The Stability and Growth Pact

Resolution of the European Council on the Stability and Growth Pact Amsterdam, 17 June 1997

I. Meeting5 in Madrid in December 1995, the European Council conrmed the crucial importance of securing budgetary discipline in Stage III of economic and monetary union (EMU). In Florence, six months later, the European Council reiterated this view and in Dublin, in December 1996, it reached an agreement on the main elements of the Stability and Growth Pact. In Stage III of EMU, Member States shall avoid excessive general government decits: this is a clear Treaty obligation 6.The European Council underlines the import ance of safeguarding sound government nances as a means to strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation. It is also necessary to ensure that national budgetary policies support stability-oriented monetary policies. Adherence to the object ive of sound budgetary positions close to balance or in surplus will allow all Member States to deal with normal cyclical fluctuations while keeping the gov ernment decit within the reference value of 3 % of GDP.

II. Meeting in Dublin in December 1996, the European Council requested the preparation of a Stability and Growth Pact to be achieved in accordance with the principles and procedures of the Treaty. This Stability and Growth Pact in no way changes the requirements for participation in Stage III of EMU, either in the rst group or at a later date. Member States remain responsible for their national budgetary policies, subject to the provisions of the Treaty; they will take the necessary measures in order to meet their responsibilities in accord ance with those provisions.

III. The Stability and Growth Pact, which provides both for prevention and deterrence, consists of this Resolution and two Council Regulations, one on the strengthening of the surveillance of budgetary positions and the surveil lance and coordination of economic policies and another on speeding up and clarifying the implementation of the excessive decit procedure.

IV. The European Council solemnly invites all parties, namely the Member States, the Council of the European Union and the Commission of the European Communities, to implement the Treaty and the Stability and Growth Pact in a strict and timely manner. This Resolution provides rm political guidance to the parties who will implement the Stability and Growth Pact. To this end, the European Council has agreed upon the following guidelines.

The Member States

1. commit themselves to respect the medium-term budgetary objective of positions close to balance or in surplus set out in their stability or convergence programmes and to take the corrective budgetary action they deem necessary to meet the objectives of their stability or convergence programmes, when ever they have information indicating actual or expected signicant divergence from those objectives;

2. are invited to make public, on their own initiative, the Council recommendations made to them in accordance with Article 103(4);

3. commit themselves to take the corrective budgetary action they deem nec essary to meet the objectives of their stability or convergence programmes once they receive an early warning in the form of a Council recommendation issued under Article 103(4);

4. will launch the corrective budgetary adjustments they deem necessary without delay on receiving information indicating the risk of an excessive decit;

5. will correct excessive decits as quickly as possible after their emergence; this correction should be completed no later than the year following the identication of the excessive decit, unless there are special circumstances;

6. are invited to make public, on their own initiative, recommendations madein accordance with Article 1O4c(7);

7. commit themselves not to invoke the benet of Article 2 (3) of the Council Regulation on speeding up and clarifying the excessive decit procedure unless they are in severe recession; in evaluating whether the economic downturn is severe, the Member States will, as a rule, take as a reference point an annual fall in real GDP of at least 0.75 %.

The Commission

1. will exercise its right of initiative under the Treaty in a manner that facilit ates the strict, timely and eective functioning of the Stability and Growth Pact;

2. will present, without delay, the necessary reports, opinions and recommenda tions to enable the Council to adopt decisions under Article 103 and Art icle 104c; this will facilitate the eective functioning of the early warning system and the rapid launch and strict application of the excessive decit procedure;

3. commits itself to prepare a report under Article iO4c(3) whenever there is the risk of an excessive decit or whenever the planned or actual government decit exceeds the reference value of 3 % of GDP, thereby triggering the procedure ...

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