17 Economic and Monetary Union
| (26801)
11857/05
COM(05) 357
| Draft Regulation amending Regulation (EC) No 974/98 on the introduction of the euro
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| Legal base | Article 123(4); —; QMV (of those Member States in the eurozone)
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| Document originated | 2 August 2005
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| Deposited in Parliament | 6 September 2005
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| Department | HM Treasury |
| Basis of consideration | EM of 3 October 2005
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| Previous Committee Report | None
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
17.1 Under the terms of their accession treaties the ten Member
States which joined the Community in 2004 are expected to adopt
the euro as their currency. Some have indicated their wish to
join as soon as January 2007. However, the Regulation governing
the introduction of the euro was designed for the current eurozone
countries. It includes specific dates that would not be applicable
to future entrants and the changeover arrangements for possible
future entrants to the eurozone would also be different. So the
existing Regulation needs revision to provide a proper legal framework
for Member States to join the single currency.
The document
17.2 This document is a draft Regulation to amend Regulation (EC)
974/98, which currently governs introduction of the euro. The
draft would remove existing dates and allows for three possible
changeover scenarios:
- a process of transition under which euro services would be
introduced in phases with euro notes and coin being issued at
the end of the transition phase. This is the approach that was
used for existing eurozone Member States;
- a scenario in which euro services including notes
and coin would be introduced at the same time. This is the approach
favoured by most new Member States; and
- the second scenario but with a phasing out period.
Under this approach euro services including notes and coin would
be introduced at the same time, but the use of national currency
for some transactions, such as legal instruments, would be allowed
for a further specified period.
17.3 The intention is to have the present Regulation
adjusted so that when a Member State was entering the euro area
its preferred timetable and chosen changeover scenario would be
added to the Regulation's Annex by a further amendment.
The Government's view
17.4 The Economic Secretary to the Treasury (Mr Ivan
Lewis) reminds us that the Government's policy on membership of
the single currency is unchanged. He repeats the substance of
this in familiar terms. He notes that, if it is decided to join
the single currency, the draft Regulation would apply to the UK
and that it includes the Government's preferred approach of a
"managed transition" for a changeover.
17.5 The Minister also tells us that although Article
123(4) EC is the legal base proposed for the draft Regulation
some Member States consider that it should be Article 123(5) EC.
The former would require a qualified majority of Member States
without a derogation, the latter unanimity. In neither case would
the UK have a vote.
17.6 The Minister says the proposal itself respects
the principles of subsidiarity. But he notes that a provision
relating to bank obligations to exchange national notes and coin
free of charge marginally fails the subsidiarity and proportionality
tests.
Conclusion
17.7 We note that the Government has no voting
rights on this document and clear it. However we observe that
if the UK were joining the eurozone it would be covered by the
proposed legislation. We assume therefore that the Government
will be lobbying the Member States who do have voting rights about
the subsidiarity and proportionality matters he mentions to us.
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