In contrast to monetary policy, Member States retain ultimate responsibility for economic policy within the economic and monetary union. They are, however, required to act in such a way as to respect the principle of an open market economy where competition reigns, to regard their economic policies as a matter of common concern and to conduct them with a view to contributing to the achievement of the objectives of the Union (Articles 120 and 121 TFEU, ex Article 98 and Article 99 TEC). Thus, the common economic policy complements the single monetary policy.
The Luxembourg European Council of 12 and 13 December 1997 adopted a Resolution on economic policy coordination in stage three of EMU in which it defined the arrangements for enhanced economic policy coordination, both between Member States participating in the euro and between those Member States and the ones not yet able to participate. It pointed out in particular that the ECOFIN Council was the central decision-making body for such coordination, adding that the ministers of the Member States participating in the euro area would be able to meet informally to discuss issues connected with their shared specific responsibilities for the single currency. This "Euro Group" takes account of the special needs of coordination for Member States participating in the euro area [see also section 7.2.4].
Since the second stage of EMU, i.e. since the 1st January 1994, economic policies of the Member States are coordinated at European level. Council Decision 90/141 is directed towards the attainment of progressive convergence of economic performance of the Member States. To this effect the Economic and Financial Affairs Council (ECOFIN), acting by a qualified majority on a recommendation from the Commission, formulates, each year in the spring, a draft for the broad economic policy guidelines (BEPGs) of the Member States and of the Union, and reports its findings to the European Council. This discusses a conclusion on the broad guidelines of the economic policies of the Member States and of the Union. On this basis, the Commission recommends [e.g. COM/2009/34] and the Council, acting on a qualified majority endorses the BEPGs [e.g. Recommendation 2010/410], which lay down the common objectives in terms of inflation, public finance, exchange rate stability and employment (Article 121 TFEU, ex Article 99 TEC). The BEPGs are at the centre of economic policy coordination in the European Union. They must be concise, concentrate on the main challenges facing the Union, with particular focus on the euro area, where coordination is most needed, and help to ensure that measures adopted in all EU economic coordination processes are consistent.
The Council, on the basis of reports submitted by the Commission [e.g. COM/2004/20], monitors economic developments in each of the Member States and in the Union as well as the consistency of economic policies with the broad guidelines. This multilateral monitoring is based on convergence programmes presented by each Member State which specifically aim at addressing the main sources of difficulty in terms of convergence (Article 121 TFEU, ex Article 99 TEC). It also involves a review of budgetary policies, with particular reference to the size and financing of deficits, if possible prior to the drafting of national budgets [see section 7.3.2]. Multilateral monitoring aims at obtaining from the Member States reciprocal engagements for the coordination of their policies.
The move to the third stage of economic and monetary union has brought the economies of the Member States adopting the euro closer together. They share a single monetary policy and a single exchange rate. Economic policies and wage determination, however, remain a national responsibility, subject to the provisions of Article 126 TFEU (ex Article 104 TEC) and of the Stability and Growth Pact. Since national economic developments have an impact on inflation prospects in the euro zone, they influence monetary conditions in that zone. It is for this reason that the introduction of the single currency requires closer common surveillance and coordination of economic policies among euro zone Member States. Close coordination should, in addition, contribute to the achievement of the Union objectives set out in Article 3 of the EU Treaty. In order to ensure further convergence and the smooth functioning of the single market, non-participating Member States must be included in the coordination of economic policies. This is particularly true for those Member States which participate in the exchange rate mechanism (ERM 2) [see section 7.2.4].
The Resolution on Growth and Employment of the Amsterdam European Council of 16 June 1997 aims to strengthen the links between a successful and sustainable EMU, a well-functioning internal market and employment. It asserts that social protection systems should be modernised so as to contribute to competitiveness, employment and growth, establishing a durable basis for social cohesion. To this end, the close coordination of the Member States’ economic policies referred to in Articles 120 and 121 of the Treaty on the functioning of the EU (ex Articles 98 and 99 TEC) should be focused in particular on policies for employment.
As the previous ''Lisbon strategy'', the new ''Europe 2020'' strategy for growth and employment [see section 7.3] calls for synergy and complementarity between the Member States' own programmes and the EU programmes. The Union contributes to the overall economic and employment policy agenda by completing the internal market and by implementing common policies and activities that support and complement national policies, with particular emphasis on a number of key actions with high added value, including: support for knowledge and innovation in Europe; reform of State aid policy; completion of the internal market for services; and support for efforts to deal with the social consequences of economic restructuring [COM/2005/0330].
On the basis of the Treaty and specially agreed instruments, economic policy coordination concentrates on those national policies which have the potential to influence monetary and financial conditions throughout the euro area, the exchange rate of the euro, the smooth functioning of the single market, as well as investment, employment and growth conditions in the European Union. Thus, economic policy coordination includes:
* the close monitoring of macroeconomic developments in Member States to ensure sustained convergence;
* the close monitoring of exchange rate developments of the euro and other EU currencies, seen as the outcome of all other economic policies;
* the strengthened surveillance of budgetary positions and policies in accordance with the Treaty and the Stability and Growth Pact [see section 7.3.2];
* the monitoring of nominal and real wage developments with reference to the broad economic policy guidelines;
* the close examination of national employment action plans (NAPs), dealing in particular with active labour market policy in accordance with the employment policy guidelines [see section 13.3.2];
* the monitoring of Member States' structural policies in labour, product and services markets, particularly insofar as they affect the chances of achieving sustained non-inflationary growth and job-creation.
On 26 November 2008, the European Commission presented a comprehensive plan to drive European Union's recovery from the global economic crisis. The fundamental principle of the European Economic Recovery Plan, approved by the European Council of 11 and 12 December 2008, is solidarity and social justice by protecting jobs and addressing the long-term job prospects of those losing their jobs. The first pillar of the European plan is a fiscal stimulus of EUR 200 billion (€ 170 billion Member States, € 30 billion EU budget), a major injection of purchasing power into the economy, to boost demand and stimulate confidence in full respect of the Stability and Growth Pact [see section 7.3.2]. The second pillar of the plan is short-term action to reinforce Europe's competitiveness in the long term, through "smart investments" targeted notably at education and training/retraining, energy efficiency, new energy sources, structural reforms, research and development and innovation. In fact, a financing instrument entitled the European Energy Programme for Recovery (the EEPR) assists the development of projects in the field of energy in the EU which, by providing a financial stimulus, contribute to economic recovery, the security of energy supply and the reduction of greenhouse gas emissions [Regulation 663/2009].