At the European Council meeting of June 1999 in Cologne, the Heads of State and Government consolidated the European Employment Strategy and created the basis for a Community employment policy, which takes account of all the economic factors that affect employment. The main objective of the European Employment Pact, known as the ‘Cologne process’ is to encourage dialogue between all the parties involved in macroeconomic policy and to strengthen their confidence, in order to encourage growth and job creation. The pact emphasises the need for a balanced mix of macroeconomic policies via:
- financial policy, which must respect the principles of the stability pact and at the same time channel public funds towards investment and competitive jobs;
- controlled pay increases in line with productivity gains;
- monetary policy oriented towards price stability.
The process introduced in Cologne set in place procedures for a macroeconomic dialogue between representatives of the Council, the Commission, the social partners and the European Central Bank in order to improve policy formation. The policy objectives include ‘sustainable and non-inflationary growth’ and ‘a high level of employment’ without prejudice to the objective of price stability.