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24 July 1992
Doc. 6652
1403-17/7/92-7-E
Report
on European Economic and Monetary Union
- Consequences for Europe
of the European Community's Treaty on European Union
(Rapporteur: Mr JESSEL, United Kingdom, Conservative)
Problem
The Economic and Monetary Union (EMU) foreseen in the European Community's Treaty on European Union will have far-reaching consequences for the Community's member states, and will also greatly affect all other countries in Europe and beyond. It is a central concern of the Parliamentary Assembly - representing the parliaments of the Council of Europe's 27 member states and having as special guests delegations from eight other European parliaments - to promote greater unity among all member states and facilitate their economic and social progress.
Solution
The pronounced economic divisions in Europe, and the sense of exclusion on the part of countries left outside the Union, should not be exacerbated as a result of it. Furthermore, it should be ensured that richer countries or regions, in which investments are likely to be increasingly concentrated as a result of EMU, give sufficient support for poorer countries or regions.
I. DRAFT RECOMMENDATION
1. The Economic and Monetary Union (EMU) foreseen in the European Community's Treaty on European Union signed on 7 February 1992 at Maastricht, will have far-reaching consequences for its member states, for it foresees the replacement of national currencies by a single European one, as well as the latter's management under a European Central Bank. EMU will also greatly affect all other countries in Europe and beyond. The role of the Council of Europe is to enhance a constructive co-operation between member states of the European Community and the rest of Europe.
2. It is a central concern of the Parliamentary Assembly, representing as it does the parliaments of the Council of Europe's 27 member states, to promote economic co-operation at the level of all its member states, in conformity with the aim of the Council of Europe's Statute to "facilitate the economic and social progress of its members".
3. i. The signatory states of the Maastricht Treaty maintain that EMU will not only facilitate trade by doing away with currency fluctuations and transaction costs, but also attract foreign investment to participating countries, promote economic growth, enhance economic and therefore political stability, and prepare the ground for the eventual political unification of Europe.
ii. Many people, however, contend that member states of the European Community and their populations will not be ready to abandon their national currency and their management thereof, because economic policies, traditions and conditions will remain too dissimilar for EMU to function; or because they want to retain a measure of economic sovereignty.
4. The Assembly, in conclusion, recommends that the Committee of Ministers invite the governments concerned to take the following objectives regarding Economic and Monetary Union into consideration:
i. the pronounced economic divisions in Europe and the sense of exclusion on the part of countries left outside the Union should not be further exacerbated;
ii. Community institutions should be made sufficiently democratic and should always remain so - democracy's hallmark being that parliament, and not governments or commissions, has legislative power and control;
iii. it should be ensured that the richer countries or regions, to which investments are likely to be increasingly concentrated as a result of EMU, show sufficient support for poorer countries and regions;
iv. it should be ensured that EMU will have positive consequences for developing countries.
II. EXPLANATORY MEMORANDUM
by Mr JESSEL
TABLE OF CONTENTS
Page
I. INTRODUCTION: WHAT IS THE EUROPEAN ECONOMIC
AND MONETARY UNION (EMU)? 4
1. General considerations 4
2. The EMU calendar. The "convergence" criterion 5
3. The European Central Bank (ECB) 6
4. Derogations for the United Kingdom and Denmark 7
II. PROS AND CONS OF THE EMU 7
1. Perceived advantages 7
2. Perceived risks 8
3. Can EMU function without political union? 10
4. Are EC economies sufficiently "federalised"? 10
5. Practical difficulties in switching to
one currency 11
6. Consequences for non-EC countries 11
III. CONCLUDING REMARKS 12
APPENDIX 1: Economic convergence in the Community
in 1991 13
APPENDIX 2: Output development in the United States
and in the EC from 1970 to 1991 14
APPENDIX 3: Certain articles from the Treaty
on European Union dealing with the
Economic and Monetary Union 15
I. INTRODUCTION: WHAT IS THE EUROPEAN ECONOMIC AND MONETARY UNION (EMU)?
1. General considerations
1. Of all the decisions taken by the European Community in the course of its 35-year old history there is none - either the Rome Treaty of 1957 or the "1992" project to complete the internal market -that is likely to prove of greater importance for its future than that taken in December 1991 to create an Economic and Monetary Union (EMU) before the end of the decade; that is, to abolish national currencies in favour of a Community-wide one, presumably to be called ECU (European Currency Unit). The EMU, it will be recalled, forms part of the Treaty on European Union, which also contains provisions relating to foreign policy and security. It was signed at Maastricht by the governments of the twelve member states of the European Community in February 1992.
2. The Treaty is now being examined by the parliaments of EC member states with a view to ratification. In some countries, such as Denmark and Ireland, the question of whether to accept it or not has already been decided through plebiscite. In early June 1992 the Danish people in a referendum rejected the Treaty, casting its realisation into doubt, while later in the month the Irish voted in favour.
3. The Rapporteur considers that the Danish "no", far from rendering a debate in the Parliamentary Assembly superfluous, on the contrary makes it more necessary than ever. After all, it is the national parliaments of the Twelve - all of which are members of the Council of Europe - who (in some cases together with the people through the above-mentioned referenda) have to decide whether to ratify the Treaty or not. In consequence, what more appropriate body could there be for a debate on this subject at European level than the Parliamentary Assembly, where not only all the parliaments of the Twelve are represented, but also those of other countries which will be deeply affected by the EMU - the Seven of EFTA, and all the other European countries who are either members of the Council of Europe or whose parliaments enjoy special guest status? This is, then the rationale behind the present report.
4. True, the EMU almost happened once before when, in December 1969, the political leaders of the then six EC member states announced their intention to establish an Economic and Monetary Union within a decade. As it happened it did not then materialise; but it did give rise to the European Monetary System (EMS) and to the Exchange Rate Mechanism (ERM), both big changes in themselves. The Agreement signed at Maastricht on 7 February 1992 by the Foreign and Finance Ministers of the twelve member states of the European Community is, however, not just a general declaration of intent, as was the case in 1969, but is a Treaty.
5. The European Monetary Union (EMU) Treaty goes far beyond anything decided previously. It signifies the abandonment of national sovereignty1 in that most sensitive of areas, a nation's management of its own money. It is one thing to open borders to trade; harmonise customs barriers toward third countries; finance agriculture jointly as through the Common Agricultural Policy; or, indeed, harmonise sales taxes such as Value Added Tax, and special taxes on petrol, alcoholic drinks and tobacco (as is planned as part of the "1992" project).
6. It is a very different thing to give up monetary authority before the political unification process has been completed; it affects not only present members of the EC, but also European countries outside the Community, whether they have applied for membership or not.
2. The EMU calendar. The "convergence" criterion
7. What, then, is the calendar agreed upon at Maastricht for the attainment of the Economic Monetary Union? The first stage started already on 30 July 1990, when capital movements were freed among the majority of Community member states. The second stage is to begin on 1 January 1994 - that is, one year after the completion of the "1992" project - with the creation of a European Monetary Institute (EMI). In 1996 the EMI and the Commission of the European Community are to address, to the Council of Ministers of the EC, reports on the state of "convergence" of the economies of member states.
8. "Convergence" in this context signifies the degree to which economies are integrated or come to resemble each other in key dimensions such as interest rates, inflation, fiscal policies and budget deficits.
9. More specifically, it was decided at Maastricht that the degree of convergence of member states' economies will be measured according to four criteria:
- Two criteria of monetary stability:
. Achievement of a high degree of price stability, as measured by a year-on-year inflation rate not exceeding the rate in the three best performing EC economies by more than 1,5 points.
. The long-term nature of the convergence, as measured by a long-term interest rate not exceeding by more than two points, over one year, the average rates for the above three economies.
- A criterion of public financial discipline: states must avoid "undue fiscal deficits. In this respect, the following will be considered to be incompatible with the EMU:
. A deficit/GDP ratio greater than 3% - other than a small and exceptional overshoot.
. A debt/GDP ratio greater than 60% in the absence of effective steps taken to reduce the debt.
- An exchange-rate stability criterion: states must have remained within the narrow band of the EMS exchange-rate mechanism without devaluation for at least two years.
The state of "convergence" in 1991 in the European Community is shown in Appendix 1.
10. Before the end of 1996, the Council of Ministers is to decide which member states are ready to enter Stage 3 of the EMU, in a report addressed to Heads of State or Governments. After that the latter will take the final decision on common currency.
11. There are two scenarios. In Scenario 1, at least a majority of the member states will have been deemed ready to enter stage 3, and the Heads of State and Government will choose the date when the stage is to begin, for instance, 1 July 1997. In the course of 1997, the European Central Bank (ECB) is to be set up, replacing the above-mentioned European Monetary Institute.
12. In Scenario 2, less than a majority of EC member states are considered ready to enter stage 3. In this event reports by the European Monetary Institute and the Commission will be addressed to the Council of Ministers at the beginning of 1998 on the subject of progress in reaching convergence among economies. Before 1 July 1998, the Council of Ministers will examine which countries are ready to enter stage 3, and will report to Heads of State and Government. The latter will decide which member states are to commence stage 3. In the course of 1998, the European Central Bank (ECB) is created. On 1 January 1999, stage 3 is entered into by the countries concerned, and the European Central Bank assumes its responsibilities, replacing the European Monetary Institute.
3. The European Central Bank (ECB)
13. A few words need to be said about the role of the ECB, not least because the set-up is complex. In brief, the ECB will head the existing national central banks, to be joined together as the European System of Central Banks (ESCB). The primary objective of the ECB (and the ESCB) will be to maintain price stability. It will also be required to support the "general economic policies in the Community", without prejudice to the price stability objective. Its actions will be required to be in accordance with the principles of an open market economy, favouring an efficient allocation of resources.
14. The ECB will have as its main tasks the formulation and execution of the single monetary policy, the holding and management of participating member states' official foreign exchange reserves, promotion of the smooth operation of payments systems, and contribution to "the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system."
15. In the pursuit of their objectives and tasks under the Treaty, the ECB and national central banks are required to be free from all outside interference. Staff of the institutions and members of their decision-making bodies will be required not to seek or take instructions from any outside body, including Community bodies and national governments, and these bodies will undertake not to seek to influence the ECB or national central banks in the performance of their tasks.
4. Derogations for the United Kingdom and Denmark
16. The British government played an active part in the Intergovernmental Conference on EMU convened in December 1990, but subject to its general reserve that it could not accept any commitment by the United Kingdom to move to a single currency and monetary policy without a separate decision by government and Parliament at the appropriate time. In the event the government, while being generally satisfied with the technical arrangements proposed for the next two stages of EMU, and in particular their emphasis on free market principles, did not commit the United Kingdom to joint Stage 3, but instead obtained provisions which allow the country an option to join that Stage, subject to a final decision by government and Parliament, nearer the time. This option is contained in a protocol that has the legal force of the Treaty.
17. Denmark also reserved the right, in a separate protocol, not to move automatically to Stage 3. The United Kingdom will participate fully in Stage 2 (assuming ratification of the amended Treaty) and firmly expects to meet the convergence conditions that have been set -which will allow it to move to Stage 3 if Parliament so decides.
II. PROS AND CONS OF THE EMU
1. Perceived advantages
18. Advocates of the EMU see the substitution of an EC currency for national ones as a necessary condition for political unification. They say it will be necessary for European economic and political stability, and for the Community's ability to meet economic challenges from the rest of the world, in particular the United States and Japan. With the currency, it is maintained, the EC as a region will also be much more attractive to foreign investment, a factor of importance to economic growth and employment. They point to the increased stability to trade that is supposed to follow, and to the elimination of costs of currency transactions. They will refer, for instance, to the famous tourist who, in changing his, say, 1 000 FF in each of the twelve capitals of the European Community, only has about half of the sum left in the end.
19. Others consider monetary union as necessary in order for European nations to go beyond the dilemma that has plagued their relations for centuries: the choice between hegemony and balance of power. In other words, a given European country had to opt either to try to dominate its neighbours (hegemony) or ensure an equilibrium between them. That both conditions are unstable and precarious has been shown from the Roman Empire onwards, down to the two World Wars of this century. With a single currency, the argument goes, the whole issue would be obsolete, because a monetarily united Europe would be a politically united one as well.
20. There is also the argument, fervently made among others by the Commission of the European Community, that monetary integration will favour economic growth. Your Rapporteur certainly agrees that economic growth in Europe has been immensely helped by such arrangements as the European Community and EFTA. However, Appendix 2, showing the growth in output in the EC and the USA from 1970 to 1991, would throw some doubt upon the assertion that growth would have been even quicker if monetary integration had already taken place. As can be seen, output growth has in both areas increased by about 70%, and yet the US is one economy and the EC Twelve, albeit highly interwoven.
2. Perceived risks
21. The sceptics, however, argue that the problems and complications have largely been overlooked. For one thing they point to the lack of parallel development (or "convergence" as previously defined) that may be expected in 1997 (scenario 1) or in 1999 (scenario 2), between, on the one hand, the monetary responsibility which would now be at central EC level, and, on the other, the political responsibility which, they say, will then still in all likelihood essentially remain at the level of individual member states. They also point to the considerable differences among member states of the European Community as regards economic development and monetary policy traditions.
22. Thus, for instance Germany has traditionally - at least until recently when unification costs have soared - adhered to a strict anti-inflationary policy, with low budget deficits and a Bundesbank jealously guarding both its independence and the value of the currency by setting whatever interest rates are required. The German determination most certainly has its origin in the country's traumatic experiences with runaway inflation in the 1920s in particular, and it has no doubt contributed significantly to Germany's economic success in the decades since the Second World War.
23. Other countries, however, such as Italy and Greece, have for decades taken a more relaxed attitude with regard to inflation and budget deficits. For other countries again, like the United Kingdom and France, the independence of their central banks vis-à-vis their governments, has been less of a dogma. True, thanks to the EMS and the ERM - and that is a major accomplishment - these "national traditions" have become much less diverse, for any "excesses" have tended to be "punished" much more swiftly by market forces, in the form of "attacks" against the currency, reduced industrial competitiveness etc.
24. However, it would be an exaggeration to state that national particularities and occasional lapses have completely vanished. On the contrary, they may crop up unexpectedly in response to sudden strains or crises. The present German fiscal deficit (enormous by that country's historical standards) brought on by the unification in particular, has suddenly turned the DM into a relative "weak" EC currency. Would that deficit, which the Germans consider necessary in order to assist the new Länder, have been accepted by the other EC countries, had the EMU already been in place?
25. But, someone will object, have not most of the EC member states (and a number of others not belonging to the Community) participated during several years in the Exchange Rate Mechanism, through which they are committed to exchange rate fluctuations among their currencies of only a few percent? Even though this co-operation has not been without its problems (such as in the recession of 1991-1992), why would the step from "a few percent" of variations to "zero percent" (in the form of one EC currency) be so major?
26. In answer to this one might argue that one of the differences between EMS and EMU is that the former means more or less stable, but adjustable exchange rates, (adjustments have been carried out frequently in the history of the EMS), whereas the EMU by its very nature precludes exchange rates adjustments in the future. Some even maintain that exchange rates should be adjusted right now between the major EC currencies, in order to take into account the particular difficulties facing one or the other participating currency (such as the D-Mark following the German unification).
27. A second difference is that within the EMS - that is with national currencies maintained but allowed to fluctuate little in relation to each other - EC member states retain their economic influence, including their fiscal and budgetary independence. At the same time they have an interest in seeing their own currency develop in parallel with those of other member states, and this in order to gain certain tangible advantages, above all lower inflation for greater international competitiveness. Each country, so to speak, "makes its own cake" and may "eat it or keep it" as it wishes.
28. With an EMU, however - that is, with one EC currency instead of national currencies - the economic influence will be imposed by a monetary instance exterior to, and above, the individual member state. The authority in question will be the European Central Bank which, however, will in all likelihood not have any controlling political institution. The "cake" is in this instance, made jointly, but there is in likelihood no guarantee that countries will agree on the recipe, and quarrels will probably erupt when the cake is to be divided.
29. What recipes are there? The one agreed to at Maastricht might be called the "German" one. It states that the future European Central Bank should give priority to fighting inflation, even at the price of, for instance, high unemployment or economic stagnation.
30. However, in a monetary union such a policy will mean that a capital will orient itself much more readily than now in the direction of the richest regions of the European Community, where returns on investment are likely to be higher. The workforce will undoubtedly follow, with possibly far-reaching consequences for unemployment, and for the economy and population base of remote, poorer regions. Greater regional support by the European Community will then be called for, and the Maastricht agreement contains certain commitments in this regard. However, can one be sure about the generosity on the part of richer Community countries in the longer term, especially if the cost is substantial?
31. This analysis has not, however, gone uncontested in the Committee on Economic Affairs and Development. To some members, the fate of regions is already determined by the freedom of capital movements in Europe, and to them the EMU will not mean any significant change. They
even maintain that the single European currency will create more regional stability, not less, through a less changeable monetary environment and greater regional support made possible by greater overall wealth.
32. The other possible development is, of course, that the European Central Bank in the end - in spite of the Treaty's stipulations and the good intentions of all concerned - nevertheless yields to pressure from economically weaker member states, and starts permitting a higher budget deficit for one country, a greater money supply for another etc. To the extent that this leads to a enhanced inflation in any one country, it will now spread across the whole European Community, since each country will become sensitive to the economies of the others from the monetary point of view. One might even fear that the eagerness on the part of countries to reduce budget deficits or inflation might be less than under the present EMS system - since one's owns "sins" no longer have to be atoned for only by oneself but are shared by everybody. How would such a development be received in Community countries which have, historically, a strong aversion to inflation, especially if they feel that they have to "pay the bills of others"?
3. Can EMU function without political union?
33. The main, and seemingly paradoxical, argument of those sceptical of the EMU is, then, that a central bank - even though it should be independent of political authorities - must still have a correspondence at political level to function effectively. In other words, a European Monetary Union presupposes either an abandonment of democratic control of the economy, or a European political union - that is, an EC government and a parliament. However, is this wanted? And is it a realistic prospect by 1999, considering that only seven years from that date so much of the political power is still to be found among the parliaments and governments of member states? The difficulty of moving forward in the political field was evident at Maastricht, and it will be interesting to see what the Community Summit in Lisbon in June 1992 will hold in store in this regard.
34. It is not only that member states - governments and parliaments -are not particularly keen to see their own power overly reduced (and that of Community institutions correspondingly increased). It is also that the European Community is not exactly the paragon of a democratic institution. The European Community's only truly democratic body, the European Parliament, still has very limited powers, and the peoples of some countries show no eagerness to give it any role; the Council of Ministers is only democratic in the sense that the governments they represent derive from majorities in national parliaments; and the Commission, which wields enormous power, has not been elected by anyone, only appointed by governments.
35. The EC conference convened for 1996 to prepare the way for political union will no doubt have a most difficult task.
4. Are EC economies sufficiently "federalised"?
36. Another factor is the limited size of the European Community's budget, both in comparison with the combined GNPs of the twelve member states (about 1,15%) and in relation to the national budgets of member states, which amount to between 40% and 50% of GNP. In other words,
is monetary union possible amongst states which have made such little progress along the road to a federal economic structure - contrasted with, say, the United States, where Washington's share of the country's GNP amounts to about 35%?
37. This is not to say that the European Community's budget is in itself very small. On the contrary, more and more member states have, in the wake of Maastricht, woken up to the need to increase their budget contributions considerably if the EMU agreement and all other EC commitments for the coming years are to be fulfilled. In a recently presented (February 1992) budget plan, the EC Commission maintained that the budget will have to be increased from the present 63 thousand million ECUs to 85 thousand million ECUs by 1997 - to be paid mainly by the richer member states.
38. Even if this succeeds the EC budget will, of course, not come anywhere near the size normally considered necessary for a federal structure. The difficulties of raising the budget are already massive. There are major complaints about the cost of the Common Agriculture Policy (about 53% of total EC expenditure). In addition, the Maastricht agreement evoked the so-called "subsidiarity principle", which states that the European Community should only take care of matters which cannot be better dealt with at member state level. If more money is being asked for, then this presumably means activities in more areas. Is this consistent with the "subsidiarity principle"?
5. Practical difficulties in switching to one currency
39. One of the most challenging tasks in connection with the EMU would be planning the mechanics of any transition to a single currency. Your British Rapporteur well remembers the decimalisation of his country's currency 21 years ago, but few are aware of the time and effort which went into that exercise behind the scenes. In fact, the lead time for decimalisation was about four years, and the cost of producing new coins and converting machinery has been estimated at between 600 and 900 million pounds at today's prices. A switch to the ECU would be a far more complex exercise, because all notes as well as coins would eventually need to be replaced, and because none of the national currency units would convert on a one-for-one basis into ECU. Add to this the confusion of eg elderly people when faced with a completely unknown currency.
6. Consequences for non-EC countries
40. Little is known about the likely impact of an EC single currency on other countries, especially in Central and Eastern Europe, but also in the developing world. Several EFTA countries already seem committed to keeping their currencies pegged to any future single currency, just as they stick to the "abstract" ECU (a "basket" of national currencies, with its value quoted daily) in today's ERM. However, it is less certain whether the formerly planned economies in Central and Eastern Europe will be able to do so. The risk as the Rapporteur sees it is that a single currency will add to the feeling of exclusion of non-EC members in general, and Central and East European countries in particular, which because of their lack of economic development are likely not to be able to join the EC in the near future and, above all, not to be able to meet the stringent criteria for passage to a single currency. Is it the purpose of, or the proper course for, the EC to contribute to a separation of this kind?
41. On the other hand, certain countries which have already applied for membership, such as Sweden, have already let it be known that they would be prepared, as members, to accept the EMU in all its aspects. To the extent that they already participate in the EMS and the ERM, the change for them would not be significantly different from that of current EC members.
III. CONCLUDING REMARKS
42. In conclusion, then, the sceptics maintain that a Rome built in one day runs a major risk of collapsing, and that the EMU enterprise under its present timetable and in its current form may cause considerable friction among the member states of the European Community. They also point to the "irreversible" nature of the step to a common EC currency. It will of course be impossible to return to a national currency if the European one does not work. Why not instead, they ask, defer a monetary union until the political unification process has been completed, until one can be reasonably sure that the experiment is on solid ground? Does not the European Community have enough to think about at the present time, they enquire, when much still remains to be done about the "1992" project, and when many European countries have either asked for admission or are planning to do so?
43. What your Rapporteur wants to do is to point both to the advantages and to the risks of the EMU enterprise, so as to enable the Parliamentary Assembly to reach a reasoned opinion on the subject. The Committee on Economic Affairs and Development itself held a most stimulating and lively discussion on 22 June 1992, before unanimously adopting the draft Recommendation preceding the present explanatory memorandum. The Rapporteur thanks all his colleagues for their valuable contributions.
44. The role of the Assembly is all the more natural since it is composed, inter alia, of members of all the twelve parliaments of the European Community - parliaments which have been or are being be asked to ratify the EMU treaty. And the presence of parliamentarians from fifteen other member states in the Assembly's midst - plus eight parliaments enjoying special guest status - is also altogether appropriate, as they represent countries which either have already applied for EC membership, or will be increasingly closely associated with it, or affected by it.
Reporting committee: Committee on Economic Affairs and Development.
Budgetary implications for the Assembly: None.
Reference to committee: Standing mandate.
Draft recommendation: unanimously adopted by the committee on 22 June 1992.
Members of the committee: Mr Holtz (Chairman), Dame Peggy Fenner, Mr Lotz (Vice-Chairmen), MM Aarts, Gudmundur Bjarnason, Bokov, Bloetzer, Bonnici, Brach, Brennan (Alternate: O'Brien), Capanna, Cox (Alternate: Lord Kirkhill), Croze, Csepe, Demiralp, Efraimoglou, Fabra, Flückiger, Garcia Sanchez, Gasperoni, Gassner, Goerens, Mrs Haglund, MM Hellström, Jessel, Kempinaire, Kiliç, Kittelmann, Albrecht Konecny, Koritzinsky, Le Grand, Lewandowski, Mesoraca, Pinto, Rehn, Rodrigues, Rokofyllos, Schwimmer, Sinesio, Erik Smith, Mrs von Teichman, Mr Valleix, Mrs Verspaget (Alternate: Dees), Mr Wintgens.
NB: The names of those members who were present at the meeting are underlined.
Secretary to the committee: Mr Torbiörn.
1 1 "Sovereignty" is defined in the Oxford English Dictionary, inter alia, as the ability to exercise "absolute and independent authority". The Rapporteurs do not suggest that any European Community - or any European in general - country enjoys "sovereignty" thus defined in the economic and monetary field. Changes in interest rates, for instances, undertaken by one country immediately influences the options of all the others, especially at a time of increasingly free movement of capital across borders. However, in spite of these restrictions an EC country can still, as a measure of ultimate resort, use e.g interest rates to stem inflation or support the currency internationally. Furthermore, a Parliament can still use its fundamental right, namely that of controlling the country's budget. In this sense "sovereignty" in its essentials is maintained today, even in the EC.