COMMISSION RECOMMENDATION of 23 July 1975 to Member States concerning the measures to combat the recession (75/466/EEC)

I

1. The Finance and Economic Ministers, at the Council meeting of 10 July, and the Heads of State of the member governments at the European Council 16 to 17 July, have expressed their growing concern with regard to economic development in the Community.

2. The economic recession has hit all Member States longer and harder than was foreseeable a few months ago, while despite the relative success scored in the fight against inflation, consumer prices shall continue to grow fast. The fall in internal and external demand and in industrial production, the growing under-utilisation of capacity, and the deterioration of the financial position of companies have brought about, in all Member States, a very high level of unemployment, particularly of young people. Households and firms are very cautious in their decisions regarding consumption and investment. Measures put into effect in the majority of Member States in order to stimulate the economy have only had limited effects up to now. And the risk that the upturn will be delayed still further, and that the employment situation will continue to deteriorate, cannot be ignored.

3. In July of this year the Commission presented an analysis of the present situation and a series of general assessments which were approved at the meetings mentioned above.

4. The Commission takes the view that one of the principle conditions for the permanent improvement of the conjunctural situation is to restore the confidence of private consumers and firms. This necessarily supposes a stronger collaboration between social partners and between Member States in the Community.

5. The margin of manoeuvre for short-term economic policy is reduced by the persistence, in varying degree, of balance of payments deficits, of large budget disequilibria, of high levels of inflation and by the risk involved, in these conditions, in any overall macro-economic reflationary measures. It would be appropriate, from now on, that such measures be taken only by those Member States with larger margins of manoeuvre.

6. Taking into account the close commercial and financial relations of the Community with the rest of the world and because of the more parallel development of the conjunctural situation, the Community and the Member States should cooperate more closely with their most important partners with a view to reanimating world trade and stabilizing international monetary and financial affairs.

In negotiations taking place in the framework of GATT and the IMF and in the discussions with raw material producing countries, the Community must play a constructive role with a view to improving the world economic situation. In this respect, it appears important to aid the developing countries most affected by the petroleum crisis and by the world recession by financing their serious balance of payments deficits.

7. Community action at the international level, indispensable though it is, must not however delay those measures that should urgently be taken within the Community.

II

For these reasons the Commission, under the terms of Article 155 of the Treaty setting up the European Economic Community, addresses to Member States the following recommendation. 1. The Member States mentioned in the following paragraph shall take additional measures, coordinated in respect of their content and their timing, to stimulate the economic situation so as to have a discernible effect in the autumn.

2. With a view to ensuring the mutual consistency of economic policies in the Community, the greatest stimulus should be undertaken by the member countries whose positions with regard to the current balance of payments, the rise in prices, and the public finances best allow it. The Member States who currently fulfil these conditions are the Federal Republic of Germany, the Benelux countries, France and, to a lesser extent, Denmark and Italy.

3. Having regard to the need to slow down the deterioration in the labour market and to avoid the reappearance of inflationary pressures, the measures adopted should be directed towards reducing unemployment and should as far as possible be flexible and capable of reversal, so as not to jeopardize the future equilibrium of public finance.

4. To allow for the differences between the current economic, structural and institutional situations of the Member States mentioned in paragraph II.2, the measures adopted should be diversified and adopted while still aiming at the achievement of the common objective set out in paragraph 1. These measures might take the following forms: - stimulation of public sector ordering, notably by the acceleration of existing investment programmes (construction, transport and communications, protection of the environment, social infrastructure), by the adoption of new arrangements in the field of housing and urban development, and by financial support for local authority programmes;

- encouragement of private consumption, notably by the improvement of the financial situation of the poorest groups, the easing of credit for consumption and the encouragement, by offering concessions, of expenditure in the public interest, for example in energy economy;

- support of private investment, notably through re-establishment of an adequate margin for auto-financing and through running an agreed policy of moderate interest rates.

5. The more detailed definition of the measures of which only the outlines are sketched in this recommendation, must be made in a coordinated manner following the procedures agreed in the Council Decision of 18 February 1974 relative to the realization of a greater degree of convergence in the economic policy of the Member States of the EEC and notably through Articles 8 and 9.

Done at Brussels, 23 July 1975.

For The Commission

The President

François-Xavier ORTOLI