not be renewable.

Only nationals of Member States maybe members of the Executive Board.

Article 113
  1. The President of the Council and a member of the Commission may participate, without having the right to vote, in meetings of the Governing Council of the ECB.Page 21

    The President of the Council may submit a motion for deliberation to the Governing Council of the ECB.

  2. The President of the ECB shall be invited to participate in Council meetings when the Council is discussing matters relating to the objectives and tasks of the ESCB.

  3. The ECB shall address an annual report on the activities of the ESCB and on the monetary policy of both the previous and current year to the European Parliament, the Council and the Commission, and also to the European Coun cil. The President of the ECB shall present this report to the Council and to the European Parliament, which may hold a general debate on that basis.

    The President of the ECB and the other members of the Executive Board may, at the request of the European Parliament or on their own initiative, be heard by the competent committees of the European Parliament.

Article 114
  1. In order to promote coordination of the policies of Member States to the full extent needed for the functioning of the internal market, a Monetary Committee with advisory status is hereby set up.

    It shall have the following tasks:

    - to keep under review the monetary and nancial situation of the Member States and of the Community and the general payments system of the Member States and to report regularly thereon to the Council and to the Commission,

    - to deliver opinions at the request of the Council or of the Commission, or on its own initiative for submission to those institutions,

    - without prejudice to Article 207, to contribute to the preparation of the work of the Council referred to in Articles 59, 60,99(2), (3), () and (), 100, 102,103,104,116(2), 117(6), 119,120,121(2) and 122(1),

    - to examine, at least once a year, the situation regarding the movement of capital and the freedom of payments, as they result from the application of this Treaty and of measures adopted by the Council; the examination shall cover all measures relating to capital movements and payments; the Com mittee shall report to the Commission and to the Council on the outcome of this examination.

    The Member States and the Commission shall each appoint two members of the Monetary Committee.Page 22

  2. At the start of the third stage, an Economic and Financial Committee shall be set up. The Monetary Committee provided for in paragraph 1 shall be dis solved.

    The Economic and Financial Committee shall have the following tasks:

    - to deliver opinions at the request of the Council or of the Commission, or on its own initiative for submission to those institutions,

    - to keep under review the economic and nancial situation of the Member States and of the Community and to report regularly thereon to the Coun cil and to the Commission, in particular on nancial relations with third countries and international institutions,

    - without prejudice to Article 207, to contribute to the preparation of the work of the Council referred to in Articles 59, 60, 99(2), (3), () and (), 100, 102, 103, 104, 105(6), 106(2), 107(5) and (6), 111, 119, 120(2) and (3), 122(2), 123(4) and (), and to carry out other advisory and preparatory tasks assigned to it by the Council,

    - to examine, at least once a year, the situation regarding the movement of capital and the freedom of payments, as they result from the application of this Treaty and of measures adopted by the Council; the examination shall cover all measures relating to capital movements and payments; the Com mittee shall report to the Commission and to the Council on the outcome of this examination.

    The Member States, the Commission and the ECB shall each appoint no more than two members of the Committee.

  3. The Council shall, acting by a qualied majority on a proposal from the Commission and after consulting the ECB and the Committee referred to in this Article, lay down detailed provisions concerning the composition of the Economic and Financial Committee. The President of the Council shall inform the European Parliament of such a decision.

  4. In addition to the tasks set out in paragraph 2, if and as long as there are Member States with a derogation as referred to in Articles 122 and 123, the Committee shall keep under review the monetary and nancial situation and the general payments system of those Member States and report regularly thereon to the Council and to the Commission.

Article 115

For matters within the scope of Articles 99(4), 104 with the exception of paragraph 14, 111, 121,122 and 123(4) and (), the Council or a Member State may request the Commission to make a recommendation or a proposal, as appro-Page 23priate. The Commission shall examine this request and submit its conclusions to the Council without delay.

Chapter 4 Transitional Provisions
Article 116
  1. The second stage for achieving economic and monetary union shall begin on 1 January 1994.

  2. Before that date:

    (a) each Member State shall:

    - adopt, where necessary, appropriate measures to comply with the pro hibitions laid down in Article 56 and in Articles 101 and 102(1),

    - adopt, if necessary, with a view to permitting the assessment provided for in subparagraph (b), multiannual programmes intended to ensure the lasting convergence necessary for the achievement of economic and monetary union, in particular with regard to price stability and sound public nances;

    (b) the Council shall, on the basis of a report from the Commission, assess the progress made with regard to economic and monetary convergence, in particu lar with regard to price stability and sound public nances, and the progress made with the implementation of Community law concerning the internal market.

  3. The provisions of Articles 101,102(1), 103(1) and 104 with the exception of paragraphs 1, 9,11 and 14 shall apply from the beginning of the second stage.

    The provisions of Articles 100(2), 104(1), (9) and (11), 105,106,108,111,112,113 and 114(2) and () shall apply from the beginning of the third stage.

  4. In the second stage, Member States shall endeavour to avoid excessive government decits.

  5. During the second stage, each Member State shall, as appropriate, start the process leading to the independence of its central bank, in accordance with Article 109.

Article 117
  1. At the start of the second stage, a European Monetary Institute (hereinafter referred to as 'EMI') shall be established and take up its duties; it shall have legal personality and be directed and managed by a Council, consisting of aPage 24 President and the Governors of the national central banks, one of whom shall be Vice-President.

    The President shall be appointed by common accord of the Governments of the Member States at the level of Heads of State or Government, on a recommendation from the Council of the EMI, and after consulting the European Parliament and the Council. The President shall be selected from among persons of recognised standing and professional experience in monetary or banking matters. Only nationals of Member States may be President of the EMI. The Council of the EMI shall appoint the Vice-President.

    The Statute of the EMI is laid down in a Protocol annexed to this Treaty.

  2. The EMI shall:

    - strengthen cooperation between the national central banks,

    - strengthen the coordination of the monetary policies of the Member States, with the aim of ensuring price stability,

    - monitor the functioning of the European Monetary System,

    - hold consultations concerning issues falling within the competence of the national central banks and aecting the stability of nancial institutions and markets,

    - take over the tasks of the European Monetary Cooperation Fund, which shall be dissolved; the modalities of dissolution are laid down in the Statute of the EMI,

    - facilitate the use of the ecu and oversee its development, including the smooth functioning of the ecu clearing system.

  3. For the preparation of the third stage, the EMI shall:

    - prepare the instruments and the procedures necessary for carrying out a single monetary policy in the third stage,

    - promote the harmonisation, where necessary, of the rules and practices governing the collection, compilation and distribution of statistics in the areas within its eld of competence,

    - prepare the rules for operations to be undertaken by the national central banks within the framework of the ESCB,

    - promote the eciency of cross-border payments,

    - supervise the technical preparation of ecu banknotes.

    At the latest by 31 December 1996, the EMI shall specify the regulatory, organisational and logistical framework necessary for the ESCB to perform its tasks in the third stage. This framework shall be submitted for decision to the ECB at the date of its establishment.Page 25

  4. The EMI, acting by a majority of two thirds of the members of its Council, may:

    - formulate opinions or recommendations on the overall orientation of monetary policy and exchange rate policy as well as on related measures introduced in each Member State,

    - submit opinions or recommendations to governments and to the Coun cil on policies which might aect the internal or external monetary situ ation in the Community and, in particular, the functioning of the European Monetary System,

    - make recommendations to the monetary authorities of the Member States concerning the conduct of their monetary policy.

  5. The EMI, acting unanimously, may decide to publish its opinions and its recommendations.

  6. The EMI shall be consulted by the Council regarding any proposed Com munity act within its eld of competence. Within the limits and under the conditions set out by the Council, acting by a qualied majority on a proposal from the Commission and after consulting the European Parliament and the EMI, the EMI shall be consulted by the authorities of the Member States on any draft legislative provision within its eld of competence.

  7. The Council may, acting unanimously on a proposal from the Commission and after consulting the European Parliament and the EMI, confer upon the EMI other tasks for the preparation of the third stage.

  8. Where this Treaty provides for a consultative role for the ECB, references to the ECB shall be read as referring to the EMI before the establishment of the ECB.

  9. During the second stage, the term 'ECB' used in Articles 230, 232, 233, 234, 237 and 288 shall be read as referring to the EMI.

Article 118

The currency composition of the ecu basket shall not be changed.

From the start of the third stage, the value of the ecu shall be irrevocably xed in accordance with Article 123(4).Page 26

Article 119
  1. Where a Member State is in diculties or is seriously threatened with dif culties as regards its balance of payments either as a result of an overall dis equilibrium in its balance of payments, or as a result of the type of currency at its disposal, and where such diculties are liable in particular to jeopardise the functioning of the common market or the progressive implementation of the common commercial policy, the Commission shall immediately investigate the position of the State in question and the action which, making use of all the means at its disposal, that State has taken or may take in accordance with the provisions of this Treaty. The Commission shall state what measures it recom mends the State concerned to take.

    If the action taken by a Member State and the measures suggested by the Commission do not prove sucient to overcome the diculties which have arisen or which threaten, the Commission shall, after consulting the Committee referred to in Article 114, recommend to the Council the granting of mutual assistance and appropriate methods therefor.

    The Commission shall keep the Council regularly informed of the situation and of how it is developing.

  2. The Council, acting by a qualied majority, shall grant such mutual assist ance; it shall adopt directives or decisions laying down the conditions and details of such assistance, which may take such forms as:

    (a) a concerted approach to or within any other international organisations to which Member States may have recourse;

    (b) measures needed to avoid deflection of trade where the State which is in diculties maintains or reintroduces quantitative restrictions against third countries;

    (c) the granting of limited credits by other Member States, subject to their agreement.

  3. If the mutual assistance recommended by the Commission is not granted by the Council or if the mutual assistance granted and the measures taken are insucient, the Commission shall authorise the State which is in diculties to take protective measures, the conditions and details of which the Commission shall determine.

    Such authorisation may be revoked and such conditions and details may be changed by the Council acting by a qualied majority.

  4. Subject to Article 122(6), this article shall cease to apply from the beginning of the third stage.Page 27

Article 120
  1. Where a sudden crisis in the balance of payments occurs and a decision within the meaning of Article 119(2) is not immediately taken, the Member State concerned may, as a precaution, take the necessary protective measures.

    Such measures must cause the least possible disturbance in the functioning of the common market and must not be wider in scope than is strictly necessary to remedy the sudden diculties which have arisen.

  2. The Commission and the other Member States shall be informed of such protective measures not later than when they enter into force. The Commis sion may recommend to the Council the granting of mutual assistance under Article 119.

  3. After the Commission has delivered an opinion and the Committee referred to in Article 114 has been consulted, the Council may, acting by a qualied majority, decide that the State concerned shall amend, suspend or abolish the protective measures referred to above.

  4. Subject to Article 122(6), this Article shall cease to apply from the beginning of the third stage.

Article 121
  1. The Commission and the EMI shall report to the Council on the progress made in the fullment by the Member States of their obligations regarding the achievement of economic and monetary union. These reports shall include an examination of the compatibility between each Member State's national legislation, including the statutes of its national central bank, and Articles 108 and 109 of this Treaty and the Statute of the ESCB. The reports shall also examine the achievement of a high degree of sustainable convergence by reference to the fullment by each Member State of the following criteria:

    - the achievement of a high degree of price stability; this will be apparent from a rate of inflation which is close to that of, at most, the three best per forming Member States in terms of price stability,

    - the sustainability of the government nancial position; this will be appar ent from having achieved a government budgetary position without a de cit that is excessive as determined in accordance with Article 104(6),

    - 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,Page 28

    - the durability of convergence achieved by the Member State and of its par ticipation in the exchange rate mechanism of the European Monetary Sys tem being reflected in the long-term interest-rate levels.

    The four criteria mentioned in this paragraph and the relevant periods over which they are to be respected are developed further in a Protocol annexed to this Treaty. The reports of the Commission and the EMI shall also take account of the development of the ecu, the results of the integration of markets, the situation and development of the balances of payments on current account and an examination of the development of unit labour costs and other price indices.

  2. On the basis of these reports, the Council, acting by a qualied majority on a recommendation from the Commission, shall assess:

    - for each Member State, whether it fulls the necessary conditions for the adoption of a single currency;

    - whether a majority of the Member States fulls the necessary conditions for the adoption of a single currency, and recommend its ndings to the Council, meeting in the composition of the Heads of State or Government. The European Parliament shall be consulted and forward its opinion to the Council, meeting in the composition of the Heads of State or Government.

  3. Taking due account of the reports referred to in paragraph 1 and the opin ion of the European Parliament referred to in paragraph 2, the Council, meet ing in the composition of the Heads of State or Government, shall, acting by a qualied majority, not later than 31 December 1996:

    - decide, on the basis of the recommendations of the Council referred to in paragraph 2, whether a majority of the Member States fulls the necessary conditions for the adoption of a single currency,

    - decide whether it is appropriate for the Community to enter the third stage, and if so:

    - set the date for the beginning of the third stage.

  4. If, by the end of 1997, the date for the beginning of the third stage has not been set, the third stage shall start on 1 January 1999. Before 1 July 1998, the Council, meeting in the composition of the Heads of State or Government, after a repetition of the procedure provided for in paragraphs 1 and 2, with the exception of the second indent of paragraph 2, taking into account the reports referred to in paragraph 1 and the opinion of the European Parliament, shall, acting by a qualied majority and on the basis of the recommendations of thePage 29 Council referred to in paragraph 2, conrm which Member States full the necessary conditions for the adoption of a single currency.

Article 122
  1. If the decision has been taken to set the date in accordance with Art icle 121(3), the Council shall, on the basis of its recommendations referred to in Article 121(2), acting by a qualied majority on a recommendation from the Commission, decide whether any, and if so which, Member States shall have a derogation as dened in paragraph 3 of this Article. Such Member States shall in this Treaty be referred to as 'Member States with a derogation'.

    If the Council has conrmed which Member States full the necessary conditions for the adoption of a single currency, in accordance with Article 121(4), those Member States which do not full the conditions shall have a derogation as dened in paragraph 3 of this Article. Such Member States shall in this Treaty be referred to as 'Member States with a derogation'.

  2. At least once every two years, or at the request of a Member State with a deroga tion, the Commission and the ECB shall report to the Council in accordance with the procedure laid down in Article 121(1). After consulting the European Parliament and after discussion in the Council, meeting in the composition of the Heads of State or Government, the Council shall, acting by a qualied major ity on a proposal from the Commission, decide which Member States with a derogation full the necessary conditions on the basis of the criteria set out in Article 121(1), and abrogate the derogations of the Member States concerned.

  3. A derogation referred to in paragraph 1 shall entail that the following art icles do not apply to the Member State concerned: Articles 104(9) and (11). 105(1), (2), (3) and (), 106,110,111, and ii2(2)(b). The exclusion of such a Mem ber State and its national central bank from rights and obligations within the ESCB is laid down in Chapter IX of the Statute of the ESCB.

  4. In Articles 105(1), (2) and (3), 106, 110, 111 and ii2(2)(b), 'Member States' shall be read as 'Member States without a derogation'.

  5. The voting rights of Member States with a derogation shall be suspended for the Council decisions referred to in the articles of this Treaty mentioned in paragraph 3. In that case, by way of derogation from Articles 205 and 250(1), a qualied majority shall be dened as two thirds of the votes of the representatives of the Member States without a derogation weighted in accordance with Article 205(2), and unanimity of those Member States shall be required for an act requiring unanimity.

  6. Articles 119 and 120 shall continue to apply to a Member State with a derogation.Page 30

Article 122
  1. Immediately after the decision on the date for the beginning of the third stage has been taken in accordance with Article 121(3), or, as the case may be, immediately after 1 July 1998:

    - the Council shall adopt the provisions referred to in Article 107(6),

    - the Governments of the Member States without a derogation shall appoint, in accordance with the procedure set out in Article 50 of the Statute of the ESCB, the President, the Vice-President and the other members of the Executive Board of the ECB. If there are Member States with a derogation, the number of members of the Executive Board maybe smaller than pro vided for in Article 11.1 of the Statute of the ESCB, but in no circumstances shall it be less than four.

    As soon as the Executive Board is appointed, the ESCB and the ECB shall be established and shall prepare for their full operation as described in this Treaty and the Statute of the ESCB. The full exercise of their powers shall start from the rst day of the third stage.

  2. As soon as the ECB is established, it shall, if necessary, take over tasks of the EMI. The EMI shall go into liquidation upon the establishment of the ECB; the modalities of liquidation are laid down in the Statute of the EMI.

  3. If and as long as there are Member States with a derogation, and with out prejudice to Article 107(3) of this Treaty, the General Council of the ECB referred to in Article 45 of the Statute of the ESCB shall be constituted as a third decision-making body of the ECB.

  4. At the starting date of the third stage, the Council shall, acting with the unanimity of the Member States without a derogation, on a proposal from the Commission and after consulting the ECB, adopt the conversion rates at which their currencies shall be irrevocably xed and at which irrevocably xed rate the ecu shall be substituted for these currencies, and the ecu will become a currency in its own right. This measure shall by itself not modify the external value of the ecu. The Council, acting by a qualied majority of the said Member States, on a proposal from the Commission and after consulting the ECB, shall take the other measures necessary for the rapid introduction of the ecu as the single currency of those Member States. The second sentence of Article 122(5) shall apply.

  5. If it is decided, according to the procedure set out in Article 122(2), to abrogate a derogation, the Council shall, acting with the unanimity of the Member States without a derogation and the Member State concerned, on a proposal from the Commission and after consulting the ECB, adopt the rate at which the ecu shall be substituted for the currency of the Member State concerned, and take the other measures necessary for the introduction of the ecu as the single currency in the Member State concerned.Page 31

Article 124
  1. Until the beginning of the third stage, each Member State shall treat its exchange rate policy as a matter of common interest. In so doing, Member States shall take account of the experience acquired in cooperation within the framework of the European Monetary System (EMS) and in developing the ecu, and shall respect existing powers in this eld.

  2. From the beginning of the third stage and for as long as a Member State has a derogation, paragraph 1 shall apply by analogy to the exchange rate policy of that Member State.