Select Committee on European Scrutiny Thirty-Eighth Report






Commission Communication on the euro area in the world economy: developments in the first three years.

Legal base:


Document originated:

19 June 2002

Deposited in Parliament:

28 June 2002


HM Treasury

Basis of consideration:

EM of 10 July 2002

Previous Committee Report:


To be discussed in Council:

No date set

Committee's assessment:

Politically important

Committee's decision:




The document

    1. The Commission's Communication describes developments in relation to the euro area in the world economy during the three years since the start of the third stage of Economic and Monetary Union (EMU).
    2. It reviews a number of issues under five headings:

    • the economic situation and policy achievements — dealing with the global slowdown in the euro's third year, the exchange rate and the euro area's trade performance, and fiscal and monetary policy and their coordination;

    • monitoring wage developments in EMU — discussing wage moderation and its contribution to job creation in recent years;

    • investment and euro area growth potential — touching on factors influencing investment, including foreign direct investment and mergers and acquisitions, and the role of investment in growth;

    • the euro area financial system — claiming the euro, in eliminating exchange risk, has promoted consolidation and integration in the euro area financial system, and examining the various sectors of that system; and

    • the euro as an international currency — recording the developing use of the euro internationally in the private and public sectors and the possible role for the euro area in global policy coordination.

    1. Overall, the Communication claims that during the three years the benefits of the euro, based on a good policy framework and combined with structural reform, have been apparent. Good growth has not created imbalances threatening to sustainability. Private savings have been satisfactory, budget deficits have declined, investment has been steady without leading to over-investment. The euro area's current account has been roughly in balance.
    2. The Government's view

    3. The Financial Secretary, HM Treasury (Ruth Kelly) tells us the report has no financial or policy implications for the Government.
    4. Conclusion

    5. The Communication gives a detailed account of the Commission's view of the euro area economy in the first three years of the third stage of Economic and Monetary Union. We clear the document.


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