29.12.86 C^fficial]ournal of the European Communities NoC^B29 
opinion on the Commissions Annual Economic report 1986 to 1987 
(86^C^^10) 
C0n6Novemberl986 the Council decided to consult the Economic and Social Committee, 
in accordance with Council Decision No 12^B7^EEC of 18 February 1974on the attainment 
of a high degree of convergence of the economic policies of the Member States of the 
EuropeanEconomic Community^),amended by Decision No 787^7^BEEC^)and particularly 
Article^thereof, on the abovementioned report. 
TheSectionforEconomic,EinancialandMonetaryQuestions, which was responsible for 
preparing the Committee^sworl^ on the matter, adopted its opinion on 18 Novemberl986. 
The rapporteur was Mr Ceuenich, 
At its241st plenary session (meetingof 27November 1986) the Committeeadopted the 
following opinion by 92 votes to ^7 with 11 abstentions^ 
1. introduction 
The Committee feels it necessary to summarise the 
Commission^sanalysisof theeconomicsituationand 
future prospects (Section 2). This logically leads on to 
various criticisms of the Commissions analysis of the 
economic situation(Section^) and also lays the foun^ 
dations for theCommittee^s assessment of theCom^ 
mission^seconomic policy proposals (Sections. 
2. TheCommission^sanalysisof theeconomicsituD 
ation 
2.1. ^o^^o^o^^r^^^ 
2.1.1. Asharp, unexpected fall in oil prices has been 
one ofthe salient features ofthe world economy in 1986. 
This development has unexpectedly eased inflation and 
balanceof^payments difficulties in the Community. 
The impact on the Community of tumbling oil prices 
hasbeencompoundedby the second major economic 
change, the marloed depreciation of the US dollar.COn 
the other hand the changes in exchange rates have made 
it considerably more difficult for European Community 
exporters to find market outlets in the dollar area. 
Thethirdcomponentin thechanging pattern of the 
international economic scene has been the fall in interest 
rates. 
2.1.2. COn balance, these three trends createabetter 
mediumDterm foundation foramorerapidgrowthof 
the world economy.Nevertheless, despite these changes 
thegrowthrateintheCOECDareaise^pectedtobe 
about 2,^ in 1986 and 1987,afigure slightly down 
on that for 198^. 2.1.^. The 66^cut in oil prices (expressed in ECUs) 
has unprecedentedly eased the pressure on oiLconsum^ 
ing countries.The oil bill of the Community asawhole 
has in fact fallen by approximately 1,8^ of CD^. 
Nevertheless, the fall in oil prices is expected to lead to 
a substantial rise in oil consumption and this, coupled 
with cutbacks in nonCO^ECsupplies, should ultimately 
push up oil prices again. 
2.1.4. The collapse in oil prices has considerably 
sloweddowninflationandthishasmadeiteasierto 
alsobringdownnominal interestrates. Realinterest 
rates nevertheless remain relatively high. Lower oil 
prices and interest rates lead to higher profitability and 
this can boost investments provided demand develops 
as it should. 
2.1B0. Huge current account and budget deficits are 
adistinctive feature of the US economy.However, the 
fall in the dollar is not expected to substantially trim 
the US tradedeficit either in 1986 or in 1987 since 
importcosts initially outstripearningsfrome^ports. 
The costs of servicing the growing external debt also 
weigh heavily on the USA^scurrent account. 
Efforts to trimtheUSbudget deficit have sofar also 
been rather unsuccessful^atight US fiscal policy in the 
ne^t four years, however,would seem to be inevitable. 
2.1.6. ^orld trade in manufactures is expected to 
growmoderately in 1987. SincenonEECStates will 
probably increase their imports only very slowly, 
growth in trade is particularly dependent on expansion 
in Europe. 
No C 333/30 Official Journal of the European Communities 29. 12. 86 
2.1.7. The main threats to the world economy in 
1987 are the possible further slow-down in growth in 
the USA, the risk that oil prices might start rising again, 
and the continuing precarious situation of some major 
debtor countries. 
2.2. The economic situation of the Community and 
future prospects 
2.2.1. The above changes in the international econ­
omic climate have somewhat improved the conditions 
for faster medium-term economic growth in the Euro­
pean Community. Nevertheless these more favourable 
conditions have not yet been reflected in significantly 
higher growth rates. Growth in 1986 will only be slight­
ly up on 1985 and, if current economic policies remain 
unchanged, the 1987 rate is expected to be still no more 
than a few decimal percentage points higher than in 
1986. The average 2,8% growth rate forecast for the 
Community in 1987 is therefore significantly below the 
3,5 % target for 1986 to 1990 set under the cooperative 
growth strategy. 
2.2.2. In assessing the economic situation in the 
Community, it is important to remember that growth 
rates vary considerably from one Member State to 
another. The forecasts for 1987 are as follows: more 
than 3,0% in Italy, Portugal, Germany and Ireland; 
3,0% in Spain; approximately 2,5% in the United 
Kingdom, Luxemburg and France; and below 2% in 
the other Member States. In Greece Gross Domestic 
Product (GDP) is even likely to fall in real terms. 
2.2.3. One reason for this relatively unsatisfactory 
growth lies in the negative contribution made by foreign 
trade to real growth (estimated at more than — 1 % of 
GDP in 1986 and at -0,8% of GDP in 1987). Such 
figures primarily reflect the abrupt slackening of 
demand on the part of oil producing countries and 
exchange rate shifts. Nor has the decline in EEC exports 
been fully offset by the more buoyant domestic demand 
seen particularly in the first half of 1986. 
2.2.4. There are however some indications that the 
fall in energy prices is increasingly helping to improve 
the consumer climate. As a result, private consumption 
is becoming an important factor of economic growth 
(real increases of 3,7% in 1986 and 3,5 % in 1987). 
2.2.5. Another major growth factor is investment. 
Fixed capital investment plays the main role here (real 
increase of 6,1% in 1986 and 6,9% in 1987) whilst 
investment in the construction sector, though recover­
ing, has provided little momentum. On balance, how­
ever, it is clear that investment is expanding signifi­cantly less quickly than in earlier economic upturns. A 
more powerful investment drive is therefore still needed. 
2.2.6. It is estimated that in 1986 and 1987, domestic 
demand will rise in real terms by 3,8% and 3,5% 
respectively but that public consumption will, as in the 
past, account for a disproportionately small share of 
this increase. 
2.2.7. In 1986 average consumer price increases in 
the European Community fell to 3,7%, the lowest 
for 20 years. There are, however, still considerable 
divergences from one Member State to another, with 
Greece and Portugal, and to a lesser extent Spain and 
Italy, still experiencing relatively high inflation rates 
this year. In 1987 the average inflation rate is expected 
to fall further to 3,0 % since the situation will continue 
to improve, particularly in the four countries just men­
tioned. 
2.2.8. Favourable consumer price trends and 
improved terms of trade have, together with moderate 
nominal wage increases, led to an exceptional situation 
whereby a 2,3 % increase in real wages and an associa­
ted rise in purchasing power have been secured at no 
increase in real unit labour costs. This situation how­
ever is unlikely to recur in 1987. 
2.2.9. Employment levels are expected to rise by 
0,8% in both 1986 and 1987. Such a rise is above the 
long-term average but part of the rise can be attributed 
to specific labour-market policy measures. However, 
since the rising female participation rate is one of the 
main factors in the continuing expansion of the labour 
force, unemployment will remain extremely high, i.e. 
11,9% in 1986 and 11,7% in 1987 (EUR-12 average). 
2.2.10. As far as the different components of the 
labour force are concerned, the rising proportion of the 
long-term unemployed is a particularly vexed issue: in 
fact, about 40% of the unemployed have already been 
out of work for more than a year. Youth unemployment 
also remains very high although there are signs of an 
improvement. 
2.2.11. The economic prospects for 1987 indicate 
that the modest upturn will continue. Further growth 
nevertheless depends primarily on domestic economic 
factors since no hopes can be pinned on the export 
sector. Only a slight reduction in the currently unaccept­
able level of unemployment will be possible. 
29. 12. 86 Official Journal of the European Communities No C 333/31 
3. Comments on the analysis of the economic situation 
3.1. The Committee notes the Commission's analysis 
of world economic trends but would also like to stress 
the following points: 
— the USA's current account balance problems are 
likely to continue beyond 1987; any attempt to use 
a tight fiscal policy to correct this could push the 
current downturn in the USA into recession; 
— a further fall in the dollar exchange rate would be 
equally hazardous; 
— future growth in the European economy is likely to 
be greatly impeded by economic developments in 
the USA and by their consequent impact world­
wide; 
— the overall threat to world trade is even greater; 
protectionist tendencies are on the increase and 
unpredictable, erratic exchange rate movements 
could exacerbate uncertainty. 
3.2. The Committee wishes to make the following 
comments on the assessment of the economic situation 
in the Community: 
— it is by no means certain that average consumer 
price rises will continue to decline in 1987; 
— private consumption might be more buoyant if there 
were no further shrinkage in the proportion of 
national income accounted for by wages and sal­
aries; 
— the GDP growth rate estimates for certain econom­
ies, e.g. the Federal Republic of Germany, seem too 
optimistic; 
— a more powerful investment drive is needed, particu­
larly on the manufacturing and new technology 
fronts; 
— it is doubtful whether forecast growth rates alone 
will be sufficient to reduce unemployment in the 
coming years unless the employment goal is given 
higher priority than hitherto in national economic 
policies. The Committee, therefore, particularly 
welcomes the fact that the Commission has made 
the reduction of unemployment in a more dynamic 
European economy the central focus of its argu­
ment. 
4. Implementation of the cooperative growth strategy 
4.1. General problems of a cooperative strategy 
4.1.1. 1986 and 1987 forecasts, particularly those on 
economic growth and employment in the European Community, indicate that the economy is nowhere near 
to achieving the objectives of the cooperative growth 
strategy. A particular matter for concern is the fact that 
growth in 1986 has been relatively weak despite the 
fact that the huge drop in the cost of imports (especially 
commmodities) and the beneficial effect on the terms 
of trade have created a very favourable climate for 
higher output and higher levels of employment. 
4.1.2. The conclusion to be drawn here is that a 
favourable or at least a more favourable climate in 
areas such as prices, manufacturing costs, corporate 
profits, current account balances and budget deficits 
clearly does not automatically trigger a substantial 
quickening of the pace of economic growth. A healthier 
climate merely provides an opportunity to improve 
output and employment and this first needs to be 
exploited via economic policy. 
4.1.3. This opportunity could be exploited by imple­
menting the cooperative growth strategy—an ambitious 
policy with relatively lofty objectives. Hitherto, how­
ever, the climate for implementation of the cooperative 
growth strategy has improved more as a result of 
changes in the price structure in response to market 
situations than from progress on the policial front. 
Little has happened politically to make the implemen­
tation of the cooperative growth strategy more prob­
able. The Council decision in December 1985 and the 
talks between EEC bodies and both sides of industry 
at European level may well have achieved a high level 
of consensus on the aims of the strategy and the means 
of implementing it but they have not yet had much 
impact on the attitude of the groups involved at national 
level and on the coordination of the economic policies 
pursued by the Member States concerned. 
4.1.4. We would therefore make a number of basic 
comments on the prospects for achieving cooperative 
action by both sides of industry and the economic 
policy-making bodies of the individual States. 
4.1.5. Even in the largely Welfare State-oriented 
West European economies, economic planning and 
decision-making based on the interests of individuals 
or specific sections of society are traditionally a pre­
dominant feature. Some governments are even deliber­
ately reasserting, or giving greater scope to, this prin­
ciple and even the EEC Commission makes certain 
provision for it in its cooperative growth strategy. 
Cooperative action however goes further than individ­
ual or sectional interests in that it requires self-interest 
to be subordinated to the interests of others. Cooperat­
ive action is, therefore, only rational under certain 
circumstances, e.g. when making sacrifices prompts or 
obliges other parties to do likewise; because this is the 
No C 333/32 Official Journal of the European Communities 29. 12. 86 
only way to achieve an economic situation which is 
advantageous to all and is an improvement on that 
which can be secured by the pursuit of pure self-interest. 
In a word: sacrifices must pay. Normally, however, this 
is contingent on the others also toeing a cooperative 
line. 
4.1.6. Cooperative action does, however, conflict 
with self-interest. The greatest personal benefit is 
achieved by letting others take cooperative action whilst 
continuing oneself to pursue the path of self-interest. 
Such an attitude might, of course, be noticed by the 
other parties and lead them to discontinue their cooper­
ative action. However, not all instances of non-cooper­
ative action can be identified, e.g. cases in which no 
clear criteria for cooperative action have been estab­
lished and cases—which might well occur in the smaller 
EEC-States—where the contribution made by the indi­
vidual to the overall venture is relatively small. Non-
cooperative action is also understandable, despite the 
risk that others will cease their cooperative action, if it is 
likely to bring a short-term advantage or an apparently 
adequate advantage without any penalty. 
4.1.7. These observations demonstrate that the pros­
pects for implementing the cooperative growth strategy 
successfully can be improved. The Commission should 
accordingly: 
(a) define clear-cut criteria for cooperative action on 
the part of the groups and Member States con­
cerned; 
(b) make it clear that we are dealing with a relatively 
long-term strategy extending beyond 1990; other­
wise there is a risk that cooperative action could 
be terminated prematurely; 
(c) give due importance to the contribution of all 
Member States to the joint strategy; 
(d) consider what conclusions are to be drawn in the 
event of non-cooperative action; 
(e) bring home to each social group what advantages 
are likely to flow from its sacrifices. 
4.2. Monetary policy 
4.2.1. In 1986 the objectives of monetary policy were 
relatively easy to achieve as the sharp decline in import 
prices alone was enough to significantly curb consumer 
price rises. On average the European nations were 
therefore able to cut back on money supply expansion 
without limiting the scope for economic growth. 
4.2.2. In 1987 monetary policy objectives will be 
more difficult to achieve as the decline in import prices is unlikely to continue. What we shall have to do is to 
consolidate our success in fighting inflation. This will 
not be easy, inasmuch as the 3,5% average rate of 
inflation is partly due to the very low or, in absolute 
terms, even negative inflation rates recorded in certain 
countries. The situation is unlikely to remain stable in 
these countries—and at any rate would not be necess­
arily desirable. 
4.2.3. In order to stabilize average inflation in the 
European Community it will therefore be necessary to 
continue to curb price increases in those States where 
rates are above average. Monetary policy can in prin­
ciple only achieve this without hindering growth, if 
there is a corresponding reduction in the increase in 
costs. The conditions are favourable for this since the 
fall in inflation can continue to be taken into account 
in wage settlements. This would also bring about a 
convergence of price increases in the individual states, 
thereby permitting convergence and consistency in the 
money supply growth without having to have recourse 
to a growth-inhibiting monetary policy. 
4.2.4. The Commission points out that monetary 
policy must also provide adequate finance to secure real 
growth. But what is an adequate level of finance in 
the context of the cooperative growth strategy? The 
Committee holds the view that current growth rates in 
individual Member States should not be used as a 
starting point. Monetary targets should instead accom­
modate an inevitable, but low, residual inflation rate 
and should offer individual Member States real scope 
for growth (in accordance with the growth possibilities 
inherent in each individual country) so that achievement 
of the annual 3,5 % growth rate which the cooperative 
growth strategy sets as the objective by 1990 becomes 
possible in the Community as a whole. Higher inflation 
rates can be avoided provided a cooperative wage policy 
is pursued, as the Committee has already pointed out 
in its opinion on the economic situation in mid-1986. 
4.2.5. As the Commission has rightly noted, the trend 
in the dollar exchange rate might require a flexible line 
on short-term interest rates in Europe. This may also 
prevent an acceleration of the growth in the money 
supply. 
4.2.6. Efforts to liberalize capital transactions and to 
strengthen and expand the European Monetary System 
(EMS) are important components in improving the 
convergence of monetary and financial policies in the 
European Community and, as a result, in getting the 
Member States to undertake cooperative action. 
4.3. Fiscal policy: the room for manoeuvre 
4.3.1. The Commission has undertaken a very detai­
led analysis of trends and opportunities in the field of 
29. 12. 86 Official Journal of the European Communities No C 333/33 
public finance, concluding that fiscal policy can make 
a major contribution to the implementation of the 
cooperative growth strategy. In the Committee's view, 
fiscal policy has a key role to play since the current 
trend in private investment is not keeping pace with 
the improvement in supplyside conditions, improved 
profitability in particular. 
4.3.2. Clearly higher investment requires, besides the 
improvement in profitability, an improved level of 
demand. In the past this aspect has been secondary to 
budgetary consolidation. Good progress has been made 
recently in consolidating public sector budgets, but not 
all Member States have as yet achieved a sound ratio 
between the rise in public debt and GDP growth. Fortu­
nately, however, a few of the larger countries have 
achieved some room for manoeuvre. 
In the Federal Republic of Germany the public sector 
budget deficit has now been curtailed to the extent that 
fiscal policy can be assigned a more prominent role in 
shaping demand. The Commission rightly points out 
that a coordinated expansionary policy, necessarily 
involving Germany, would also give France and the 
United Kingdom scope for a more expansionary budget­
ary policy. The fact that Denmark and Luxembourg 
are in surplus should also be taken into account. 
The improved budgetary situation is not the only factor 
offering greater scope for expansionary fiscal policy. 
The Committee feels that there is considerable scope for 
stimulating growth and employment by restructuring 
government spending and revenue. 
4.3.3. The question of how the available room for 
manoeuvre should be used is crucial. The Committee 
sees the main requirement as increased investment in 
infrastructure, including higher spending on environ­
mental conservation and urban renewal areas where 
public investment in particular has declined consider­
ably over the last decade. Investment should also be 
stepped up in research and development, vocational 
training and training for the long-term unemployed. 
Public investment is particularly important not only 
because of its role in creating demand and employment 
but also because it enhances private investment's chanc­
es of success. Capital investment projects such as the 
channel tunnel could be funded at any rate partly by 
private investment. 
4.3.4. It is doubtful whether there is any further 
scope for tax cuts or a reduction in other charges, social 
security contributions in particular. The elimination of 
tax loopholes and subsidies might, however, make it 
possible to cut tax rates. Moreover, since Member States have different tax systems, ways of making them 
more effective in the area of job-creation could be 
investigated. 
4.3.5. Efforts to reform the tax system should also 
be directed primarily at simplification. This could be 
achieved by taking low income groups out of the tax 
net, and stopping transfer payments to them at the 
same time. Basically, there should be no reduction or 
slowdown in welfare spending until social need has been 
eliminated. This is how the Committee understands 
the Commission's comments at any rate. Measures 
designed to increase the supply of labour by trimming 
social welfare payments will therefore not be needed in 
the foreseeable future. 
4.4. Completion of the internal market and a positive 
structural policy 
4.4.1. In its opinion on the economic situation in 
mid-1986 the Committee examined at length the link 
between the effectiveness of the cooperative growth 
strategy and the completion of the internal Community 
market. The Committee stressed that a larger market 
and keener competition were likely to stimulate growth. 
Steps should of course be taken to ensure that con­
sumers also derive benefit from the advantages of an 
internal Community market. Changes in market struc­
tures will require additional consumer-policy activities, 
such as a consumer information policy and quality 
controls. The Commission should at all events pay 
greater attention to consumer interests. In its opinions 
and reports the Committee will seek to find out whether 
this has effectively been the case and whether a balance 
has been struck betweeen the various interests. The 
opinion on the economic situation in mid-1986 also 
pointed to the importance of the structural changes— 
regional and sectoral—linked to the completion of the 
internal market and called for structural measures to 
accompany the adjustment process. 
4.4.2. The Committee therefore particularly wel­
comes the fact that, in respect of the Community's own 
supply-oriented measures, the Commission points to a 
connection between the opening-up of markets and 
interventionist structural and regional policies. 
4.4.3. It is apparent that the process of real conver­
gence, i.e. the narrowing of the gap in real per capita 
incomes and unemployment rates between individual 
regions and Member States, has not only ground to a 
halt since the mid-70s but the gap has actually widened. 
However, the goal of real economic convergence has 
acquired additional importance with the enlargement of 
the Community and the acceleration of the continuous 
structural changes now taking place. 
No C 333/34 Official Journal of the European Communities 29. 12. 86 
4.4.4. Implementation of the cooperative strategy wil 
help to create a favourable macroeconomic climate for 
dynamic economic growth. However, the most disad­
vantaged regions should also seek to achieve growth 
rates above the Community average since such action 
would immediately give momentum to the process of 
real convergence in the Community. It is now incum­
bent on the European Community, more than ever, to 
implement its panoply of social, regional ans structural 
policy instruments, whilst seeking to increase their 
efficiency by better coordination between the Funds 
themselves as well as between the Funds and other 
financial instruments of the Community. The Commit­
tee would refer in this connection to the opinion on the -
Commission's 15th competition policy report and the 
opinion on the Commission's White Paper on the com­
pletion on the internal market. Both of these mention 
the link between an effective competition policy, com­
pletion of the internal market and the creation of a 
European social area. The Committee thinks that the 
completion of the internal market can only succeed if 
Community policies are at the same time given a social 
dimension. This presupposes that the Commission will 
make a detailed study of the impact of the internal 
market on workers. 
4.4.5. Social, regional and structural policies can, 
however, only have the desired effect if the measures 
are coordinated and based on analyses of the prospects 
for the individual sectors of the economy. Moreover, 
as the Commission has emphasized in its competition 
policy reports, action must also be taken to dismantle 
internal protectionism and prevent a subsidy war. 
4.5. Wage policy 
4.5.1. The Commission's cooperative strategy envis­
ages that real labour costs per head will grow on 
average by 1% in the years 1986 to 1990, with real 
wages per head growing by 1,1 %. The average growth 
in productivity per head during this same period is 
expected to be 2,3%. Since unemployment is abnor­
mally high in all Member States except Luxemburg, the 
Committee has no objection to the proposal that the 
rise in real labour costs and real wages should remain 
below productivity growth provided that, at the same 
time, (a) the other components of the cooperative 
growth strategy are systematically implemented, (b) 
investment is further increased and (c) extra jobs are 
created. The Committee is nevertheless critical of the 
aim of ensuring a significant difference between the rise 
in real labour costs and real wages on the one hand, 
and the rise in productivity on the other. The Commit­
tee would also stress that real wages must continue to 
rise and that the acceptability of real-wage moderation 
will be proportional to the impact which the cooperat­
ive growth strategy has on employment trends. 4.5.2. The Annual Economic Report 1986 to 1987 
(Table 21) indicates that real unit labour costs (differ­
ence between the increase in real labour costs per head 
and the increase in productivity per head) should 
decrease in the Community of Twelve by 0,7 % in 1987, 
as against 1,8% in 1986, a figure partly attributable to 
the fall in import prices. At the same time real labour 
costs per head in certain Member States should increase 
by about 2 to 3% in 1987. The Commission would 
recommend that the two sides of industry in these 
countries take account of employment trends and 
unemployment levels when negotiating wage agree­
ments. 
The Commission is therefore prepared to see both 
employment and unemployment rate differentials taken 
into account in wage policy settlements. However the 
Committee considers that previous movements in profi­
tability and real unit wage costs (Table 21) should also 
be taken into account since such figures give a pointer 
to future investment and employment opportunities. 
4.5.4. With regard to wage policy in the broader 
sense, the Commission propounds a number of prin­
ciples: 
First of all the Commission proposes that collective 
wage agreements should allow for changes in the terms 
of trade. More concretely, wage policy measures need to 
reflect the distinction between domestic and imported 
inflation. The Committee recognizes that this could 
be of importance, particularly if the terms of trade 
deteriorate seriously again. Steps must be taken to 
ensure that imported inflation does not have a virtually 
automatic effect on domestically-determined costs. 
4.5.5. Other Commission proposals, i.e. regionally 
differentiated wages, general pay moderation even in 
buoyant sectors, fixed-term contracts and profit-related 
wage schemes, are at present extremely radical 
measures. The social partners therefore need to engage 
in a very intensive dialogue before changes in existing 
practice can be expected in these areas, and employment 
protection measures should be maintained as far as 
possible. It is also important to take account of regional 
consequences so as not to undermine the aims of the 
common regional policy. 
4.6. Labour market measures, working time 
4.6.1. In its cooperative growth strategy the Com­
mission says that apart from the macroeconomic deter-
29. 12. 86 Official Journal of the European Communities No C 333/35 
minants of employment, there are a large number of 
microeconomic policy instruments which could stimu­
late the willingness of the corporate sector to take on 
labour. These include: 
— the reorganization and reduction of working time, 
— employment protection regulations, 
— training and retraining facilities, 
— start-up facilities for small firms, cooperatives and 
the self-employed, 
— measures to help the long-term unemployed. 
4.6.2. The idea is to make growth more employment-
creating. Steps to reorganize and reduce working time 
could also help here, provided they have a neutral 
impact on cost levels. In view of the present situation, 
particularly the disappointing results in combatting 
unemployment in 1986 and the prospects for 1987, 
the Committee considers that the cooperative strategy 
should lay greater emphasis on the reduction of working 
time and on its reorganization in the light of specific 
sectoral needs. It is also striking that the Commission 
consistently mentions the reduction of working time 
solely in connection with, and in second place to, reor­
ganization. Shorter working time would seem to be 
contingent on reorganization. The Committee, how­
ever, thinks that reduction of working hours is an 
employment-policy instrument in its own right. Work­
ing time must first be reduced before being reorganized 
in order to ensure that restructuring leads to the cre­
ation of more jobs. 
4.6.3. A joint drive for shorter hours within the 
framework of a cooperative strategy cannot solely 
reflect the aspirations of individual workers for in this 
case the jobless would lose out. Employers' interests 
should be accommodated by ensuring that cuts in work­
ing hours do not affect their costs. The Commission 
correctly points out that this can be achieved by longer 
production plant runs which often require a more flex­
ible use of labour. Social dialogue has the task of 
identifying mutually acceptable ways of deploying the 
workforce. 
4.6.4. The Commission does not propose blanket 
abolition of employment protection regulations. How­
ever, it feels that they have a particularly adverse effect 
on employment in some Member States. The matter 
cannot be discussed in detail until it has proved possible 
to identify the effects of those rules alleged to hinder 
employment. Generally, employment-protection pro­
visions are particularly important to workers in periods of high unemployment. Inter alia, workers need this 
form of social protection because it acts as a buffer 
against the income risks arising from a drive to reduce 
the working time of individuals and groups of workers. 
4.6.5. Unqualified support should be given to the 
promotion of training and retraining. Such facilities 
promote structural change in general, and make it easier 
for the jobless (a disproportionately large number of 
whom are unskilled) to find employment. Special atten­
tion should be paid to the problems of the long-term 
unemployed. 
4.6.6. The Committee endorses the Commission's 
proposal (a) to review superfluous or distorting pro­
visions which hinder the creation or expansion of small 
and medium-sized firms and (b) to devise a policy for 
overcoming such hindrances. 
4.7. International coordination of economic policies 
4.7.1. The sharp differences between the current 
account balances being run by the various nations are 
a hindrance to world trade, and economic policy must 
be coordinated more effectively at international level. 
The Commission has submitted a very informative 
analysis of the income elasticity of exports and imports 
of the countries concerned. It says that Japan in particu­
lar, and also the Federal Republic of Germany, should 
sharply expand their domestic demand. However, it is 
out of the question that Germany should act as a 
locomotive for the world economy. The requisite slow­
down in real incomes in the USA seems to be getting 
underway already; restrictive measures should be avoid­
ed so as not to jeopardize the growth in world trade 
any further. 
4.7.2. Against this background, the debt problem 
besetting a large number of developing countries will 
take a turn for the worse if Europe and Japan fail to 
expand their economies more vigorously and so play a 
more active role in world trade. The cooperative growth 
strategy should not be called into question if it leads to 
a sharp deterioration in the Community's balance on 
current account. Current account deficits in the Euro­
pean Community are the necessary counterpoint of 
current account surpluses in the developing countries. 
Unless their debts are written off, the developing 
countries can only eliminate their excessive debts by 
running current account surpluses. 
4.7.3. It is to be hoped that the results of the new 
GATT Round will help to improve the balance of world 
No C 333/36 Official Journal of the European Communities 29. 12. 86 
trade. One fundamental international trade rule that 
needs to be emphasized over and over again is that 
protectionism must be fought against as a matter of 
principle. Priority must be given to GATT or bilateral 
negotiations that seek to scrap any existing protectionist 
practices. 
4.8. Strengthening the social dialogue 
4.8.1. The Commission is fully alive to the import­
ance of improved social dialogue. It correctly shows 
how the past absence of social dialogue has contributed 
to current problems. The importance of the social dia­
logue is that it is conducive to a climate of confidence, 
enabling all concerned to act positively rather than 
defensively. 
4.8.2. In principle, the social dialogue should cover 
all aspects of the cooperative growth strategy. It should 
take place at both sectoral level and the level of the 
economy as a whole. As the body empowered by the 
basic EEC Treaties to advise the other Community 
institutions—and hence as the foremost platform for 
social dialogue—the Economic and Social Committee 
advocates social dialogue at all levels and in all forms. 
4.8.3. The Commission correctly point out that the 
social partners also have differences of opinion at Com­
munity level. The role of the State in stabilizing econ­
omic processes should not be controversial, if only 
because in a market economy where decisions about 
production and employment are decentralized, the indi­
vidual businessman cannot assume responsibility for 
Done at Brussels, 27 November 1986. the entire system. As an individual, his scope for taking 
cooperative investment decisions is extremely limited 
because he normally has to compete against other busi­
nessmen. At the same time he cannot rely on the invest­
ment behaviour of other businessmen and, by the same 
token, on their demand for goods and services. In 
the context of a cooperative strategy, the State must 
therefore exert a stabilizing influence on demand expec­
tations. 
4.8.4. The Commission should not confine itself to 
promoting a social dialogue at Community level. It 
should rather develop machinery for evaluating, and 
thus promoting, the implementation of the cooperative 
growth strategy at national level. 
The Committee in fact shares the Commission's view 
that there is still a discrepancy between potential 
growth opportunities and the actual growth rate achiev­
ed; failure to properly implement the cooperative 
growth strategy is certainly a factor here. It must not be 
forgotten however that the cooperative growth strategy 
was only adopted in December 1985 and so by 1986 
has not really had time to be effective. More vigorous 
implementation of the cooperative growth strategy is 
however now a matter of urgency. 
The Committee therefore considers that the interim 
report on the implementation of the Community strat­
egy, which is due out in July 1987, is an absolute 
necessity. It remains to be hoped that national govern­
ments will take up the Commission's invitation and 
submit papers on the strategy's implementation. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT 
26. 5. 86 Official Journal of the European Communities No C 333/37 
ANNEX 
The following amendments were rejected by the Committee in the course of the plenary session debate: 
1. Point 4.3.3 to be reworded as follows: 
'4.3.3. The question of how the available room for manoeuvre should be used is crucial. In addition 
to the requisite reduction in entrepreneurs' charges—a matter referred to below—the Committee sees the 
main requirement as increased investment in infrastructure... private investment's chances of success.' 
Reason 
Tax rebates or reduced social security charges do not appear to be recommended. Yet Community firms 
have to contend with intolerable tax and social security charges in comparison with US or Japanese firms. 
Outcome of the vote 
For: 53. Against: 71. Abstentions: 8. 
2. Reword point 4.3.4 as follows: 
'It is possible that there is sufficient further scope for tax cuts or a reduction in other charges, social 
security contributions in particular. It is therefore vital to reduce the tax and social security burden on 
Community firms, which places them at a serious disadvantage compared with their OECD competitors. 
The elimination of tax loopholes and subsidies might also make it possible to cut tax rates...' 
Reason 
Tax rebates or reduced social security charges do not appear to be recommended. Yet Community firms 
have to contend with intolerable tax and social security charges in comparison with US or Japanese firms. 
Outcome of the vote 
For: 57. Against: 75. Abstentions: 5. 
3. In point 4.3.5 
a) Replace the passage 'Basically, there should be no reduction ... needed in the foreseeable future' by 
the following: 
'The rise in social spending should be curbed in line with the Commission's wishes. It is not right 
that households' disposable income should be increasingly eroded by the expansion of transfer 
payments. Furthermore, firms in the Community have heavier social security burdens than their 
American and Japanese competitors. A continuation of this situation can only impair the competitive­
ness of the European economy and will ultimately affect employment.' 
Reasons 
The wording of point 4.3.5 is not satisfactory. How is 'until social need has been eliminated' to be 
understood? Does this not mean postponing indefinitely any solution to a real problem? 
No C 333/38 Official Journal of the European Communities 29. 12. 86 
The view that the opinion is in line with the Commission's comments is contradicted by the text of 
the Commission's report (p. 115). 
The last sentence is meaningless. In the present unemployment situation no government is envisaging 
measures designed to increase the supply of labour ('the demand for labour' is probably what is 
meant). 
But the real problem lies in the continuous rise in employers' and workers' social security contributions, 
which is impairing European competitiveness and helping to increase unemployment. 
One cannot avoid curbing social security contributions. The essential thing is that this operation 
should be aimed at improving the employment situation so as to bring about a social consensus on 
the subject. 
Outcome of vote 
For: 49. Against: 79. Abstention: 9. 
b) Point 4.3.5 to be reworded as follows: 
'4.3.5. Efforts to reform the tax system should also be directed primarily at simplication. This 
could be achieved by taking low income groups out of the tax net, at the same time as stopping 
certain transfer payments to them, while cautiously replacing some of the direct taxes and contributions 
paid by firms by indirect charges (which should have no impact on prices, except in the case of 
imported goods). Basically, there should be no reduction or slowdown... at any rate. However, efforts 
should be made to reduce social welfare costs without impairing efficiency. (Last sentence to be 
deleted.)' 
Reason 
Tax rebates or reduced social security charges do not appear to be recommended. Yet Community 
firms have to contend with intolerable tax and social security charges in comparison with US or 
Japanese firms. 
Outcome of vote 
For: 63. Against: 66. Abstentions: 7. 
4. In point 4.6.2 
Delete the last two sentences. 
('The Committee however, thinks that... leads to the creation of more jobs.') 
Reasons 
The view expressed by the Committee does not have a sufficient theoretical or empirical basis to make it 
generally acceptable. 
No adequate theoretical or practical arguments have been advanced that could make this standpoint 
admissible, not even as a conditional or limited hypothesis and even less as a generally valid principle; 
this standpoint is expressed in fundamental terms and no regard is paid to the complexity of the 
circumstances or to the effects—direct, indirect and induced—that would result. 
Outcome of vote 
For: 49. Against: 76. Abstentions: 13.