20.8.76 OfficialJournaloftheEuropeanCommunities NoL229/1
II
(Actswhosepublicationisnotobligatory)
COUNCIL
COUNCILDECISION
of26July1976
onthepreparationofpublicbudgetsfor1977
(76/646/EEC)
THECOUNCILOFTHEEUROPEAN COMMUNITIES ,HASADOPTEDTHISDECISION :
Article1
MemberStatesshallpursueeconomicpolicieswhich
conformtotheguidelinesonthepreparationof
publicbudgetsfor1977setoutintheAnnex.
Article2
ThisDecisionisaddressedtotheMemberStates.HavingregardtotheTreatyestablishingthe
EuropeanEconomicCommunity ,
HavingregardtoCouncilDecision74/120/EECof
18February1974ontheattainmentofahighdegree
ofconvergenceoftheeconomicpoliciesofthe
MemberStatesoftheEuropeanEconomic
Community (1),andinparticularArticles1and3
thereof,
HavingregardtotheproposalfromtheCommission,
WhereastheCouncilagreeswiththeanalysisofthe
economicsituationcontainedintheCommission
communication of23June1976concerning,in
particular,thepreparationofpublicbudgetsfor1977,DoneatBrussels,26July1976.
FortheCouncil
ThePresident
W.F.DUISENBERG
(*)OJNoL63,5.3.1974,p.16.

NoL229/2 OfficialJournaloftheEuropeanCommunities 20.8.76
ANNEX
ECONOMIC POLICYGUIDELINES
1.Generalguidelines
1.1.TheMemberStatesandtheCommunityarefacedwithmajoreconomicpolicy
problems:
—thepersistenceoftherecoveryisnotyetassured;
—employmentprospectsareonlyimprovingslowly;
—therateofinflationisstilltoohigh;
—theexcessivedivergencesfromonecountrytoanotherareindangerofpersisting.
Classicaleconomicmanagementinstrumentsarenotinthemselvessufficienttoresolve
theseproblemsandtoimprovethecohesionoftheCommunity .Thiswillentail,
moreover :
—theadjustmentofincomeclaimstothemacro-economic andstructuralconstraints;
—areorientationofmedium-termpolicytogoalsfixedjointly;
—thestrictcoordinationofconjuncturalpoliciesintheCommunityintermsofthese
objectives;
—theimplementation ofappropriatestructuralandregionalreforms.
1.2.Withaviewtosafeguardingthecurrentrateofeconomicgrowthwithinthe
Communityandtherebyimprovingthechancesoffullemploymentbeingrestored
in1980,theCommissionhasproposedtheimplementation ofastrategyincorporating
specifictargetsfortheCommunityasawhole:anaveragerealgrowthrateforthe
Communityofbetween4-5and5%inthegrossdomesticproductbetweennowand
1980andareductionintherateofincreaseinconsumerpricestonotmorethan
4to5°/oonaverageby1980.Targetsforwithinthisperiodandforeachcountry
couldhelptosmoothouteconomicfluctuationsandinfluencetheactionsofeconomic
agents.
1.3.Fromthesecondhalfof1976onwards,theweakeningoftheeffectsofthetemporary
measurestostimulatedemandandtheoperationofthebuilt-instabilizerswillprobably
providetheneededmoderatingeffectonthegrowthintheeconomy.Inaddition,the
monetarypolicymeasurestakeinanumberofcountriestocounteractupheavalsabroad
willprobablyworkinthesamedirection,inparticularbymakingiteasierforthe
disparitiesintheratesofgrowthofpricestobenarrowed.
1.4.Beyond1976,theattainmentofthepriorityobjectiveofagradualreturntoanadequate
rateofgrowthcombinedwitheconomicstabilitycallsforgenerallycautiouseconomic
policiesmakingsimultaneoususeofthewidestpossiblerangeofinstrumentsavailable.
Monetaryandbudgetarypolicyinstrumentsshouldcontinuetocreatethegeneral
conditionsconducivetoaneasingofpriceandcostpressures.Ceilingsshouldalsobe
imposedonthegrowthinliquiditytocompletetheguidelinesadoptedeachyearfor
thetrendinnetbudgetarypositions.Anotheressentialelement,whichwillneedtotake
accountofthespecificsituationineachMemberState,shouldbeanappropriate
incomespolicydesignedtomoderatetheincreaseofpricesandcosts.Economicpolicies
willhavetobechosensoastoobtainarapidreductioninunemployment andthe
necessaryswitchinthestructureindomesticdemandtowardsfixedinvestmentand,
insomecountries,toexports.
1.5.ProposalshaverecentlybeenputforwardbytheCommissiontorestorefullemploy­
mentandstabilityintheCommunity.Nonetheless ,theCommissionreiteratesherethat,
asregardsincomespolicyandpolicyonsavingsandwealth:

20.8.76 OfficialJournaloftheEuropeanCommunities NoL229/3
—theStateandtheotherauthoritiesshouldshowrestraintintheirbudgetary
management ,shouldapplyafairfiscalpolicyandshouldenforcetheruleson
competitioninparticularduringmergersofbusinesses;
—workersshouldtakepartinthejointefforttoreduceproductioncosts,inparticular
bybeingmoreflexibleasregardsthegrowthintheirmoneywages,soastotake
greateraccountofthepotentialoftheeconomy;
—non-wageincomerecipientsshouldshowacorresponding moderation ;
—firmsshouldimposeuponthemselvesastrictdisciplineasregardspriceincreases;
—thegovernmentsandbothsidesofindustryshouldadoptappropriatemeasures
topromoteasset-ownership byemployeesaswellastheirparticipation inthe
decision-making oftheirfirms.
1.6.Asregardsbudgetarypolicy,theCommissionsetsoutbelow,inaccordancewith
Article3ofDecision74/120/EEC,guidelinesforthepublicbudgetsin1977.Italso
stressesthatmonetarypolicywillhavetocontributetotheefforttoreducetherate
ofincreaseofpricesthroughensuringnon-inflationary financingoftheeconomic
upswing.Toachievethistheexpansionofliquidity,whichhasbeentoorapidupto
thepresentinseveralcountries,willhavetobemoderated,especiallyinthosewherean
improvementinthebalanceofpaymentsisrequired.Thisactionmustbeundertaken
withinaCommunityframework .Bothinternalandforeignsavingswillhavetobe
channelledmoreeffectivelytowardsinvestmentfinancing.
1.7.Theexchangemarketswillbecomemorestableastheerosionofdomesticpurchasing
powerinseveralMemberStatesischeckedandasthedeficitcountries'balancesof
paymentsimprove.Butanorderlysituationintheexchangemarketsrequiresagreater
convergenceofmonetarypolicy.Forthisinterestrateswillhavetobekeptata
relativelyhighlevelinthosecountrieswherethedisequilibrium ismostserious.
2.Budgetarypolicyguidelines
2.1.Theeconomicoutlookforthesecondhalfof1976andfor1977callsforprudent
budgetarymanagement .
For1976,thegovernmentshavetakenappropriatestepstosoftenthestimulusgiven
totheeconomybythepublicbudgets,byseekingtoreduceoratleasttostabilizethe
scaleofthenetborrowingrequirementasaproportionofthegrossdomesticproduct.
Thislinemustbefirmlymaintainedinthesecondhalfoftheyear,particularlyinthose
MemberStateswhichhavebalanceofpaymentsdifficulties .
Thispolicyofgraduallyreducingpublicdeficitswillhavetobepursuedin1977.Itis
essentialforthere-establishment ofequilibriuminthemediumterm,evenifitmeans
coordinatedactiononincomes.Giventherequirementsposedbysuchanobjective,the
relativereductionofdeficitsshouldbebasednotonlyonhighergrowthintaxrevenue,
alreadyachievedin1976,butinparticularonappropriatecurbsonpublicexpenditure .
Ifthisstrategywereunsuccessful,moderationofthegrowthoftaxesandimpositions
ofalikenature,generallyconsiderednecessaryovertheyearsahead,wouldalmost
certainlyremainanillusorygoal.Theriskwouldalsobereducedofexcessivepublic
deficitshavingtobefinancedthroughthecreationoftoomuchliquidity,which,
togetherwiththegrowthofcreditnecessaryfortherecoveryofinvestment,would
posedangersforthemonetaryequilibriumoftheeconomy.
Thesegeneralguidelinesdonotpreclude,andmayindeednecessitate,specificand
limitedmeasuresoftaxrelief,totheextentthatsuchmeasureswouldhelprestrain
costandpricerisesandpromotetherecoveryofprivateinvestmentincountrieswhere
sucharecoveryisslowtodevelop.

NoL229/4 OfficialJournaloftheEuropeanCommunities 20.8.76
Denmark
2.2.Theeconomicupswingshouldcontinueduringthesecondhalfof1976thankstoa
strengthening ofinvestmentdemandtogetherwithagrowthinexportsanddespite
areducedlevelofprivateconsumptioncomparedwithaparticularlyhighlevelinthe
earlymonthsofthisyear.Theoutlookfor1977appearstoshowsomeslackeningof
growthmainlyduetoweakerhomedemand.Atthesametime,betweennowand
theendof1977unemployment shouldcontinuetodeclinegraduallyandpriceand
costincreasesshouldslowdown.Ontheotherhandthecurrentaccountdeficitwill
probablygreatlyexceedthatfor1975bothin1976and1977,andwillremainata
worryinglevel,althoughitshoulddeclinefromthesecondhalfof1976onwards.
Fromnowuntiltheendof1977economicpolicyshouldhavetheobjectivesof
improvingthecurrentbalanceofpaymentsandtheemploymentsituationandassisting
theslowingdownintherateofpriceincreases.Toachievetheseaimsactionshouldbe
takentorestrainincomegrowthandtocastbudgetarypolicyinasstrictamouldas
economiccircumstances permit.Thismeansthatratherthanseekingasignificant
increaseinthetotaltaxburden,thepolicyshouldbestrictlytolimitthegrowthof
expenditure .Insuchcircumstances thenetborrowingrequirements ofcentral
governmentwhichwillincreaseslightlyin1976/77andreachalmost5%>ofthegross
domesticproductcouldbestabilizedin1977/78atthesameabsolutelevelandshow
arelativeimprovement .Afurtherobjectiveinthetwofiscalyearsshouldbetoincrease
thenon-monetary meansoffinancingthedeficitasfaraspossible.
Germany
2.3.Therecoveryhascontinuedtogathermomentumoverthepastfewmonths,and
althoughsomedegreeofslowingdownisexpectedduring1976asthedirectimpactof
therecoveryprogrammesbeginstowearoff,economicactivityshouldstillexpand
strongly.Growthshouldcontinuein1977withaprogressivereductionthroughoutthe
yearofthenumberofunemployed .
Inordertoachievethedesiredgrowthandtoreduceunemployment themainaimsof
economicpolicyshouldbetolimittherateofgrowthofpricesandcostsevenfurther
andtoobtainasufficientlevelofinvestment.Thisimplies,besidesareasonable
pricingpolicyonthepartoffirmsandanappropriategrowthinincomes,amonetary
policywhichsetslimitstonominalincreases.Thisalsoimpliesapublicfinancepolicy
whichendeavourstoachieveagradualreductioninthenetborrowingrequirementby
restrictingthegrowthofexpenditure .Indeed,thesecondhalfof1976shouldseethe
introductionofamorerestrictivelineinexpenditurepolicybytheFederal,Landand
localauthorities,particularlyatFederallevelwherethebudgetwasstillproviding
stimulustotheeconomyatthebeginningoftheyear.Despiteamoresubstantial
increaseintaxrevenue,however,thereshouldbehardlyanyreduction,incomparison
withthepreviousyear,inthedeficitoftheFederal,Landandlocalauthoritiesin1976.
ThecentralgovernmentdeficitshouldbealittleundertheDM55000million
recordedin1975,thatisabout4-5%ofthegrossdomesticproduct.Maintainingthe
restrictivelineplannedwithregardtoexpenditureshouldmakeitpossible,in1977,
toreducethisfigureasaresultofincreasedrevenueduemainlytogrowthandwithout
takingaccountoftheproposedincreasesinvalueaddedtax.Withregardtosocial
security,ontheotherhand,thedeficitis,ifanything,likelytoincrease,sothatefforts
toeconomizeinthissectorshouldbepursued.

20.8.76 OfficialJournaloftheEuropeanCommunities NoL229/5
France
2.4.Duringthesecondhalfof1976andin1977,economicactivitywillcontinuetoreceive
considerablestimulusbothfromdomesticdemand(particularlyprivateconsumer
demand)andfromexports.Thetendencyforpricestoriseislikelytoremainstrong
(risqued'êtreencoreforte),whilethebalanceofpaymentsoncurrentaccountsis
improving .
Followingthemassiverecoveryprogrammecarriedoutin1975,budgetarypolicy
in1976revertedtothestrictmanagementprinciplespreviouslyapplied.Althoughthe
centralgovernmentbudgetwasbalancedwhenitwastabledandpassed,theout-turn
willprobablyshowastillsizeabledeficitofaboutFF15000million,asaresultof
thecarry-overinto1976ofanumberofmeasuresintroducedinSeptember1975to
supporttheeconomy,particularlythetaxassistanceoninvestmentandthespecial
capitalexpenditureundertakenin1975. _
For1977,themainaimofeconomicpolicyshouldbetoreducesignificantlytherise
incostsandprices,usingbothdirectactiononincomesandapplyingamonetary
policyandastrictbudgetarypolicy.Inthislatterarea,thegrowthofcentral
governmentexpenditureshouldbereducedtoalevelclosetothegrowthrateofthe
grossdomesticproduct,soastoavoidprovidingtoostrongastimulustodomestic
demand,whichisalreadysufficientlydynamic.Inviewoftheunderlyingtrendof
revenue,thisistheonlypossiblemeansofachievingareturntogovernmentfinance
equilibriumwithoutrecoursetomajortaxincreasesin1977,whichcouldwellleadto
increasedpressureoncostsandprices.Undertheseconditionsthebudgetaryout-turn
couldbeclosetooneofbalance.Thefinancialpositionofsocialsecuritycouldworsen
andcallforactiontokeepitinbalance.
Ireland
2.5.Theupturnineconomicactivityinthesecondhalfof1976shouldgrowprogressively
strongerin1977whereastheriseinpriceswillnotslowdownuntilthesecondhalf
oftheyear.Unemployment willremainatahighlevel.For1977asawhole,despite
anincreaseinexports,thecurrentbalanceofpaymentswillprobablyonlyshowa
slightimprovementover1976.
The1976budgetout-turnofcentralgovernmentshouldshowanetborrowing
requirementalittlelessthanthefigureof£679millionoriginallyforecast,thisslight
improvementbeingduetoanincreaseinrevenueexceedingtheexpectedadditional
expenditure .
In1977budgetarypolicyshouldaimatafurtherreductioninthecentralgovernment
netborrowingrequirementasaproportionofthegrossnationalproduct,inconformity
withCouncilDecision76/323/EECof15March1976fixingtheeconomicpolicy
conditionstobeobservedbyIreland(1).Thiscanbeachieved,inconjunctionwithan
appropriateincomesandpricespolicy,byastrictlimitationonsalariesandsocial
transferpayments,andbyarigidscrutinyofotheritemsofcurrentexpenditure,
togetherwith,possibly,amodestincreaseinthetaxburden.Furthermore ,the
proportionofmonetaryfinancingoftheborrowingrequirementshouldbereduced.
(')OJNoL77,24.3.1976,p.15.

NoL229/6 OfficialJournaloftheEuropeanCommunities 20.8.76
Italy
2.6.Theweakeningofeconomicactivitywhichseemsprobableinthesecondhalfof1976
shouldbefollowedin1977byanewupswing,whereastheincreaseinpricesandthe
evolutionofthebalanceofpaymentswillcontinuetogivecauseforconcern.
Inviewofthedevelopments onthebalanceofpaymentsaccount,budgetarypolicy
for1976hasagaintakenonamorevigoroustone.Duetoanespeciallystronggrowth
inrevenuethenetbudgetdeficitshouldreachonlyLit9600000millionandthe
adjustedTreasuryborrowingrequirementonlyLit13800000million,i.e.10%>ofthe
grossdomesticproductasagainst12%in1975,inconformitywithCouncilDecision
76/324/EECof15March1976fixingtheeconomicpolicyconditionstobeobserved
byItaly(1).Thesestepstowardsamorebalancedmanagementofpublicfinanceare,
however,dependentnotonlyonmaintenanceoftherateofpublicexpenditurewithin
thelimitsforecast,butalsoonanabsenceofdelayinthereceiptofexpectedtax
revenue.Theywillnotbepossibleunlessthegovernmentusesallmeansnecessaryto
achievethesetwoobjectives.Particularcaremustbetakentoseethatthetreasury
borrowingceilingisnotexceededsincethereisariskthatthiscouldonlybecovered
bysimplyincreasingthemoneybase.
Determinedactionappearsvitalin1977toreducetherateofcostandpriceincreases
andtoavoidanewdeteriorationinthebalanceofpayments.Theseobjectiveswillnot
beachievedunlessincomesrisemuchlessrapidlythancanasyetbeforecast,and
unlessbudgetarypolicyseekstomoderatehomedemandsoastoreducefurtherthe
treasurynetfinancingrequirementsasaproportionofthegrossdomesticproduct.
Thismeansthattheslowdownforeseeninthegrowthoftaxrevenuemustbeoffsetas
faraspossiblebytheinstitutionofeffectivemeasurestoreducetaxevasion.Inaddition
publicexpendituremustgrowataratesubstantiallylessthanthegrossdomestic
productinvalueterms,whichcanbeachievedbyreconsideringcertainexpenditure
items.Parallelwiththesemeasurestheremustbeanattempttoreducefurtherthat
partofthetreasurynetfinancingrequirementwhichismetbyincreasingthemoney
base.
Netherlands
2.7.Asaresultinparticularoftherapidupswinginexternaldemand,productionshould
increaseduringthesecondhalfof1976andin1977atarateapproachingthe
underlyinggrowthofthetrendsinproductivecapacity,withouthoweverbringingabout
anyappreciablefallinunemployment .Thereshouldbeasubstantialincreaseinthe
currentbalanceofpaymentssurplus.Theriseinpricescouldwellremainhighandthe
propensitytoinvestinadequateunlessthereisamarkedslowingdownintherise
ofcosts.
Centralgovernmentbudgetarypolicyfor1976hasbeenmarkedbythedeferred
effectofmanyimportantmeasurestosupporttheeconomyandcombatstructural
unemployment introducedearlierandbythegrowthoflarge-scalecurrenttransfer
expenditure.Sincethegrowthofrevenue,bothfiscalandnon-fiscal,hasprovedlower
thanforecast,thenetborrowingrequirementwillbeintheregionofFl15000million,
thatisnearly6-5°/oofthegrossdomesticproduct,ascomparedwith3-8%in1975.
Thisfigurepresupposesthattheexcessexpenditurealreadycarriedoutcan,asforecast,
beentirelyoffsetbysimilarreductions.Strictmanagementatcentralgovernmentlevel
isallthemorenecessaryasthedeteriorationoflocalauthorityandsocialsecurity
financesistendingtoincreaseandasthefinancingofthepublicdeficitasawhole
willnecessitateconsiderablerecoursetomonetarymeans.
(»)OJNoL77,24.3.1976,p.16.

20.8.76 OfficialJournaloftheEuropeanCommunities NoL229/7
For1977,itisnecessarytoreducethecentralgovernmentnetborrowingrequirementso
astomovetowardsthemedium-termobjectiveenvisaged.Thispolicyimplieseffective
implementation oftheprovisionsplannedbythegovernmentandpresentedto
ParliamentinJune1976tomodifythemedium-termtrendofexpenditure .Thisisall
themoretruebecausethemeasurestostimulateinvestment,proposedatthesametime,
haveasignificantbudgetarycost.Inviewofthedeficitoftheothergovernmentsub­
sectors,whoseunderlyingdeteriorationcanbesloweddownonlybyreviewinga
numberofpriorities,thepublicdeficitasawholewillstillrequiremonetaryfinancing,
whosescaleshouldbelimitedasfarasispossible.
Belgium
2.8.Inthesecondhalfof1976,thestrengtheningofdomesticandexternaldemandshould
ensuretherapidexpansionofproductionwhichshouldcontinueataslightlyslower
ratein1977.Unemployment shouldfallonlyslowly.Theslowingdownincostand
priceincreasescouldbejeopardizedin1977ifthemeasuresofrestraintatpresentin
forcearenotrenewed.Thebalanceofpaymentssurplusoncurrentaccountcould,
nonetheless,remaininsurplus.
Inviewoftheslowdowninrevenuegrowthresultingfromthemeasurestoaccelerate
taxcollectioncarriedoutin1975,budgetarypolicyin1976hasendeavouredtobring
aboutanappreciablereductioninthegrowthofexpenditure ,despiteafurtherincrease
inunemployment expenditureandthecarry-overinto1976ofinvestmentexpenditure
decidedonpreviously.Providedexpenditureunderthesupplementary budgetis
containedwithinverystrictlimits,thecentralgovernmentnetborrowingrequirement
couldbekeptdowntoBfrs140000million,higherinabsolutetermsthanthe1975
figure,butthesameproportionofthegrossdomesticproduct.Afurtherdeterioration
inthefinancesofthesocialsecurityandlocalauthoritysectors,andinsomepublic
undertakings ,seemsinevitable,sothatthefinancingofthepublicdeficittakenasa
wholecouldwellgiverisetoanincreaseinthemonetarybase.
For1977,itisessentialthatdeterminedactionbecontinuedtoreducetherateofcost
andpriceincreases.Furthermore ,inthebudgetaryfield,soastooffsetasfaras
possibletheprobableworseningofthedeficitsofsocialsecurity,localauthoritiesand
somepublicundertakingsandtoavoidexcessivetensionsonthefinancialmarkets,
effortsshouldbemadetoachievearelativereductioninthecentralgovernmentnet
borrowingrequirementbylimitingstrictlytherealgrowthofcurrentexpenditureand
transferpayments.Similarly,energeticactionshouldbeundertakentocontrolthetrend
ofsocialsecuritybenefitsandthefreedomofactionofthelocalauthoritiessoasto
avoidanylastingdamagetothefinancialstructuresofthesesub-sectorsandtothe
medium-term objectivessoughtforgeneralgovernmentasawhole.
Luxembourg
2.9.Therecoveryinexternaldemandshouldcontinuetosupporteconomicactivity
throughoutthepresentyear,thoughatemporaryslowdownseemsprobableinthe
secondhalfoftheyearandduringpartof1977.Theriseinpricesshouldcontinueto
moderateslowly.
Despitetheappreciabledecelerationinthegrowthofexpenditure,thebudgetout-turn
in1976willprobablyshowadeficitoftheorderof0-6%ofthegrossdomestic
product.Aseconomicactivitygraduallyreturnstonormal,revenuewillforthemost
partnotreverttosuchahighgrowthrateasinthepastandtheyieldfromcorporation
taxwillreflectthelossessufferedbytheironandsteelindustryin1975.Providedthere
isprudentmanagementofoperatingexpenditureandtransfersofincome,thebudget
out-turnin1977shouldcomeclosetoachievingequilibrium,inaccordancewiththe

NoL229/8 20.8.76 OfficialJournaloftheEuropeanCommunities
desirablemedium-term trend.Aslightdeficitcouldhoweverpersistasaresult
ofthecarry-overoflosseswhichwillcontinuetoaffecttheyieldofcorporationtax.
Asin1976,thelong-termfinancingofthisdeficitseemsassuredbyinstitutional
investors.
UnitedKingdom
2.10.Duringthesecondhalfof1976thechiefsourceofgrowthwillcontinuetobeexports
while,apartfromstocks,domesticdemandwillremainrelativelyweak.Inadditionthe
recentdeclineoftheexchangeratewillnotonlyhaveanunfavourableeffectonprices,
whichcannolongerbeexpectedtodeceleratesubstantially ,butalsoonthedeficiton
thecurrentbalanceofpaymentswhichmightwellincreaseintheshortterm.In1977
appreciableprogressshould,onthecontrary,bemadeinthesefieldsprovidedthatthe
exchangerateisstabilized,thatincomesrestraintiscontinued,andthatthemoney
supplyissuitablycontrolled.Therapidgrowthofexportscombinedwithamodest
increaseininternaldemandislikelytoensureasteadyrateofgrowth.
Budgetarypolicyfor1976/77hasbeenfashionedinsuchawayastoexercise
moderationoninternaldemandandontheincreaseincosts.Providedthattheceilings
imposedonalargepartofexpenditureduring1976/77arerespected,theborrowing
requirementofthecentralgovernmentandthepublicsectormaybebelowtheinitial
forecast(£10400millionand£12000millionrespectively).
Theelasticityofpersonalincometaxshouldremainhighandcorporationtaxshould
reverseitsrecentdecline.Evenifthepublicdeficitdoesturnouttobesmaller,its
financingwillrequirecarefulhandling,giventheneedforastrictmonetarypolicy.
Thebudgetarypolicyfor1977/78shouldaimatasubstantialreductioninthepublic
deficitandacontinuingmoderationofincomegrowth.Themaintenanceofstrict
ceilingsonexpenditurewillbeallthemorenecessaryasthecontributiontoreceipts
ofpersonalincometaxwillbelessbuoyantandtheyieldofcorporationtaxissubject
toconsiderableuncertainty.Thereductioninthepublicdeficitwilldiminishtheriskof
excessliquidityjoepardizingthereturntostabilityandexternalequilibrium .