7. 2. 83 Official Journal of the European Communities No C 33/9 
Opinion on the Commission's Annual Economic Report 1982/83 
The text referred to the Committee has not yet been published in the Official Journal 
of the European Communities. 
A. LEGAL BASIS FOR THE OPINION 
On 26 October 1982 the Council referred the abovementioned Report to the Economic 
and Social Committee in accordance with Article 198 of the Treaty establishing the 
European Economic Community. 
B. OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE 
The Economic and Social Committee prepared its opinion on the above matter at its 
203rd plenary session held in Brussels on 15 and 16 December 1982. 
The full text of the opinion is as follows: 
THE ECONOMIC AND SOCIAL COMMITTEE, 
Having regard to the Treaty establishing the 
European Economic Community, and in particular 
Article 198 thereof, 
Having regard to the resolution of the Council and 
the representatives of the Governments of the 
Member States of 22 March 1971 on the attainment 
by stages of economic and monetary union in the 
Community, 
Having regard to the Council Decision of 
18 February 1974 on the attainment of a high degree 
of convergence of the economic policies of the 
Member States of the European Economic 
Community (!), 
Having regard to the Commission's Annual 
Economic Report 1982/83, 
Having regard to the request made by the Council of 
the European Communities on 26 October 1982 for 
an opinion on the Commission's Annual Economic 
Report 1982/83, 
Having regard to the decision taken by its Bureau on 
27 October 1982 instructing the Section for 
Economic and Financial Questions to draw up an 
opinion on the Commission's Annual Economic 
Report 1982/83, 
Having regard to the Committee's opinion on the 
economic situation in the Community (mid-1982) (2) 
and the accompanying Report of the Section for 
Economic and Financial Questions, 
Having regard to the report submitted by the 
rapporteur, Mr Goris, including its Appendix on the 
economic situation in Denmark, 
(i) OJ NoL63, 5.3. 1974, p. 16. 
(2) OJ No C 252, 27. 9. 1982, p. 31. Having regard to the opinion adopted by the Section 
for Economic and Financial Questions at its 73rd 
meeting held on 1 December 1982, 
Having regard to the discussions on 15 December 
1982 and during the 203rd plenary session held on 
15 and 16 December 1982, 
HAS ADOPTED THE FOLLOWING OPINION 
by 82 votes to 21, with 37 abstentions: 
1. Economic situation in the autumn of 1982 — 
outlook for 1983, as described by the 
Commission 
1.1. 1982: 
In general, the economic situation in the 
Community has deteriorated since the opinion of 
1 July 1982. The real growth rate of 2 % envisaged 
for 1982 in the Commission's previous report must 
now be revised downwards to 0-3 %, so that one can 
speak of stagnation. The very high level and the 
instability of interest rates are in the Commission's 
view mainly responsible for this. Many enterprises 
have been caught in unexpectedly difficult financial 
situations and they now need a lot of convincing 
that lower interest rates are a durable prospect, 
before taking positive investment, stock-building 
and employment decisions on that basis. 
Unemployment has further worsened: 9-4% of the 
working population is without a job, compared with 
7-8 % in 1981. The situation continues to vary greatly 
from one Member State to another, with national 
unemployment rates ranging from 1-2% 
(Luxembourg) to 13-9 % (Belgium). 
No C 33/10 Official Journal of the European Communities 7. 2. 83 
No improvement can be expected for public 
finances. On the contrary, public-sector deficits are 
still rising. As in 1981, these deficits will amount to 
5 % of the Community's GDP. It should be noted 
here that the divergence between the Member States 
will probably be somewhat smaller, after the 
increase in 1981. 
The rate of inflation, on the other hand, is declining 
(10-5%, compared with 11-8% in 1981). Here it 
must, however, be emphasized that inflation rates 
still vary greatly from one Member State to another, 
although this divergence, expressed as a standard 
deviation, is decreasing slightly. 
The balance of payments on current account is 
expected to show a more favourable trend than in 
1981; the deficit is now estimated to be slightly over 
US $ 15 000 million (0-4 % of GDP, compared with 
US $ 20 800 million — 0-8 % of GDP in 1981). 
1.2. 1983: 
The prospects for 1983 can be regarded as somewhat 
more positive, since the Community can expect 
about 1 % real growth, although the rates will vary 
greatly between the individual Member States, from 
-0-3 % in the Netherlands to 2-5 % in Ireland. The 
slight increase in growth now forecast is based on 
the expectation of a slight revival in private 
consumption and investment as a result of the 
anticipated fall in inflation and interest rates. If this 
materializes and business profitability improves, 
investment could rise by 0-6% in 1983 ( — 3-0% in 
1982). Demand could also be bolstered by limited 
restocking. 
In contrast with these somewhat more promising 
prospects (compared with 1982), the outlook for 
public finances and employment is not good. Indeed 
it is to be feared that public-sector deficits will 
continue to increase on account of the poor growth 
rate. As some Member States have taken or are 
planning measures to stem these mounting deficits, 
the deficit for the Community as a whole, as a 
percentage of GDP, could remain stable. 
Unemployment will rise in 1983 and probably pass 
the 12 million mark (10-3%, compared with 9-4% in 
1982) on account of a further slight fall in 
employment and an increase in the labour supply. 
As mentioned above, it is expected that the rate of 
inflation will continue to fall, in fact more rapidly 
than was anticipated at the beginning of the year. 
On the basis of a forecast drop in import prices and 
domestic costs in some countries, an average 
inflation rate of 8-8% is now expected in 1983. The 
divergence between the Member States will remain 
considerable in 1983. Although a slight improvement in world trade is 
anticipated, external trade is not expected to make a 
significant contribution to growth in the 
Community. In 1983 the terms of trade will continue 
to shift in the Community's favour; current account 
equilibrium could be achieved. The differences 
between the countries will, however, remain great. 
1.3. The social and economic situation in the 
Community has become worse since the opinion of 
1 July 1982; the situation on the labour market has 
deteriorated, growth is but hesitant and confidence 
in a lasting recovery has dwindled on account of the 
international tensions and the low level of external 
demand. The Committee considers the 
Commission's forecasts as such to be still too 
optimistic. Like the Commission, the Committee 
does not rule out the risk of a deflationary spiral. 
The signs of a revival in economic activity which 
were to be observed at the end of 1981 have now 
disappeared and 1983 threatens to be the fourth year 
of recession. 
2. The Commission's economic strategies 
2.1. The prospects outlined above of economic 
stagnation and decline in the Community are in the 
Commission's view due to the increasing structural 
rigidity in the economic and social spheres, which 
makes it impossible to respond rapidly and 
appropriately to changes in economic 
circumstances. 
The Commission notes that there is no generally 
accepted strategy for the modernization of the 
Community's economic structures. Three types of 
approach are in fact possible: 
— first, the view that provided rigorous financial 
and adjustment policies are persevered with, a 
spontaneous improvement in real economic 
performance will be forthcoming, although the 
time-lags are uncertain and probably quite 
long, 
— secondly, the view that, while rigorous financial 
and adjustment policies are necessary to avoid 
re-exciting inflationary expectations, they risk 
being insufficient to induce a spontaneous 
recovery, and that therefore some policy 
measures should support economic activity in 
the macroeconomic and structural domains, 
7. 2. 83 Official Journal of the European Communities No C 33/11 
— and thirdly, the view that the economy has 
entered a period of prolonged quasi-stagnation 
in output and that an essential policy task is now 
to adapt to this reality in order to reduce 
disruptions and inequalities deriving from it. 
In the Commission's view, none of these 
socio-economic approaches on its own is capable of 
solving the present difficulties. It therefore proposes 
a policy framework based on the idea that lasting 
recovery can only be achieved by a diversified set of 
measures which vary according to the different 
economic situations of the Member States and draw 
on all of the abovementioned approaches. 
Specifically, the Commission argues that radical 
reforms are needed to restructure the Community 
economy and in particular to improve the 
employment situation; these reforms include a 
reduction in excessive public spending, the 
promotion of profitable investment and a 
considerable stepping up of job creation. In this 
connection the Commission emphasizes the role of 
greater moderation and flexibility in real wages. To 
the extent that this policy threatens to reduce 
demand temporarily, such a trend would have to be 
countered by monetary and if possible budgetary 
measures (interest rates and taxation) to support 
demand. 
2.2. The Committee agrees with the Commission 
that measures to bring about a cyclical upturn — 
whatever results they achieve — will not on their 
own provide an adequate solution to the problem of 
unemployment. 
The Committee therefore considers that policy 
priorities must be fixed within a structural context. 
Care must be taken here to ensure that measures that 
are expected to be effective in the short term do not 
impede the necessary structural adjustments. 
Priorities must be fixed because it is impossible to 
achieve the economic and social objectives 
simultaneously. 
The Committee therefore considers that priority 
must be given to the maintenance of employment 
and the creation of new jobs which lead to growth in 
GNP, subject of course to budgetary and (internal 
and external) monetary constraints, which may 
naturally vary from one country to another. 
The Community endorses: 
— the strategy recommended for this purpose by 
the Joint Council (Eco/fin. Soc) on 16 November 1982, which comprises 'the 
promotion of economic and financial stability, 
an increase in investments, promotion of the 
competitivity and profitability of industry, 
completion of the common market and positive 
labour market adjustments', 
— the conclusions reached by the European 
Council held on 3 and 4 December 1982, which 
fully endorsed the need for a comprehensive 
strategy for achieving a marked improvement in 
the employment situation through the creation of 
durable new jobs. 
The Committee is aware that this choice of priorities 
may result in other policy objectives being 
frustrated, depending of course on the situation of 
the Member States. 
The Committee considers, however, that it would be 
quite inappropriate to put one's faith in a 
spontaneous economic recovery and an upturn in 
employment, and then just wait for this to happen; 
rather, the Member States and the Community must 
pursue a vigorous economic policy that is not only 
conducive to the gradual bringing-down of inflation 
but is above all geared to a revival of effective 
demand, particularly investment. 
In the Committee's view, making a success of this 
strategy presents a challenge which calls for an 
enormous effort on the part of all those involved in 
the policy, in particular employers, workers and 
government. It is not only the interests of the social 
partners but of society in its entirety, both in the 
individual Member States and the Community as a 
whole, that are at stake. 
2.3. The Commission's economic policy 
proposals 
2.3.1. Budgetary policy 
The Committee agrees with the Commission that the 
action to put public finances on a sound footing — 
action which will vary from one country to another 
— must include a change in the pattern of spending. 
This change should be in favour of expenditure 
which boosts economic development. 
In general, the Committee can also go along with 
the Commission's views on changes in the tax 
structure to promote investment and employment. It 
would, however, point to the need to be careful that 
such changes do not have regressive effects. 
No C 33/12 Official Journal of the European Communities 7. 2. 83 
The same applies to the Commission's call for 
higher charges for the use of public-sector facilities. 
Finally, the Committee would reiterate that, 
although public finances will inevitably have to be 
consolidated in the medium term, short-term 
economies by the public authorities must not be 
allowed to reinforce deflationary factors. This is 
particularly pertinent since economy measures may 
be outweighed by the resultant decline in incomes 
and output, leading to a loss of tax revenue, so that 
the public-sector deficit continues to grow despite, 
and even because of, the economies. 
2.3.2. Investment policy 
As the Committee has already remarked, the 
Governments of the Member States must create the 
basic conditions which will encourage investment, 
with the emphasis on new job-creating investment in 
growth areas. For this very reason the various 
government plans incorporate incentives for 
additional investment. Such a policy should have 
positive effects in the short term; really significant 
results, however, will only be forthcoming as 
confidence in an economic upturn grows. This 
business confidence is a decisive factor in economic 
activity. Public-sector investment, though necessary 
in certain areas, cannot alone make up for the lack 
of business confidence. 
New investments involve new technologies. In this 
connection special attention should be devoted to 
two important problems: 
— the introduction of new technologies requires the 
availability of highly-skilled manpower, which 
can be achieved by the retraining or advanced 
training of existing personnel or by a flow of 
new highly-trained manpower on to the market. 
This will mean training programmes, especially 
for employees in small and medium-sized 
enterprises which have no facilities of their own 
for further training, 
— the stimulation of programmes of fundamental 
and applied research so that the Member States 
can draw on their own advanced technology. 
Technology advisory centres should be set up to 
make advanced technology more accessible to 
small and medium-sized enterprises. More 
Community funds should be used for this 
purpose. 
2.3.3. Incomes policy 
The Committee notes that the Commission 
recommends an incomes policy confined to direct and indirect wage incomes. It cannot agree with 
such an approach. 
In so far as the Commission recommends a different 
wage/profit relationship in order to stimulate 
investment, the necessary inferences should be 
drawn with regard to workers' rights in respect of 
the ownership and management of firms. 
Furthermore, it is essential that the economic policy 
advocated should not in any way impair the 
purchasing power of the least well-off sections of 
society, particularly as far as the systems of social 
protection are concerned. 
The Committee has always been aware that some of 
these questions fall within the sphere of free 
collective bargaining at national level between the 
two sides of industry. In its opinion of 1 July 1982 
the Committee stressed that: 
'Although due account has to be taken of the need 
for a competitive economy, stable public finances 
and moderate incomes, Member States must not 
be allowed to engage in competitive reductions in 
incomes. Such action could have real and 
cumulative deflationary consequences at 
international level.' 
2.3.4. Employment and the adjustment of labour 
costs 
Moderation of the rise in labour costs and 
improvement of the operation of the labour market 
must be seen in the light of the need to create jobs. 
Measures to reorganize working time could also 
make a contribution here. 
The recent Jumbo Council also considered this 
topic. The Council agreed that a reorganization and 
a reduction of working time would only have a 
positive effect on employment if they did not affect 
the competitiveness of firms. Other preconditions 
mentioned were that there should be a flexible 
labour market and that specific and sectoral 
features, especially the size of firms, should be taken 
into account. 
These conditions have already played a role in the 
actual proposals for reducing working time put 
forward in a number of Member States. It is obvious 
that account must first be taken of collective 
bargaining procedures and practices in the Member 
States. 
The Community will have to seek Communitiy-level 
coordination in the short term, and ultimately a 
7. 2. 83 Official Journal of the European Communities No C 33/13 
Community policy for the reorganization of 
working time. 
2.3.5. Monetary policy 
As regards the international monetary system, the 
Committee has in the past given a large measure of 
support to the Commission's proposals. In its 
opinion of 1 July 1982, the Committee called for a 
lowering of interest rates, and this has taken place to 
some extent. In the same opinion, as well as in its 
opinion of 29 April 1982, the Committee also made 
an urgent call for extension of the European 
Monetary System. The Committee accordingly 
regrets that the Commission and the Council have 
failed to take any further action in this sphere. 
2.3.6. Convergence and interdependence 
The Commission stresses the interdependence of the 
economies of the individual countries in the present 
international situation and calls for an improvement 
in the coordination of the economic policies of the 
industrialized countries. 
The Committee dealt with this matter in detail in its 
opinion of 1 July 1982. Because of the seriousness of 
the economic and social situation, the Community 
has to react rapidly and effectively. It is clear that it 
must also do so because the political room for 
manoeuvre of individual Member States is limited 
and Member States cannot solve their problems in 
isolation. Collective solutions can sometimes be 
found at European level or they may emerge from 
commitments entered into under the Treaty of Rome 
and the decisions deriving therefrom. 
The Community's role in such an economic policy is 
to coordinate and align national economic and 
social policies. It must prevent the economic policy 
measures of the different Member States from 
clashing or even cancelling each other out. 
The following action is required: 
— growth must be encouraged and jobs must be 
safeguarded over a long period or permanent 
new jobs created, 
— current and planned public programmes of the 
Member States aimed at structural adjustment of 
supply and demand conditions must be 
coordinated by the Council so that there is an optimum impact in terms of job creation and 
inflationary effects are avoided. 
The following sectors, in which there is unsatisfied 
demand, should be covered in particular: 
construction, energy, transport and 
communications, environmental investments, social 
infrastructure. 
The subsidization policies of the various Member 
States must not, however, safeguard or create jobs 
(or serve the other purposes mentioned above) in 
one country at the expense of jobs or the 
competitiveness of firms in another country. Only 
those Member State subsidies which are temporary 
and taper off over time should be permitted, subject 
to the provisions of Articles 92 and 93 of the EEC 
Treaty. 
The Committee would draw particular attention to 
the need for transparency in existing subsidies, as 
emerges from the sectoral analyses carried out by 
the Committee's Section for Industry, Commerce, 
Crafts and Services. 
Finally, in connection with the above, the 
Committee would point out that coordination is 
necessary for the restructuring of the various sectors. 
In this context it is vital that the economic 
potentialities of the Community's large internal 
market be fully utilized. 
The Committee would stress that the tendency to 
resort to protectionist measures to resolve national 
economic problems must be resisted. Every effort 
must therefore be made to remove the remaining 
technical barriers to trade and differences in fiscal 
conditions in order to bring about more equitable 
conditions of competition between undertakings on 
the domestic market. 
Although considerable success has been achieved 
with the integration of the market in goods since the 
Community was set up, no major progress has been 
made in the services sphere. In the transport, 
insurance and banking sectors, efforts will therefore 
have to be stepped up to establish a single 
Community domestic market. 
As regards the international situation, attention 
must again be drawn to the growing worldwide 
protectionism which is severely hampering the 
expansion of world trade. The Committee is against 
No C 33/14 Official Journal of the European Communities 7. 2. 83 
this trend and wishes to see a return to strict The realization of a common market in goods and 
adherence to the rules of international trade, services and the coordination of national economic 
particularly within the General Agreement on policies (with a view to convergence) must go hand 
Tariffs and Trade (GATT). in hand with the coordination of monetary policy. 
Done at Brussels, 15 December 1982. 
The Chairman 
of the Economic and Social Committee 
Francois CEYRAC 
APPENDIX 
to the opinion of the Economic and Social Committee 
Defeated amendments 
The following amendments, tabled in accordance with the Rules of Procedure, were rejected 
during plenary sessions discussions: 
Section 2.3.1 
The paragraph on page 9 to read as follows from the fourth line: 
'... consolidated in the medium term, it is necessary to prevent the size and excessive 
abruptness of short-term economies by the public authorities from reinforcing deflationary 
factors.' 
(rest of paragraph deleted). 
Reasons 
The text is self-explanatory. 
Voting 
For: 45, Against: 60, Abstentions: 8. 
Section 2.3.3 
Replace the first two paragraphs of this point by the following: 
'The Committee shares the Commission's desire to tackle the wage/profit relationship 
through the development of economic activity and the creation of new wealth. It also agrees 
that any adjustment of wages must be spread over a period of time so as to avoid the risk of 
deflation. 
The Committee notes that greater flexibility of labour costs in relation to profits could be 
combined with greater access to equity shares only if account is taken of the application of 
current national legislation. 
It would also point out that the adaptation of "social benefits and regulations" is already in 
progress in some Member States and that the need for financial equilibrium in the social 
security accounts is a problem all the Member States are confronted with, albeit in varying 
degrees.' 
Reasons 
The text is self-explanatory. 
7. 2. 83 Official Journal of the European Communities No C 33/15 
Voting 
For: 44, Against: 75, Abstentions: 9. 
Section 2.3.4 
Last sentence of last paragraph to read as follows: 
'Measures to reorganize working time could also make a contribution here, in certain cases, 
but not in a general, across-the-board way.' 
Reasons 
The text is self-explanatory. 
Voting 
For: 32, Against: 76, Abstentions: 11. 
Section 2.3.4 
Delete the last paragraph. 
Voting 
For: 32, Against: 76, Abstentions: 11. 
Section 2.3.6 
In the final paragraph, replace 'jobs must be safeguarded over a long period' by 'the stability of 
employment must be promoted'. 
Reasons 
The text is self-explanatory. 
Voting 
For: 48, Against: 69, Abstentions: 9. 
The following sentences were replaced by new ones: 
Section 2.3.2, second paragraph 
'New investments involve new technologies. In this connection special attention should be 
devoted to two important problems:'. 
Section 2.3.6, penultimate paragraph 
The Committee is against this trend and trusts that these trade barriers will be reduced 
through multilateral negotiations, particularly within GATT.