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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(78)103final.
Brussels.13March1978.
COMMUNICATION FROMTHECOMMISSION TOTHECOUNCIL
SUMMARYACCOUNTANDDEGREEOPCONVERGENCE OPTHEECONOMIC
POLICIESPURSUEDINTHEMEMBERCOUNTRIESINTHECOMMUNITY
IN1977
COM(78)103final.

TABLEOFCONTENTS
Page
FOREWORD
A.THEECONOMICPOLICYINTHECOMMUNITY IN1977 1
I.Theeconomicbackgroundatthebeginningof1977 1
II.Inadequateachievement ofeconomicpolicy 3
objectivesin1977
III.Improvedconvergence ofeconomictrendsin 5
theCommunity?
IV.Whytheeconomicrecoverydidnotcontinuein1977 9
B.THEECONOMICPOLICYINTHEVARIOUSMEMBERSTATES 16
-Denmark 16
-FRGermany 19
-France 23
-Ireland 26
-Italy 28
-Netherlands 31
-Belgo-Luxembourg EconomicUnion 33
-Belgium 33
r­
-Luxembourg 35
-UnitedKingdom 36
C.IMPLEMENTATION OFTHECOUNCILDECISION OF18FEBRUARY197440
CONCLUSIONS
STATISTICAL ANNEX

FOREWORD
Together with itscommunication ontheadjustment ofthe
economic policy guidelines for1978 theCommission herewith submits
tothe Council areport ontheeconomic policies pursued inthe
Member States last year .Insodoing ,theCommission isacting in
accordance with Article 2ofthe Council Decision of18February 1974
ontheattainment ofahigh degree ofconvergence oftheeconomic
policies ofthe Member States ofthe European Economic Community .
Atthe same time the report describes ,inaccordance with
Article 12oftheabovementioned decision ,theimplementation ofthe
decision during 1977 andassesses theconformity ofthepolicies
pursued with theobjectives set .
This report issent tothe European Parliament atthe same time
asits istransmitted tothe Council .

A.THEECONOMIC POLICYINTHECOMMUNITY IN1977
I.Theeconomicbackroundatthebeginningof1977
1.1 TheeconomicproblemsfacingtheMemberStatesofthe.
Communityatthe.beginni..gof1977wereserious:theslowingdown
ofdynamicforces,persistinginflation,risingunemployment and
largebalanceofpaymentsdisequilibria .
Following alullduringthesummer,economicgrowth
continuedinthelastquarterof1976andthefirstquarterof1977.
Thefirstsignsofaweakeningofdemandandproduction werealreadybe­
comingevidentatthebeginningof1977,andtheybecameevenclearerasthe
yearworeon.Theprospectsforastrong,self-sustaining andaccelerating
economicupswingremained(eventhen)uncertain.FortheCommunityasawhole,
assumingnochangeineconomicpolicies,theforecastwasfora3-31/2%
growthrateinrealGDP(1976:A.8%)(1).Asaresult,itwasanticipated that
theunfavourable labourmarketsituation wouldtendtocontinue.
1.2.Othermajorcausesforconcernatthebeginningoftheyearwere
thelackofadequateimprovement inInflationratesandtheincreased
divergences inpriceandcosttrendsandinpaymentsbalancesamongthe
MemberStates.Anincreaseinthe.costofoilimports,a
riseinrawmaterialandfoodprices(exacerbated bythefallinvalueof
somecurrencies )andincreasesinpublicservicechargesandtaxesresulted
onceagaininaccelerating inflationrates,whichinturnthreatenedto
pushupwagedemandsand,insomecases,toreducethegrowthofreal
disposable income.
» -
Atthebeginningof1977,theaverageCommunitygrowthratefor
consumerpricescomparedtothepreviousyearwasstillabout11-12%.
Evenlesssatisfactory wasthefactthatinflationrateswerediver­
gingwidelybetweenmembercountries;theyrangedfrom4XfortheFederal
RepublicofGermanyto21-22%inIrelandandItaly(seetable5).Theseprice
•·η/···
1)SeetheCommission'sreportontheeconomicsituationintheCommunity,.
December1976,p.27(table10),andCommunication totheCouncHconcerning
theadjustmentoftheeconomicpolicyguidelinesfor1977,C0M(77)58final
ofAMarch1977,p.5.

divergences werealsothecauseofpharpchangesinexchangerates,which
intheautumnof1976affectedmainlytheFrenchfranc,theliraandthe
poundsterling,althoughanadaptionofintervention ratesinthesnakewas
alsonecessary,(1).
1.3.Divergences inthetrendoftradebalancesandpaymentsbalances
withintheCommunitywerejustaslargeasdivergences ininflationrates.
BalanceoftradedeficitsforFrance,ItalyandtheUnitedKingdom,and
fortheCommunityasawhole,hadinthefourthquarterof1976reached
theirsecondhighpointsince1974,andtheyimprovedonlyverygradually
inthefirstquarterof1977.
1.4.,Sincetheautumnof1976,monetaryandbudgetarypolicyinthe
deficitcountrieshadbeenmainlyaimedatholdingdownpriceand-costrises,
checkingthefallinthevalue'ofcurrenciesandrestoringbalanceof
paymentsequilibria.TheMemberStateswithbalanceofpaymentssurpluses
andlowlevelsofinflationwerelookedtotobringaboutarevivalin
demandandproduction (1).
(1)CommissionCommunication totheCouncilconcerningtheadjustmentofthe
economicpolicyguidelinesfor1977,March1977,OJn°L119of12May
1977,p.22,paragraph1.3.
mmm/*mm■

II.Inadequate achievement ofeconomicpolicyobjectives in1977
2.1IntheAnnualReportontheeconomicsituationintheCommunity
layingdowntheeconomicpolicyguidelinesfor1977(prepared intheautumn
of1976),itwasassumedthat,inpursuitofthefourthmedium-term economic
policyprogramme,,anaveragegrowthrateofabout4%forrealCommunity GDP
in1977wasnecessary,providedthatpositiveinfluences,particularly
expansionary forcesoutsidetheCommunity,continuedtostrengthen (1).
However,inadjustingtheeconomicpolicyguidelinesfor1977(2),growth
targetshadtobereviseddownwards.A3.5%growthratewasforecastforthe
CommunityatthistimeontheassumptionthattheFederalRepublicofGermany
andtheNetherlands wouldachievetheirtargetgrowthratesof5%and4X
respectively .Astheyearprogressed,itbecameclearthatthetargetfigures
wouldnotbeachievedbyeitherofthesetwocountriesortheCommunity asa
whole.
2.2Inallprobability,realCommunity GDPgrewbynomorethan2%in
1977.ThegrowthratesfortheFederalRepublicofGermany;Franceandthe
Beneluxcountrieswillprobablybeabout2.5%thatforItalylessthan2%,
andtheUnitedKingdom'sGDPwillprobablyhaveshownlittleornogrowth.
OnlyIrelandregistered ahighrateofgrowth(51/2X)(seetable1).
Thedifference betweengrowthratesforGDPand"finaldomesticdemand
showsthatinmanyMemberStates,theforeignsectorcontributed tooverall
growth.OnlyinIreland,Luxembourg and,especially,theNetherlands,did
realdomesticdemandincreasefasterthanrealGDP.Withoutthepositive
contribution oftheforeignsector,thegrowthrateofrealCommunity GDP
wouldhavebeenevenlower(3).
•••/••*
(1)Annual .ReportontheeconomicsituationintheCommunity andeconomic
policyguidelinesfor1977,OJNoL358of29December1976,paragraph3.4
(2)Commission Communication totheCouncilconcerning theadjustmentof
theeconomicpolicyguidelinesfor1977,March1977
(3)Theforeignsectorcontribution (difference betweenimportsandexports
ofgoodsandservices)tothegrowthofrealGDPwasnegative(-0.4%)
in1976.

2.3 In1977thenumberofregistered unemployed increasedbya
further600,000intheCommunityto5.7million,whichcorresponds to
arateof5.4%oftheworkingpopulation (1976:5.0%).AllMemberStates
werenotaffectedbythe.deterioration intheemploymentsituation.Thus
theFederalRepublicofGermany/IrelandandtheNetherlands succeededin
containing orreducingthenumbersoutofworkandtheunemployment rate."
However,incertainotherMemberStatestheincreaseinunemployment has
beencheckedinthecourseofthepastfewmonths,thankstothemeasures
adoptedwithinthe'frameworkoftheemploymentpolicy.
Theproportionoffemaleunemployment roseeverywherein1977.The
numberofyoungpeopleoutofworkreached2millionintheCommunity.Their
percentage ofthetotalexceeded 40%inthemajorityofcountrieswiththe
exceptionoftheFederalRepublicofGermany(seetable5).
2.4 ThetargetssetintheAnnualReportforreducingtherisein
consumerpricesin1977(from10%toabout7-8%asaCommunityaverage)also
rapidlyprovedtooambitious (seetable1).Certainspecialfactors(risein
materialsprices,delayedeffectsofthedepreciation ofsomecurrencies,
increasesinpublicsectorchargesandtaxes)continuedtomakethemselves
feltduringthefirstpartoftheyear.Inthefirsthalfof1977,thegrowth
rateintheconsumerpriceindex(recalculated asanannualrate)wasstill
ashighas11%fortheCommunityasawhole.Inthesecondhalfoftheyear/
theeffectsofthestabilization measurestakenbegantomakethemselves
felt;theannualrateforthisperiodwassome7.5%.Costandpriceincreases
sloweddown,particularly intheUnitedKingdom,IrelandandtheBenelux
countries .
Ifonetakesthetrendofinflationratesthroughout theyear,
andnottheannualaverages,itappearsthatthetargetsforreducingthe
riseinpricesin1977irPcomparison withtheinitial figureshavebeen
achieved,exceptinDenmarkandFrance.TheinflationrateintheFederal
RepublicofGermanywasabout3.5%attheendof1977,whichisequivalent
theannualaverageinflationratein1970.FortheUnitedKingdomtherate
was12%andforIreland11%(seetable4).InFrancetheriseinprices
sloweddownsubstantially inthelastquarterof1977:calculated atan
annualrateitwassome7%.InItaly/too,theupwardtrend.inconsumer
priceshasslackenedmarkedly.

-5-
III .Improved convergence ofeconomic trends inthe Community
■3.1. Progress achieved inreducing balance ofpayments
disequi libria was also impressive .The
Community 'strade balance (fob/fob)in1977 will show animprovement of
some t10000million over 1976 ,andthe current account balance animprove­
ment ofsome t8000million (seetable 6>.Most striking ofall hasbeen
theprogress achieved byItaly andthe United Kingdom ,both ofwhom had a
current account suplus attheendof1977 (some t2000million and
t300 million respectively ),and also byFrance ,which cut itsdeficit
byalmost half .Theoverall current account surplus oftheNetherlands
wasreduced bysome t2000million compared with theprevious year ,while
that ofthe Federal Republic ofGermany wasbrought down only slightly .
3.2 . The reduction inthe current account deficit in1977 was almost
asspectacular asin1975 ^when theCommunity 'scurrent account improved
byjust under t10000million .Thetotal deficit ofthedeficit countries
fell to85000million in1977 ,compared with almost t14000million in1976 .
Asin1975 ,themain factor behind this improvement wasthevery marked decline
indomestic demand inmost ofthecountries .Other special factors played
arole ,factors which were partly responsible forthe large deficits in1976
(severe winter ,anticipative purchases ofoil,poor harvests )buthad a
further impact in1977 .Finally ,North Seaoilbegan toplay akeyrole in
1977 .
In1976 Community imports ofgoods andservices hadrisen by
almost 111/2%inreal terms (compared with a5%increase indomesti C'demand ).
In1977 ,bycontrast ,thegrowth oftotal imports wasdown toonly 2%(with
domestic demand rising by1*3% !.TheNetherlands istheonly country where
thedevelopment ofimports hasbeen faster than that ofexports .TheCommunity 's
real exports increased byabout 4.3% (asagainst 9.7% in1976 ).Italy andthe
United Kingdom each increased their total exports in1977 byabout 51/2%in
real terms ,France by6.3% andIreland byabout 14%,while theexpansion in
world trade atconstant prices wasonly 5%iThequestion rises ,however ,
whether theabsorption ofbalance ofpayments deficits in.thedeficit countries
hasnotbeen accomplished tooquickly orwhether thereduction ofsuroluses in
the other countries has not been too small .
./.

3.3.Themarkedworseningintheexchangerateparitiesofthe
currenciesofthedeficitcountriesin1976-morethan20%forItaly,
alittlelessthan17%fortheUnitedKingdomandaround10%forFrance
-undoubtedly madeanappriciable contribution totheimprovementinthe
payment'sbalancesofthesecountriesin1977.Themonetarydepreciations
whichcameaboutintheabovementionedcountries,followedastheywere
bytighterincomespoliciesresultedinanincreasedeffectiveness of
thebalanceofpaymentsadjustment mechanisms.Incomparison -withthese
fluctuations ,thevariations inexchangeratesin1977weremoremoderate
attheendoftheyear.Onayeartoyearbasis,theItalianliraregistered
aneffectivedeclineof6.5%andtheDanishkrone,whichin1976appreciated
byaboutthesameorderofmagnitude,fellby6%.Ontheotherhandthe
parityoftheFrenchfrancremainedpractically unchanged(-1.5%)while
thepoundsterlingexperienced aneffectiveappreciation ofaround51/2%,
nearlyasmuchastheDM(seetable7).
Developments ininternational competitiveness maybesetoutif
accountistakenofbothchangesindomesticpricesaswellasexchange
rates,althoughtheresultsobtained;;aresubjecttoseverelimitations.~~•
^Betweenthefinal~qua"rter "of*1976"aricT the"last"quarterof1977theUnited
KingdomandIrelandlostthecompetitivity thattheyhadgainedinthe
previousyear;asin1976theimprovement inItaliancompetitivity was
onlyminor,theriseindomesticpriceshavinggonealmosthandinhand
withthedepreciation ofthelira,whileinFrancethesituatuion,which
hadimprovedmarkedlyinthepreviousyear,didnotchangeverymuchin
1977.ThepositionoftheFederalRepublicofGermany-aftertheworsening
experienced thepreviousyear-deteriorated again(seetable7).

3A. Monetary policy hascontributed substantially tothis Increased
convergence ofeconor.i development .Thebitter experience drawn from
monetary depreciations ofpreceding years ,haslargely influenced monetary
policy intheMember States ,whether grouped together ,ornot ,inthesnake .
Toshatter thedangerous devaluation spiral -rises indomestic costs ,
inflationary pressures and afurther devaluation -thegovernments ofthe
floating countr ies(United Kingdom ,France ,Italy )have ,since theautumn of
1976 andthroughout 1977 ,directed their monetary policyat thestabilization
ofexchange rates .The realisation ofthis objective hasnecessitated
amore restrictive monetary policy ,butthecountries inquestion have .at
thesame time developed theconvergence oftheir economic policy at
aCommunity level .Likewise themonetary policy authorities oftheMember
States participating inthe Community exchange rate system have reacted
immediately tothedownward pressures exerted ontheir currencies by
increases inmoney market rates ,even ifthis policy hasnotbeen in
accordance with the immediate needs ofdomestic economic activity ;
itwas inthis direction that the Benelux countries acted atthe end of '
theyear .Denmark ,while pursuing arestrictive monetary policy ,adapted ;
theexternal value ofitscurrency to.therise inthelevel ofdomestic :: i.
costs bytwodevaluations inApril andAugust . ;
'' '
Thepublication intheUnited Kingdom ,France andtheFederal i
Republic ofGermany ofobjectives fortheexpansion ofthemoney supply
have also contributed toacloser convergence .Inthese three countries
themagnitude ofthe increases aimed atranged from 8to13%.Even I
though these norms refer tomonetary aggregates defined andcalculated
inadifferent manner ,these figures have made ,incomparison with the -j
trends observed inthepast ,agreater contribution toamore balanced :
f
development . !
Theprogress accomplished inthefield ofmonetary policy
harmonisation wasreflected inacloser alignment ofliquidity expansion in
the various Member States .With theexception ofItaly where money supply
wasgrowing atanannual rate ofabout 20XandIreland ,where growth j
accelerated towards theendoftheyear ,themovements ofthebroadly defined f

-8-
moneysupply(M2orM3)wasmaintained,in1977,withinarelatively
narrowrangefrom8%(Netherlands )to121/2X(France).Onthe
otherhandnonarrowingofthegap,incomparisonwiththeprevious
year,wasobservedinbothlongtermandshortterminterestrates.
Thisresultisnot,however,surprisingsinceithas,toalarge
extent,beentheconsequenceofamonetarypolicyaimedatobtaining
agreaterdegreeofconvergence (seetable9).
3.5.Budgetarypolicyhasplayedaveryimportantroleinthe
adjustmentprocesseswhichhavetendedtoreducethedisparities as
farasbalanceofpaymentsandpricedevelopments areconcerned.In
Italy,andintheUnitedKingdom,inparticular,thecontrolofpublic
financeshasservedtoslowdownthegrowthofinternaldemand,albeit
indifferent ways:inItaly,thiseffectwasachievedbyastrengthening
offiscalpressure,whereasintheUnitedKingdomastrictlimittothe
growthofexpenditure enableddirecttaxreductionstobemadein
supportofthepolicyofmoderatingtherateofgrowthofnominalincomes.
InDenmarkandinFrance,thebudgetaryprocesshasalsotendedto
havetherestrictive effectsrequiredbytheneedforadjustment,
althoughtoalesserdegree.Theothercountries,withtheexception
ofBelgium,havemaintained abudgetarypolicystancemorerestrictive
thantheconjunctural situationrequired.Thesecountriesin1977,have
thereforetakenaleadonthewaytowardsgraduallyreducingpublicsector
deficits-amediumtermobjectiveforallMemberStates(seetable10).
3.6.Thereductionininflationrates,inCommunityaverageterms,
hasalso,in1977,resultedinanarrowingofthegapoftheserates
withintheCommunity (seetable1and4).InJanuary1977thegapbetween
annualincreasesinconsumerpricesamongmembercountries wasstill18
percentagepoints;inDecemberithadfallento11points,theextreme
valuesinthisperiodbeingregisteredintheFederalRepublicofGermany
andinItaly.
tit*/ft••

»8•
Theimprovedconvergence ofthedevelopments notedforsome
months,appearsever^eareriftheshortertermpricerisesare
considered,insteadofthe/eartoyearincreases.
ThepriceLullwasalreadysignalledinthefirst-halfofthe
yearinthemajorityofmembercountries,byastrongweakeningofthe
riseinwholesaleprices.Duringthesecondhalfoftheyearthecorre­
spondingindiceshaveeven,insomeMemberStates,fallenforseveral
consecutive months.In1977wholesalepricesremainedpractically stable
inBelgium,theFederalRepublicofGermanyandinFrance.Intheother
countries aswell,withtheexceptionoftheUnitedKingdomandIreland,
theirupwardmovementhasbeensubstantially lessthanthatoftheconsumer
priceindex.Towardstheendoftheyeartheirdevelopment ,togetherwith
thatofconsumerprices,hasshownasubstantial convergent trendas
betweenthedifferent MemberStates(seetable4).

-9-
IV.WhyAheeconomicrecoverydidnotcontinuein1977
4.1.Lookingbackovereconomicdevelopments endpoliciesin
1977^,oneinevitably comesupagainstthequestionwhytherecoveryfaltered,
whyeconomicactivityinalmostalltheMemberStateslevelledoffandin
somecasesevendeclinedforaperiod,andwhyexpectations evenduringthe
secondhalfoftheyearwerenotfulfilled.Wasthegrowthofaggregate
demandtoolowanddidtheresponsibility forthisliewiththeprivate
orpublicsector,domesticdemand,ortheslowdowninthegrowthofworld
trade?Ontheotherhand,mustoneassumefromthehesitancyanduncertainty
ofthecyclicaltrendthatsupplyandgrowthwereingeneraltooweak,a
weaknesswhichcouldnotbeovercomebydemandstimulation alone?
Thefollowingattempttoanalysetheweaknessofeconomic
activityin1977isrestrictedtothemainfactorsinvolved.Specific
factorsaredealtwithinthechaptersoneachcountry.
Thegrowthofdemandandproduction intheCommunity wasin
generaldisappointing forthreebasicreasons:
-theweaknessoftheworldeconomyandtheslowdowninthe:growth
ofworldtradeoutsidetheCommunitycomparedwiththepreviousyear;
-thegenerally morerestrictive stanceofeconomicpolicythanforeseen
inthesecountrieswhichhadlarge-scale balanceofpaymentsprobtems,
highlevelsofinflation,anddepreciating currencies;
-thelagintherevivalofeconomicactivityinthoseMemberStates,such
astheFederalRepublicofGermany,whichforalongperiodover­
estimated theselfsustaining dynamicforcesintheprivatesector
andtheabilityofthepublicsectortopursueananticyclical budgetary
policy. . ■
••im••

-10-
4.2.Thedisappointing growthratesintheCommunityarenodoubt
inlargepartduetothefactthattheexpansioninthevolumeofworld
tradewaslowerthanexpected.EvenintheAnnualReportrelatingto1977,
itwasassumedthatthevolumeofworldimportsoutsidetheCommunityinJ)1977wouldbeabout71/2%Thisforecasthadveryquicklytoberevised
downwards.Therealgrowthrateofworldtrade(imports)isnowputat
about5.5%andthegrowthinthevolumeofimportsbytheindustrialized
countries (excludingtheCommunity)atabout7%,i.e.halfthelevelof
growthin1976.Onereasonforthissituationwasthatlevelsofdemand
andgrowthratesintheindustrialized countrieswerelowerthanexpected
(4%insteadof5-5.5%)/especiallyinJapan,butalsointhesmaller
industrialized countries,whosebalanceofpaymentsdifficulties forced
themtopursuerestrictive economicpolicies.Sincethepolicyofthe
developingcountriesandthestate-trading countrieswastoreducetheir
highlevelofforeignindebtedness,therewasaslowdowninthegrowthof
importsbydevelopingcountries,whileimportsbythestate-trading countries
droppedstillfurther.
Theslowdownintheworldeconomyin1977hadothercauses,
however,themostimportantbeing:theendingofimpulsesemanatingfrom
stockbuiIdingandfromrawmaterialandoilimports(whichhadpartlybeen
broughtforwardin1976becauseofexpectedpricerises),anduncertainties
andconstraints inworldtradecausedbythespreadofprotectionism and
byexchangeratefluctuations .
4.3.However,itwouldbeanoversimplification toattributethe
inadequatelevelofeconomicrecoveryintheCommunitytothemarked
slowdowninthegrowthofworldtradealone.TheCommunityaccountsfor
about30%ofworldtradeandthusexercisesasignificantinfluenceonits
development.Equallyimportantisthefactthatalmost§0%oftheforeign
1)AnnualReportontheeconomicsituationintheCommunityandeconomic
policyguidelinesfor1977,0JnL358of29December1976.
••/aa

-11-
demandofeachMemberState(andalmosttwothirdsinsomecases)comes
fromtheotherCommunitycountries.Itwasindeedmainlythelowgrowth
ofdomesticdemandinthemembercountrieswhichcausedthelackofgrowthin
foreigndemandforeachmembercountryin1977comparedwith1976.This
generalweaknessofforeigndemandfromtheCommunitycountriesisreflectedin
theabruptdropinthegrowthofintra-Community trade.In1977,intra-
Communitytradeinrealtermsprobablyonlyincreasedbyjustunder21/4%
whereasin1976itgrewbyalmost15172.
WORLDTRADEANDINTRA-COMMUNITY TRADE
(Annualgrowthratesin%andatconstantprices)
1970-74 1975 1976 1977
(5years)average
Worldtrade(outside
theCommunity,imports) 8 -1 91/2.51/2
Intra-Community trade 9 -7.0151/2Ζ1/4
Importsfromnon-Community
countries 7.5 -21/2'131/21r.1/2
Exportstonon-Community
countries 7.8 -31/26 61/4
4.4.Thegrowingeconomicinterdependence oftheindustrialized countries
andparticularly theCommunitycountriesisconfirmedbyanotherphenomenon.
Inrecentyears,thesynchronization ofcyclicalmovements,asevident
particularly inthetrendofindustrialproduction,hasclearlyincreased.
••/•••

-12-
Thequarterly trend ofindustrial production intheMember States
does indeed point toaconvergence ofseasonal fluctuations even where
economic policies arequite different .Inmost ofthecountries ,the
recession inthethird quarter of1976 (orinsome cases inthe second
andthird quarters of1977 )and thepickup after the long slack summer
period occurred more orless simultaneously .Asimilar pattern of
parallel cyclical trends isreflected inthequarterly growth rates for
real GDP,available forfour oftheCommunity countries (1).
Though itisregarded asnecessary that cyclical trends inthe
"strong "and "weak "countries should beout ofphase ,this-did nothappen
in1977 ,with theexception ofthe United Kingdom .
(1)The real GDPofthese countries taken together rose by1%inthe
fourth quarter of1976 and inthe first quarter of1977 ,subsequently
fell andprobably rose again byjust under 1%inthefourth quarter
of1977 .

-13-
4.5►Therealaveragegrowthratesofthevariouscomponentsofdemand
intheCommunitytakenasawhole,concealanumberofdivergencesin
trendbetweenMemberStates.Nonetheless,somebasicsimilarilities
oftrendcanbeseenformostofthecountriesincomparisonwith1976
(seetable2):
-inallthecountriesexcepttheNetherlands andIreland,thegrowth
ofrealdomesticdemand,especiallygrossfixedcapitalformation,
declined;privatedemandprovidedthemainsupportforeconomic
activity,withtheexceptionoftheUnitedKingdomandDenmark;
-whereasin1976stockbuiIdinghadcontributed onaverage2%tothe
growthrateofrealGDP,in1977thefigurefelltozeroorwas
evennegative,onceagainwiththeexceptionoftheNetherlands,
IrelandandalsotheUnitedKingdom;
~theexternalsectorinthecountrieswithlargedeficitsinprevious
yearsaccountedforabout1-11/2%(forItalyevenalmost2%)
ofrealgrowth;thecontribution wasnegativefortheNetherlands and
Onlyofasmallorder"forGermanyandBelgium.
4.t6. Thegrowthratesofrealprivateconsumption havebecomegenerally
subduedinthe1970'sandhaveweakenedfurtherbetween1976and1977.This
weaknesswasmostmarkedintheUnitedKingdom,DenmarkandItaly,asa
consequence ofrestrictive fiscalpoliciesandfallsinrealincome.Inthe
remaining membercountriesrealdisposable incomehasincreasedfurther,a
resultofbothgrowthinthecompensation ofemployees andincreasedrates
forcurrentgrantsfromgeneralgovernment .Thepersonalsector'ssavings
ratioremainsatthehighlevelattainedintheearlyyearsoftherecession
ThedeclinesinthesavingsratiointheFederalRepublicofGermanyandin
theUnitedKingdomaretheresultsofspecialfactorssuchasaboveaverage[
withdrawals fromsavingcontracts,partlycompensatedforbycontractions in
theincomesofwagesandsalaryearners.

-14-
ApartfromtheFederalRepublicofGermany,Luxembourg andItaly
compensation ofemployeespercapitagrewmoreslowlyin1977thanin1976.
However,atthesametimetherewas-amarkedslowingdownintherateof
productivity growth.Asaresultinthemajorityofmembercountriestherewas
afurtherincreaseinunitlabourcosts,insomecasesevenanacceleration was
registered (FederalRepublicofGermanyandItaly).OnlyintheUnitedKing­
domwasaslowingdownobserved(seetable3and4).Becauseofweakdemand•.
theincreased wagecostscouldnotbepassedon,sothatthecontinualincrease
inunitlabourcostshasprevented animprovement intheprofitability
infirmsandenterprises .IntheFederalRepublicofGermanythedeterioration
inpropertyandentrepreneurial incomehasshownitselfmostclearly.
4.7.Asfromthesummerof1976,i.e.alreadyatanearlystageinthe
cyclicalupswing/moreandmoreCommunitycountrieswereobligedtoadopta
restrictive lineinmonetaryandbudgetarypolicy.Thestabilization programmes
introduced bytheUnitedKingdom(July1976),FranceandDenmark(August1976)
andItaly(September 1976)hadtobemaintainedfarinto1977,and,insome
cases(UnitedKingdom),couldonlyberelaxedafterthefirstsignsoflasting
successbegantoappear. '
, Asaresultoftheunfavourable employmentsituation,high
inflationratesandtheslowgrowthofearnings,thelevelofprivate
consumption alsoremainedlowforalongtime.
•--
Thenecessaryreductionofbalanceofpaymentsdisequilibnain
thedeficitcountriesshouldhavebeenaccompanied byastrongexpansion
inforeigndemandinsideandoutsidetheCommunityifamarkedslowdownin
therecoverywastobeavoided.Theannualreportadoptedtowardstheendof
1976pointedtothedangersandpossibleconflictofobjectives inherentin
theadjustmentstrategybeingpurused:"Ifthepresentweaknessineconomic
growthhappenedtocoincidewiththeeffectsofstabilization programmes
introducedintheMemberStates,theresultcouldbeacumulativecontraction
ofinternaldemand".(1)
(1)AnnualreportontheeconomicsituationintheCommunityandeconomic
policyguidelinesfor1977,OJNoL358of29December1976,paragraph4.3

-15-
4.8.Itisnowclearthatthisisnolongerariskbutareality,
partlybecausetheeconomicrecoveryintheFederalRepublicofGermany
i
wasnotsustainedin1977,asaresultofshort-term andstructuralfactors.
Theimpactofthemeasurestakeninthepublicsectorhavebeenlessthan
expectedandhavehad,takenoverall,acontractionary effect.The
borrowingrequirement ofGeneralGovernment hasbeenrapidlyreducedfrom
DM60billionin1975toDM34billionin1977,thatistosayfromnearly
6%tolessthan3%ofgrossnationalproduct(seetable10).Public
investmentinrealterms,hasfallenbothin1976and1977.The
selfreinforcing effectsresultingfromshort-term movementsinprivate
investment,whichhavecharacterised previousphasesofexpansion havenot,
thistime,beeninevidence.Thereasonsforthislieinthedegreeof
spareproductive capacity,andtheuncertainties aboutfutureeconomic
development,aresultofaccumulating administrative bottlenecks and
environmental policy.Butitisessentially theprofitability ofprivate
enterprises whichhasdeteriorated againin1977,aresultofincreasesin
wageandsalarycostsandtheappreciation oftheDM.Theextentofthe
latterhasexceeded somewhatthedifference incostandinflation rates
betweentheFederalRepublicanditscompetitor countries.

-16-
B.THE ECONOMIC POLICY INTHE VARIOUS MEMBER STATES
DENMARK
5.1 .Theguidelines laid down inMarch 1977 were "based ontheoutlook for
theyear asawhole ofvery modest growth ,anincrease inunemployment
andthecontinuation ofasevere external constraint .Aprudent
economic policy wastherefore advised ,which implied themaintenance ofa
restrictive budgetary policy ,excluding anystimulatory measures with the
exception ofcertain forms ofinvestment .Atight incomes *policy wa3 of
over-riding importance with theaimofmoderating thegrowth ofcosts ,and
theguidelines emphasised thenecessity formonetary policy totake account
oftheobjective forthebalance ofpayments .
Onthewhole ,theoutturn for 1977 was inline with both theforecasts
andthebroad intentions oftheguidelines foreconomio policy .Growth has
remained weak asaresult ofalack ofexport demand ,andwasaggravated by
thedeterioration ofthe economic situation inneighbouring Scandinavian
countries .Unemployment has increased .Insuch circumstances ,andtaking
into account theneed foranimprovement inthe current account ofthebalance
ofpayments which had suffered from the effects ofthebadharvests ofthe
previous year ,adeterioration intheterms oftrade andanincrease inexternal
debt servicing payments ,theauthorities steadily increased therestrictive
nature oftheir economic policy bystricter control ofinternal demand .
Budgetary policy hashadatwo-fold objective .Onthe onehand ,thetax
burden hasbeen increased (higher rate ofValue Added Taxraised from 15%to18%
anincrease inspecific taxes oncertain goods andservices ,increases in
public tariffs andregistration duties )with theeffect ofreducing private
consumption andlimiting imports .Ontheother hand ,itsought tostimulate
investment andincrease employment .There resulted ,inthefourth quarter
of1977 »afall inconsumers *expenditure andanimprovement inthebalance
oftrade caused byaslowing down ofimports .Despite themeasures taken to
stimulate employment andtostrengthen investment ,theborrowing requirement
for1977/78will be,asaresult ofhigher taxation ,inconformity with the
Community guidelines .

-17-
During thenegotiations foranewpayagreement on15April 1977 »the
role ofincomes policy wastoattempt toensure that the strict framework
laid down "byParliament inAugust 1976 wasrespected (payincreases limited
to6%peryearuntil March 1979 ?onlyasingle slice^ofanycost-of-living
increases to "bepaid ,allother "slices "becoming due tobepaid tothe
credit ofindividual employees' accounts with thecomplementary retirement
pension fund ).Even though ,infact ,theincrease inpay (8%to9%for
1977 asawhole )somewhat exceeded thetarget ,nevertheless itrepresents .a
distinct deceleration .This development has ledtoasignificant deceleration
inthegrowth ofcosts ,inconformity with theaimofre–establishing external
equilibrium .
Monetary policy remained relatively restrictive .Despite certain relaxations ,
domestic credit waskept Tinder strict control inorder toencourage capital
inflows .Interest rates tended torise during theyear .Thefinancing of
the external deficit was accomplished with little difficulty asthere wasa
ready supply offunds onworld markets .Inaccordance with theadopted
guidelines ,thegrowth ofthedomestic money supply wascontained within
narrow limits .
Theauthorities didnotpursue anactive exchange rate policy .Thetwo
devaluations ofthe crown ,compared totheEuropean unit ofaccount ,which
occurred in1977 (thefirst of3$inApril ,thesecond of5%inAugust )were
caused byexternal forces ,asapart ofthevoluntary process ofadjustment
ofinternal demand and inorder tosoften the effects ofthe depreciation of
other Scandinavian currencies (especially theSwedish crown )onDanish exports .
During thefirst nine months of1977 »thecompetitive position oftheDanish
economy improved significantly .Prom October ,thestrong appreciation ofthe
German mark caused theother "snaJce "currencies toappreciate also .The
relative competitive advantage lost during thefourth quarter ,especially
compared with thedollar andtheweakened Scandinavian currencies ,was
however offset bytheeffect ofthedevaluations onreducing import prices
andbythemaintenance oftheDanish crown inamore stable monetary group .
\1)A"slic& wcorresponds toanincrease ofthre«-points intheindex of
consumer prioes (excluding anyeffects ofchanges intaxation ).
/•

18-
conclusion,thestanceofeoonomiopolicyin1977hasenabled
significantprogresstobemadetowardsreachingthepriorityobjective
ofanimprovementinthebalanceofpayments.Theamountofdeflation
inherentinsuchapolicyhas,however,ledtosinincreaseinunemployment
which,despitethemeasurestakentoimprovethesituation,continueduntil
theendoftheyear.

-19-
P2D5SAL REPUBLIC OPGERMANY
5.2 .In1977 jreal GDPintheFederal Republic ofGermany grew "by2.6%.This waswell
below the 5/»target announced "bytheFedral Government atthe "beginning oftheyear .
Theeconomic upturn which gottinder wayinlate 1976 andearly 1977 came toa
standstill from spring onwards .Consequently ,there wasnoimprovement inthe
labour market situation .Price rises ,bycontrast ,were roughly inline with the
target ;measured in .terms ofconsumer prices ,theannual average rise wasonly
3.9$ .Inforeign trade ,theyear sawthehighest balance oftrade surplus (DM38400
million )since 1974 .However ,because ofincreasing deficits forservices and
transactions ,thecurrent balance ofpayment 'ssurplus (DM8200million )was
somewhat lower than intheprevious year .This surplus hasbeen more than com­
pensated bylong-term capital exports .
Animportant exogenous factor inthe slowdown meconomic activity was the
unexpectedly sluggish growth' offoreign demand .This sluggishness wasmainly dueto
slower growth inthevolume ofworld trade .Exports toother Community countries ,
especially France ,Italy andDenmark ,were much lower than expected ,nodoubt asa
result oftheefforts made bythese countries toimprove their balance ofpayments
positions .However ,despite the increasing burden imposed bytheappreciation ofthe
German mark (6.6%from December 1976 toDecember 1977 onaverage against other
currencies (1)),German exports showed afurther slight increase intheir share "of
thevolume ofworld trade . ^
Theoptimistic growth forecasts made atthebeginning of1977 probably influenced
•helevel ofwage demands andsettlements .Provided that real growth ofaround 5$
hadbeen achieved ,wage settlements ofaround 7%might have been expected toresult
i.nafurther slowdown inthe rise inwage costs andafurther slight improvement
infirms' profits .With noincrease inproduction since thespring ,however ,thelevel
ofwage increases granted very quickly ledtoamarked acceleration inwage costs and
arapid slowdown inthegrowth offirms' profits .Because oftheweakness ofdemand ,
bwasnotpossible tooffset this through price increases ,either athome orabroad .
?hesevere squeezing ofprofits wasprobably ,inaddition tothegeneral weakness
:>idemand ,themain reason fortheslowdown inprivate investment activity .
l)Source :Commission departments

-20
Theweakness ofdemand andtheappreciable rise inwage costs probably
had anunfavourable effect onemployment ,though the stepping upoftheFederal
Government 'slabour market policy programmes andafurther fall inthenumber
offoreign workers prevented arise inunemployment .Besides such
economic factors ,there are also structural factors such astherenewed growth
intheworking population ,difficulties ofmatching thedemand and supply for
labour andthe increased tendency offirms tocarry outrationalization ,which
make itdifficult toachieve any improvement inthe labour market situation .
Inadopting itstarget foreconomic growth in1977 »theFederal Government
assumed that ,providing therecovery continued ,agrowth rate of3%could be
achieved without anyadditional stimulation ofdomestic demand .Economic policy
therefore continued initially tobedirected towards reducing public budget
deficits ,overcoming specific structural labour market problems andconsolidating
progress made towards achieving stability .However ,inadjusting theeconomic
policy guidelines fortheFederal Republic ofGermany inMarch 1977 »"the
Council pointed outthat 3%growth could beachieved only ifeconomic policy
were made more expansionary .From thespring onwards ,astheweakening ofdemand
became evident ,there wasagradual change ofcourse inbudgetary andfinancial
policy .Themeasures taken will forthemost part make themselves felt only in
1978 .
Budgetary policy for 1977 was initially geared towards pursuing
thecourse ofreducing deficits embarked upon in1975 .Inthespring /,
however ,their was achange ofcourse with theintroduction ofa
supplementary public investment programme for1977-80 amounting
tosome KM16000million .DM4500million ofthis programme ,inwhich the
Lander andlocal authorities arealso involved ,wascommitted in1977 »though
only DM500million ofthis amount wasactually disbursed in1977 *The
weakening oftherecovery wasalso taken into account intheTaxAmendment
Lawpassed inJune .Theplanned 2$and1%increases inVATwere reduoed
to1%and0.3% »Inaddition ,anumber oftaxreliefs forfirms andindividuals
•••/#••

weregranted,therebyforegoingtheKM5-6000millionincreaseinrevenue
originallyplanned.Finally,taxreliefsworthsomeDM10800millionwere
approvedintheautumn,ofwhichjustunderDM2000milliontookeffectin
1977.
Atjustunder "theriseinexpenditure "bycentralandlocal
Governmentremainedverymodestin1977*Whilecurrentexpenditure roseby
about6foycapitalexpenditureincreasedbyonly2%,Thefederalstructure
ofthecountrywasnodoubtanimpedingfactor.inpursuingamoreexpansionary
lineonexpenditure .WhileFederalcurrentexpenditure provideddirectsupport
fordemand,particularly inthesecondhalfoftheyear,localgovernment
contributed onlyslightlytosupportingtheeconomy.
Therelativelymodestgrowthofexpenditure wasincontrasttoan
unexpectedlyhighlevelofgrowthinrevenue(almost10g$).1977showed
onceagainthatthebuilt–incompensatory effectsofthetaxsystemare
eitherverylimitedintheirimpactorproduceadelayedandtherefore
ifanythingprocyclicaleffect.Thus,thefavourableprofitssituationin
1976asabasisofassessmentforincomeandcorporationtaxin1977hadthe
effectofincreasingthetaxburdenonfirmsontoptheiralreadyweakprofits
situation.Wagestaxtooincreaseddisproportionately becausethetaxreform
of19751whilegrantingreliefsforlowerincomegroups,increasedthe
progressiveeffectofthesystem.
Allinall,budgetmanagementbythepublicauthoritiesin1977had
amarkedlyrestrictiveeffect.Thefinancialdeficitofcentralandlocal
governmentfellfromDM48000millionin1976toDM34000millionin1977•
Inthefieldofmonetarypolicy,thetargetforthegrowthofoentral
bankmoneysetbytheBundesbankattheendof1976(+8$asanajirma.1
averagefor1977)assumed5$realgrowthinGUPand4%inflation.Though
currentpriceGNPgrewmoreslowlythanexpected(6.1$),theBundesbank
maintaineditsmoneysupplytargetunchangedthroughouttheyear.Upto
August1977»itmadeanextra

-22
DM14000millionmliquidityavailabletotheeconomythroughvarious
relaxationmeasures.Duringtheremainderoftheyear,theunrestonthe
exchangemarketscausedbytheweaknessofthedollarandtheinterventions
madeinthisconnectionresultedinconsiderable inflowsofcurrency(DM82C0
millionfromJulytoDecember),whichincreasedliquiditysubstantially .There
wasthusingeneralin1977,arelativelyeasysituationasregardsliquidity,
:nlinewiththeweaknessoftheeconomy,andsothemoneysupplytargetwas
slightlyexceeded(by1%);therewasatthesametimeamarkeddropn
interestrates.
Inthesecondhalfoftheyear,monetarypolicywasincreasingly
inconflictwithexchangeratepolicy.Interventions bytheBundesbank ,
mainlyagainstthedollar,remainedwithintheframeworkofday-to–day
exchangerateadjustments withoutentailingmassivesupport.Nevertheless ,
aconsiderable volumeofintervention builtupovertime. The
loweringofdomesticinterestratesproducedhardlyanyreductioninthe
upwardpressureontheGermanmark.
Inadditiontooverallbudgetary,financialandmonetarypolicymeasures,
anumberofselectiveprogrammeswerefurtherpursuedorinsomecasesstepped
upbytheFederalGovernment.Inordertosupportthebuildingandconstruction
industry,theFederalGovernment'sregionalprogrammeforsubsidizedhousing
wasextendedandcarriedforwardinto1978*Grantsforcapitalexpenditure
onresearchandfundstopromotesmallandmedium–sizedfirmswereincreased.
Inaddition,substantialfundswereagainmadeavailabletocontinuethe
labourmarketpolicyprogrammesoftheFederalInstituteforLabour.

The Council decision of17March 1977 laid down the following priorities
forFrench policy :the reduction ofinflation and thegradual restoration of
balance inexternal trade ,while atthe same time avoidance ofacontraction in
domestic demand which might aggravate theunemployment situation .Assumptions
about the growth ofworld trade atthe time fully justified ,this stance .
The information atpresent available suggests that the general objectives
pursued bytheFrench authorities have been attained ,even though thefavourable
results anticipated appear tohave been achieved only atthe endoftheperiod .
Talcing thetwobasic objectives ,thereduction ofinflation andbalance
oftrade equilibrium ,the improvement took place later than anticipated ;this
explains thedifference between thequantified objectives and theactual figures . 1
Finally ,itshould bestressed that this reversal oftrend didnot halt the
growth ofthepurchasing power ofthehourly wage rate butmerely slowed itdown .
The time–lag inachieving the objectives set ,which were inany case
fairly ambitious ,does not appear tobeparticularly long ifone looks atthe
economic situation attheendof1976 andthecriteria which theauthorities
setthemselves inrectifying the situation .
Asregards external trade ,thevolume ofimports showed virtually nochange
from 1976 to1977 andtherise inimport prices wasnotfurther increased by
variations intheweighted exchange rate .Itwas therefore only thelack of
growth inforeign demand which prevented equilibrium from being achieved earlier ,
since there wereindeed somegains inmarket shares in1977 .Inaddition exports ^
ofagricultural andfood products remained lowuntil themiddle oftheyear as
aresult ofthepoor harvests in1976 .
With regard tocurbing inflation ,several decisions taken atthebeginning
oftheperiod influenced theunderlying trend ofprices :theprice index reflected
successively theeffects ofthefreeze imposed inthelast quarter of1976 ,then
theeffects ofthe cutintherate ofVATandfinally theimpact oftherises in
public utility charges ,delayed until April andthen allimplemented atonce .Itwas ,
therefore ,notuntil Maythat theeffects ofthestabilization policy began to
make themselves really felt ;from May toDecember 1977 ,therate ofconsumer
price rise expressed atanannual rate came down from 13l/2%tounder 6 So,
although theaverage year–on-year rise inprices remains high ,theslowdown has
been marked .

-24-
The rise inunemployment during the first half–year may beregarded as
T;.eresult ofadecline inactivity .Thefall inthenumber ofjob-seekers
•-uring thesecond half oftheyear cannot ,however ,beconsidered asthe
result ofanoverall inorease inthedemand for labour ,but asasign ofthe
success ofthe specific measures taken from themiddle oftheyear onwards .
Analysis ofthevarious aspects ofthe economic policy pursued in1977
shows towhat extent themeasures taken have helped torestore the siti ,vtion :
general short –term economic policy hasproved well–judged with theexception
that external demand wasconsiderably overestimated (also true oftheforecasts
ofmost ofFrance 'strading partners )j
budgetary policy hasbeen variable initsimpact :atthebeginning ofthe
period ,thereduction inthestandard rate ofVAT (bringing a.2%reduction
inretail prices fortheproducts concerned )probably helped tosupport
consumer demand ;for theyear asawhole ,with consumption increasing less
than expected ,indirect taxrevenue was lower than forecast ;finally ,the
increase infamily allowances and social benefits hadonly aslightly expan­
sionary effect since alarge part oftheextra expenditure was financed by
raising some indirect taxes andinparticular byissues ofbonds ;
monetary policy hasplayed amoderately restrictive role .While the12.5%
growth target formoney supply (setontheassumption that economic growth
would behigher )hasprobably been respected ,thereal increase inGDPshould
notmuch have exceeded 12fo.Bycontrast ,thehigh level ofinterest rates ,
made necessary bytheobjeotive adopted onexchange rates ,has obviously been
unfavourable tothat investment which could notbenefit from state aids ;
ontheprices front ,thesuccess ofthepolicy pursued hasbeen restricted
byanumber offactors :
–theeffectiveness ofprice controls has inpractice been limited toindustrial
goods' prices only ,
–exchange rates have notbeen acounter –inflationary factor ashasbeen the
case incountries with appreciating currencies ,
–therise inwage costs has slowed down only gradually ,andtheworking through
ofthis slowdown ontoprices issubject tocomplex factors ,

-25-
-itwasdifficulttoremovequicklytheupwardpressures(suchasexcess
creationofmoney)whichhadbuiltup"beforetheplanwasintroduced.
Allinall,therealthoughlimitedeffectiveness ofthemeasureshasbeen
reflectedinslowergrowthofearnings,whilepricecontrolshavepreventedthe
recoveryofprofitmargins;
theclearimprovementintheexternal "bala.ncemust"beattributedtotheoverall
economicpolicyratherthantospecificmeasures;thegaininmarketshare
observedin1977(intheregionof1.5f°)wasprobablymainlyduetothe
weaknessofdomesticdemand.Furthermore oneoftheobjectivessetwithregard
totrade,namelyholdingdownthevalueofoilimports,hasbeeneasilyachieved
asaresultofthedepreciation ofthedollarin1977*
Allinall,itwouldappearthatthemeasuresintroducedintheautumn
of1976andsupplemented during1977haveonthewholehadfavourableresults.
Thecombination ofrestraintoncreditandwagecostsandmeasurestosupport
consumerdemandbyincreasingsocialtransfershasledtosomeinitialprogress
towardsrestoringequilibrium ,withoutmakingitnecessarytoapplytoosharp
abraketotheexpansionofdemand.Itwouldofcoursehavebeenvaintohope
thatanoverallpolicydrawnupinthelightofthemacroeconomicobjectives
describedabovecouldhaveeliminated unemployment withinsuchashortperiod.
Theincreasedunderemployment duringrecentyears,liketheinflationrates,also
reflectfactorsunconnectedwiththebusinesscycle,andwhichrestrictthe^
chancesofsuccessofshort–termpolicies.

-26-1
IRELAND
5.4.Theguidelinesofspring1977werebasedonthefavourable
outlookfortheyearasawholebothforgrowth(export,investment
andprivateconsumption development )andforemployment (slight
reductioninunemployment )andinternalequilibrium (moderation of
theinflationrate).Theystressed/asaconsequence,theimportance
ofbudgetarypolicyasaninstrument accompanying abetterbalanced
growthandreducingprogressively thedeficitinthecomingyears.
Theyalsoputemphasisonthenecessityforpaymoderation inoier
toimprovetheoutlookforthedevelopment ofemployment .
Growthin1977wasgreaterthanhadbeenforeseen.Acertain
numberofexogenousfactorshavecontributed tothisresult(improved
confidence,impactofthepriordepreciation ofthepoundonexports,
employment supportmeasures).Althoughthereductioninunemployment
hasbeensmall(fromend-1976toend-1977thenumberoutofwork
declinedfrom111,000to106,000),thismustbeattributed tocertain
specialfactorssuchastheincreaseinthelabourforce,therelatively
lowlevelofemigration andthedriftofworkersfromtheagricultural
sector.Theinflationratesloweddownsubstantially :from20.6Xin
November1976itfelltolessthan11Xinmid-November 1977.
Themajordirectionofeconomicpolicyhasbeeninaccordance
withtheguidelines tracedoutinMarchlast.Inthemiddleoftheyear
itwasmodifiedinamoreexpansionary directiontoimplementthe
electoralprogrammeofthenewgovernment andtheprioritygivento
theemployment problem.
Budgetarypolicyalreadyatthebeginningoftheyearprovided
forasupplementary efforttoencourageinvestment,taxreliefs,higher
socialwelfarebenefits,themaintenance offoodsubsidies aswellasa
transfertotheExchequerofpartofthelocalauthorityrates.Further
stimulatory measuresweretakeninthemiddleoftheyearsuchasthe
abolitionofroadtax,increasedtransfersforhousepurchaseandhigher
publicexpenditure (creationofadditional jobs).Overall,thesemeasures
enabledtheachievement ofgrowthabout5%in1977.Atthesametime
anddespitetheadditional expenditure andreducedtaxationduetothe
•••/•••

-27-
measurestaken,thenetborrowingrequirement whichfellin1976
wasbelowtheforecastlevelbeingbroughtdownto10.2%ofgross
nationalproduct,dueinparticulartolowerinterestcost.
Monetarypolicyhasbeenrelatively neutral.Theachievement
ofthenormfixedforthegrowthinthemoneysupplywassfacilitated
bythefallininterestrateswhichincreasedtheattractiveness of
giltsduringtheperiodandresultedinalimitedamountofshort-term
borrowing bythegovernment .
Incomespolicyplayedanimportantroleeventhoughalarge
amountofwagedriftwasobservedduringtheyear.Therelatively
moderatenationalpayagreementbroughtaboutin1977areductionin
inflationary pressures andamoresatisfactory development incosts.
Sincemid-October theexchangerateofthe.poundhasrisen
substantially andthishasbeena'favourable factorreducingdomestic
costs.Asaresultoftheperformance ofexports,delayedtransfers
fromtheCommunity andinvisibles,thecurrentbalanceofpayments
deficit(£150millionin1977)hasbeensubstantially lessthan
firstexpected.
Intotal,policyfollowedin1977hasbeenappropriate tothe
economicsituation andhasconformedtotheguidelines setout.It
hasstimulated growthandpermittedtheIrisheconomytoobtainfar
betterresultsthanotherCommunitycountries.

28-
ITALY
5.5 .Under the Council Decision of17May 1977 laying down the economic
policy conditions to "beobserved "byItaly in1977 inconnection with the
grant ofmedium-term financial assistance andtwo Community loans ,two
main o"b.isctives were tobeattained last year :eliminating the current
balance ofpayments deficit and limiting theyear onyear rate ofincrease
inconsumer prices to16%byDecember 1977 *Both objectives were attained .
Thebalance ofpayments oncurrent account actually closed with a !.xrge
surplus (approximately Lit 1800000million ,compared with adeficit of
Lit 2340000million -in1976 ), "theincrease inconsumer prices was
down to14.1$ .
Incontrast ,theupper limits which thesame Council Decision laid
down inthearea ofboth budgetary policy and credit policy toserve as
"instrumental "objectives inattaining themain objectives ,were mostly
exceeded .
While thegrowth ofreal gross domestic product in1977 was correctly
,(1)forecast ayear ago atsome 2vtheimprovement inthebalance ofpayments
oncurrent account went farbeyond expectations ,essentially forthree main
reasons .First ,netreceipts from tourism were even higher than thevery
expansionary forecasts .Second ,stocks were rundown more sharply than
expected ,resulting inadecline inabsolute termes inthevolume of
merchandise imports .Lastly ,theterms oftrade improved considerably
in1977 »owing toarelatively stable commodity prices andthe fairly
stable exchange rate ofthe lira .
•••/•••
1)SeeCommunication totheCouncil ofMarch 1977 (OJL119of12»5»1977 )

-29
From autumn 197o toaround themiddle of1977 the Italian
authorities pursued arestrictive short-term economic policy ,in
line with themain objectives mentioned above .With the improvement
intheprospect ofattaining these objectives ,monetary policy in
particular wasrelaxed inthesecond half oflast year .(seebelow ).
Acontributory factor wasthat therecession inproduction expected
atthebeginning of1977 forthesecond andthethird quarters inthe
event proved somewhat more severe than anticipated .
The social costs ofattaining theabovementioned main economic
policy objectives would nothave been sohigh ifworld trade in1977
had expanded assharply ashadbeen assumed atthebeginning oflast
year (8^involume terms ).Instead ,world trade grew only bysome 5$
and asaresult the expansion ofItalian exports fell short ofexpec­
tations .
Budgetary policy hadarestrictive effet until roughly the
middle oftheyear .Inthis period theupper limits –mentioned
above -were observed forallbudgetary variables (expansion oftotal
central government cash expenditure ,deficit ofTreasury alone anddeficit
ofTreasury andlocal government together ).Thetaxratio again rose .
Inthesecond half oftheyear andespecially towards the endof1977 »
however ,theupper limits fortheTreasury deficit andthedeficit of
thepublic sector broadly defined were considerably exceeded ,mainly
because the economic slowdown meant aloss oftax revenue .Inthe second
half of1977 »therefore ,budgetary policy again hadthe effect of
sustaining economic activity .
•••/•••

-30-
Monetary and credit policy also followed adistinctly restrictive
course uptothemiddle oflast year ,although inthe first quarter the
upper limit fortotal domestic credit expansion agreed "between the
Italian authorities andthe Commission was considerably exceeded as
aresult oftheabolition ofthe interest-free cash deposit andthe
special surcharge onpurchase offoreing exchange .The level ofinterest
rate3 ,especially short-term interest rates ,was lowered "bystages to
take account ofthe less expansionary outlook forprices .But even aking
into account theremarkably stable lira exchange rate trend ,interest rate
levels throughout theyear remained considerably above those inthe prin­
cipal partner countries .Thisfact and *theceilings onbank credit have meant'
that thebanks imported money onalarge scale .(1).The ceiling controls
onthe expansion oflira lending bythebanks were maintained in1977 .
Inthesecond half oftheyear monetary and credit policy was
relaxed .The discount rate andthe rate foradvances against securities
were lowered from 15/2to13a -inJune andto11.5$ inAugust .Themain
development ,however ,was avery sharp increase inlending inthe fourth
quarter of1977 »brought about bythe rapid rise inthe public sector
deficit .The upper limit for domestic credit expansion was once more
considerably exceeded ,sothat the growth ofmoney supply accelerated
significantly .Taking theyear asawhole ,the limit may well have been
exceeded bysome Lit4500 000million ,almost the whole of
which was attributable tothe public sector broadly defined .
Inthearea ofincomes policy ,agreements were concluded early in
1977 between unions and employers which –through certain changes inthe
operation ofthesliding wage scale –were intended tomoderate the rise
inaverage unit wage costs .Nevertheless ,andalthough in1977 "theupsurge
inprices remained within theagreed limits (see1above ),thegrowth
rate ofthegross wage andsalary bill ataround 24/£wasfarhigher than
that ofgross domestic product inmoney terms (up21.5A)•Theshare of
•• •••
(1)It wasmainly asaresult ofthese money imports andtheheavy surplus
oncurrent account that official gold andforeign exchange reserves
rose rapidly in1977 (^yLit5800000million ,toLit16680000million ).

-30a-
profits innational income andtheaverage profit marge perunit of
output therefore declined last year despite the "fiscalization ",in
February 1977 ,ofpart ofindustry 'ssocial security contributions .
Because ofthe above-mentioned rise inthe tax ratio ,personal
disposable income increased more slowly than gross domestic product
(byroughly 19l/2^)»Butthis waspartly offset byadecline inthe
savings ratio .
Byintervening ontheforeign exchange market andbymaintaining
awide differential between interest rates athome andthose abroad f
the Italian monetary authorities succeeded inkeeping the
exchange rate ofthe lira against thedollar steady onaverage from
January toDecember 1977 ,while itfell byonly 3*5% against foreigxi
currencies asawhole .Between 1976 and1977 »hycontrast ,theweighted
depreciation ofthelira hadbeen almost 7$£•
From ashort-term point ofview ,the economic policy pursued by
the Italian authorities last year was quite successful ,both asregards
the fight against inflation and inparticular asregards thebalance of
payments oncurrent account .From amore long'-term point ofview ,however ,
the verdict cannot besofavourable .The level andmomentum ofthe 1977
public sector deficit ofLit20000000million aresuch that they hold
serious dangers forthefuture .Inaddition ,thegrowth rate ofaverage
unit wage costs remained fartoofast despite avariety ofcounter-measures
Not least ,toolittle hasbeen done toimprove thestructure ofproduction
andtoadapt ittothe changed pattern ofdemand .
J
/

-31-
NETHERLANDS
5.6 . IntheNetherlands ,"budgetary andmonetary policy in1977 was in
line with theguidelines adopted "bythe Council .The support foreconomic
activity provided "bybudgetary policy -forgeneral government asawhole -
maintained atapproximately the same level asin1976 .
1977 was also marked "byavery sharp expansion ininvestment "by
firms (+16%involume terms )and investment indwellings (+15 /.This
expansion wasdue inpart tothe support measures taken in1975
and1976 ,especially taxreliefs andselective aids to "building andcon­
struction .Asaresult ,thebuilding andconstruction industry was fairly
buoyant ,andthere was asignificant fall inunemployment inthis sector .
The relative firmness ofprivate sector demand isone ofthe reasons
for thefall inpublic sector capital spending ;anumber ofpublic sector
projects hadtobedeferred toavoid excessive demand onproductive capacity ,
(inthesummer of1977 »"thenumber ofvacancies inbuilding andconstruction
wasequal tothenumber ofunemployed ).
There wasnonetheless aconsiderable shortfall inachieving the
objective setforeconomic growth ,andthe sole reason forthis was the
weakness ofexternal demand andtheresulting worsening oftheexternal
balance .Theresult ofthedeterioration oftheexternal balance (inreal
terms )wastodecrease theNetherlands' GDPby2.4 andtheGDPofthe
Community asawhole by0.15 This latter figure mayindeed betaken as
anindicator ofthepositive effect oftheworsening oftheNetherlands *
external balance onactivity inother countries .
Monetary andfinancial policy achieved itsobjectives onthe
whole ,benefiting from therelative fall inshort-term interest rates ,
which encouraged theswitching offunds tolong-term investments .Thus ,
areduction inthe rate ofliquidity ofthe Dutch economy -oneof
theobjectives which laybehind thetightening ofbank lending inMay1977 -

wasLargelyachieved:inOctober1977,domesticliquidity,which
wasuponly1.2X(1)comparedwithOctober1976,showedaseasonally
adjusteddecreaseof7.6XcomparedwiththeendofApril1977.
Becauseofthischangeinthecomposition ofinvestment,
thegeneralgovernment borrowingrequirement (2.4XofGDP)wasfor
themostpartcovered,despitetheappreciable declineinthefinancing
capacityoftheprivatesector<2.7XofGDPasagainst5Xin1976).
Thefallinlong-termratesobservedsincethemiddleof1976cameto
ahaltinAugust1977andwasfollowedbyaslightriseduringthe
lastthreemonthsoftheyear.
Afterhavingpursuedacomprehensive andenergetic incomespolicy
in1974and1975,theDutchauthorities graduallyrelaxedtheirattitude.
However,theymaintaineduntil1977fairlystrictpricecontrolsand
statutoryrulesconcerning theeffectsonpricesofincreasesinwage
andsalarycostsincertainsectorswhichwererelaxedin1978.As
regardscompensation ofemployees,onlytherulesonthestatutory
minimumwageweremaintained inforce;inothercases,thetrendof
wagesandsalarieswasdetermined bynegotiations atsectoralor
companylevelwithoutanygeneralagreement betweenthetwosidesof
industry.
(1)Aftercorrectiontotakeaccountofastatistical changeinthe
series.

BELGO-LUXEMBOURG ECONOMIC UNION
BELGIUM
5.7.InBelgium,economicpolicywasonthewholeinLinewiththe
generalguidelines adoptedbytheCouncil.Budgetarypolicycontinued
toprovideveryconsiderable supportforpurchasing powerandactivity,
andthissupportindeedincreasedbetween1976and1977.Itshouldbe
stressedthatthegrowthofexpenditure waslargelyduetocurrent
transferstohouseholds .Theincreaseofprivateconsumption wasmainly
duetothegrowthofsocialtransfers:bycontrast,theimpactofpublic
capitalexpenditures ,remainedmodest,partlybecauseofasubstantial
fallinfixedinvestment bythecommunesfollowingtheimplementation
ofthemergerplanatthebeginningof1977.Thus,thegeneralgovernment
borrowingrequirement rosefrom4.9XofGDPin1976to5.6Xin1977.
Thefactthat,despitetheexpansionary stanceofbudgetarypolicy,
thegrowthtargetadoptedbytheCouncil(4X)wasnotachievedwasmainly
theresultoftheweaknessofexternaldemandandthelossofbuoyancyin
Belgianexports-exportsofgoodsroseonly2.4Xinvolume.Inaddition
totheweaknessofexternaldemand,therewasadeclineininvestment by
firmsandinvestmentindwellingswhichresultedina1%fallingross
fixedcapitalformationdespitethemeasurestosupportinvestment
introduced in1976andearly1977.
Againstabackgroundoflowgrowth,employment declinedfurther.
Thoughanumberofmeasuresweretakenin1976andFebruary1977topromote
employmentofyoungpeopleandearlyretirementofolderworkers,unemploy­
mentcontinuedtorise,affecting7.8Xofthecivilianpopulation on
averagein1977<6.8Xin1976).

-34-
Monetary policy wasgradually relaxed during 1977 .The
discount rate came down from 9%atthe end of1976 to6%in
June 1977 ,andthe ceilings forrediscounting attheBanque
Nationale were raised .Itshould benoted that the discount
rate wastemporarily raised inDecember 1977 todeal with pressure
onthe franc resulting from theweakness ofthedollar .
Interest rates fell somewhat during 1977 .With long-term
rates remaining relatively high ,there was ashift from short-term
tolong-term investments .Thegovernment loans issued during the
year were thus very favourably received .

-35
LUXEMBOURG
5.8.Accordingtothelatestavailableestimates,general
government accountsfor1976and1977willprobablyshowamore
favourable outturnthanwasanticipated whenthepreliminary
economicbudgetfor1977wasdrawnup.Thegeneralgovernment
borrowingrequirementwillprobablybeequivalentto0.7%ofGDP,
asin1976.Centralgovernmentwillprobablyshowanetlending
capacityalittleabovethelevelin1976.Overall,budgetarypolicy
in1977hastherefore,asin1976,contributed tosupporting demand,
inaccordance withtheCouncilguidelines .Intheeconomicpolicy
area,governmenteffortshaveofcourseconcentrated ontheproblems
resultingfromthecrisisinthesteelindustryanditseffectson
thelonger-term outlookfortheLuxembourg economy.

-36-
UNITEDKINGDOM
5.9.IntheCommission proposaltotheCouncilontheeconomic
policyguidelinesfor1977,adoptedon22November1976(1),itwas
stressedthatthemainaimsoftheUKGovernment'seconomicpolicy
shouldbeto
-reducetherateofinflation;
-improve-'the balanceofpayments.
Theelementsofthestrategy,consistentwiththeCouncil's
recommendations ,werelaiddowninlate1976,whentheUKauthorities
sought:
-toreducethelevelofpublicexpenditure andtherebythesizeof
thePSBR;
-toensurecontrolled expansionofthemonetaryaggregates;
-tosecuretheexternalpositionbygainingInternational Monetary
Fundapprovalforastand-bycreditofSDR3.36billion.
Inparticular,intheChancelloroftheExchequer'sLetterof
IntenttotheIMF,published on15December1976,priortotheapproval
bytheFundofthestand-bycredit,itwasannouncedthatin1977/78;(2)
-thePSBRwouldbeheldto£8.7billion;
-DomesticCreditExpansionwouldbekeptto£7.7billion.
Itwas.subsequently announcedinApril1977,thattheauthorities
wouldaimtokeepthegrowthofthesterlingmoneysupplyasbroadly
defined(Sterling M3),during1977/78,withintherange9to13%.
•••/•••
(1)OJL358dated29.12.1976 .
(2)IntheUnitedKingdomthemaindecisionsconcerning budgetary and
monetarypolicyaretakenforfinancialyearsratherthancalendar
years.Itis,therefore,unavoidable thatmuchofthediscussionin
thisnotewillconcernthefinancialyear1977/78.Forpractical
purposesthefinancialyearisthesumofthesecond,third,fourth>
andfirstquartersofthecalendaryear.

-37-
Attheoutset of1977 ,both budgetary andmonetary policy
could beconsidered restrictive .This position wasreinforced bya
very firm incomes policy from August 1976 toJuly 1977 .
Partly asaresult ofthis policy stance ,which wasrelaxed
astheyear progressed ,there waslittle economic growth inthefirst
half of1977 .Incontrast ,a•recovery indemand islikely to
have occurred inthesecond half oftheyear ,although there isno
sign ofasubstantial rise inoutput .Inaddition ,theunderlying rate
ofinflation fell very markedly ,from 20% inthefirst half of1977 ,
to71/2Xinthesecond .Forthesame twoperiods ,thecurrent account
moved from adeficit of£800million toasurplus of£900million .
Special employment support policies clearly helped tosoften theimpact
ofloweconomic growth onunemployment .However ,astheyear progressed,'
theauthorities experienced increasing difficulties inreconciling their
exchange rate andmonetary policies .
Following thebudgetary posture established inDecember 1976 ,
the UKGovernment announced three major adjustments totaxation .These
adjustments were possible because oftheprogressive strengthening of
the UK'sfinancial position during theyear andtheimproved outlook .
forthe PSBR .Animportant aim oftheadjustments was toreduce the
burden ofdirect taxation with theview ,inthe first case ,ofobtaining
Trades *Union Congress agreement toafurther round ofincomes' policy .
Inthis regard UKeconomic policy was inline with theadaptions to
theeconomic policy guidelines adopted bytheCouncil inMarch 1977
(1).Themeasures may besummarised asfollows :
-inMarch 1977 ,theChancellor oftheExchequer announced direct tax
reductions (£1.3billion inafull year )partly offset byindirect
tax increases (£0.8billion ).Atthe same time,' further direct tax
reductions were proposed .
-inJuly 1977 ,the UKGovernment implemented significant direct tax
reliefs somewhat "different instructure from those announced inthe
March Budget ,atafurther cost ofabout £1billion .
•••/B?»0
(1)0JL119,12.5.1977 .

-38-
-concerned atthe sluggish rate ofeconomic growth ,the UK
Government announced further fiscal measures ,inOctober 1977 /
designed tostimulate economic activity both byreducing the
burden ofdirect taxation and byincreasing public expenditure
programmes in1978 /79.The taxadjustments were estimated toadd
about £1billion tothe1977 /78borrowing requirement .
Even after the tax reductions ,thePSBR for1977 /78,will still
remain well within the level communicated tothe IMF (£8.7 billion ).
Although these adjustments ,inparticular the third ,amount to
some relaxation ofthe stance ofbudgetary policy ,economic growth
hasremained somewhat lower than anticipated atthe time oftheMarch
Budget.'
During 1977 /78,the UKauthorities endeavoured tokeep the
growth ofthemoney supply ,asbroadly defined ,(Sterling M3),between
9%and 13% .Inthe event ,growth islikely tobeatthetop end of
this range orslightly above .Themain stimulus tomonetary expansion
hasbeen themassive inflow offunds into theUnited Kingdom that has
followed the restoration offinancial confidence ,partly offset bythe
Government 'ssuccess infunding theborrowing requirement outside the
banking system .Indeed ,the level ofofficial reserves rose from just
over 24billion atthe end of1976 toE20.2 billion byOctober 1977 .
Inthe late summer of1977 ,this inflow threatened toprovoke massive
monetary expansion ,unless the UKauthorities abandonned their policy
ofholding down theeffective exchange rate topreserve export price
competitiveness .This step wasvitually forced ontheGovernment at
the end ofOctober 1977 .
ι
Atthesame time asthe capital inflow took place ,theBank of
England 'sminimum lending rate fell rapidly from 91/2%attheend
ofMarch toalowpoint of5%inOctober .Following the change in
exchange rate policy ,minimum lending rate was raised to7%but then
fell to61/2%on6January 1978 .
./.

-39-
Thesecond stage ofincomes policy ,which ranfrom August
1976 toJuly 1977 ,was successful inkeeping the annual increase
inaverage earnings to8X.The impact ofthis policy onunit costs
is,atpresent ,helping tolower the rate ofretail price inflation .
Onthebasis ofthe retail price index (excluding seasonal food
items ),prices have risen atanannual rate ofonly 71/2Xover
thesecond half of1977 compared with 20Xforthe first half ,a
very significant improvement .ByJanuary 1978 ,theyear -on-year rate
ofretail price inflation hadfallen to9.9 X.
Under Stage 3,itwashoped torestrict the increase in
average earnings to10%nationally .Latest figures show that earnings
have risen by4.6 Xinthefirst five months ofthepolicy .Although
itisnoteasy toannualise these figures because ofvariations in
thepattern ofsettlements they dopoint tothepossibility that
earnings may increase bymore than 10Xinthepresent round of
incomes policy .
Largely due toNorth SeaOil,the UK'sbalance ofpayments
oncurrent account moved into surplus inthe second half of1977 .
Asregards exchange rate policy ,during most of1977 the UK
authorities aimed atensuring stability inexchange markets consistent
with theneed tomaintain competitivity .Inthecircumstances ,the
authorities pursued apolicy ofastable exchange rate ineffective
terms .However ,ascapital inflows intheautumn continued ona
large scale ,itbecame increasingly likely that this development
would threaten the control ofthemonetary aggregates andtheauthorities
finally allowed sterling torise against other currencies from the
endofOctober 1977 .Intheview oftheCommission itmight have helped
the UKauthorities intheir anti -inflationary policy ifsuch amove
hadbeen considered somewhat earlier intheyear inaccordance with
theguidelines adopted bytheCouncil inMarch 1977 .

-40
C.IMPLEMENTATION OFTHECOUNCILDECISION OF18FEBRUARY1974
6.1.Inaccordance withtheCouncilDecisionof18February1974
theCommissionisobligedtoreporttotheCouncilonMemberStates'
compliancewiththeprocedures andthetimetablethataimatachieving
ahighdegreeofconvergence oftheeconomicpoliciesoftheMember
StatesoftheCommunity.
Intheyear1977theCouncilheldtenmeetings(1),twomore
thanin1976,inordertoexaminetheeconomicandmonetarysituation
andtolaydownguidelinesforeconomicpolicysoastoformthebasis
ofacoordinated economicpolicy.
Thefirstyearlyexamination oftheeconomicsituation,which
isrequiredtotakeplaceinthefirstquarter,washeldon14March.
Thecouncilapproved aDecisionadjustingtheeconomicpolicyguide­
lines.HowevertheDesicionwasfinallyadoptedonlyon25April(2).
On14March,inaccordance withArticle6,theCouncilandrepresentatives
ofthegovernments ofMemberStates,endorsed,afterconsulting the
EconomicandSocialCommittee (3)andtheEuropeanParliament (4)a
resolution adoptingthefourthMediumTermEconomicPolicyProgramme
(5)relatingtotheperiod1976-1980.
Thesecondyearlyexamination oftheeconomicsituationofthe
Community wasundertaken on18Julyand,following aproposalofthe
Commission,aDecisiononthepreparation ofpublicbudgetsfor1978
wasadopted(6).
Forthethirdexamination oftheeconomicsituationtheCommission
presentedtotheCouncil,on18c1October,itsproposedAnnualReport
ontheEconomicSituationintheCommunity (7)togetherwitheconomic
•••/••■
(1)On14February,14March,5April,20June,18July,19September.
17October,21Novemberand19December.
(2)0JL11912.5.1977.:-
(3)0JC567.3.1977.
(4)OJC834.4.1977.
(5)0/L10125.4.1977.
(6)0JL20410.8.1977.
C7)C0M(77)494,final.

-41
policyguidelinesforeachMemberStatefor1978.Theseproposals
werediscussed bytheEconomicandSocialCommittee (1)andthe
EuropeanParliament (2)anddefinitively endorsedbytheCouncil
on21November (3).
6.2.TheEuropeanCouncil,oneachofthethreeoccasionsthat
itmet(4),alsoconsideredthemajorproblemsraisedbythemonetary,
economicandsocialsituation .
AthirdTripartite Conference tookplaceon27June.Like
thoseof1975and1976itbroughttogethertheMinistersofEconomic
AffairsandofEmployment,theCommission,andrepresentatives of
thetwosidesofindustry.Theobjectoftheexhaustive discussions
wasacriticalexamination oftheeffectiveness ofeconomicpolicy
intheMemberStatessince1976,andthesettingupofacommonlist
ofthemes,eachtobeexaminedasamatterofurgency,andwhich
aimedessentially attacklingtheproblemofemploymentinthe
Community.
6.3.Nevertheless ,despitecertainpartialsuccesses,theattempts
atcoordination madewithintheCommunityinstitutions haveremained
insufficient .Ingeneral,theseattemptshavelackedcontinuity and
coherence:themonitoring,duringtheyearinquestion,ofthejointly-
agreedtargetshaveveryoftenappearedtobetooformal;theCouncil
debateshaverarelyledtoanopenexchangeofviewsonthefundamental
problems.
Inaddition,themeetingsofMinistersofthosecountrieswhich
adheretotheCommunity exchangeratesystemhavealwaystakenplace
outsidetheframeworkofCommunityinstitutions,andtheobligation
ofpriorconsultation wasnotrespectedatthetimeofthetwo
realignments ofparitieswithintheCommunityintervention system.
•••'•••
(1)OJC1823.1.1978.
(2)OJC29912.12.1977 .
(3)OJL32319.12.1977 .
(4)25and26March,29and30June,5and6December.

-42-
6.4.Themultifarious dangerswhichthreatenthecurrenteconomic
situation andtheimportantproblemsofstructural changehave-given
thecurrentdegreeofeconomicinterdependence ofMemberStates-
underlined theneedforamoreeffectivecoordination atCommunity
levelofeconomicpolicies,bothintheshortandlongterm.Thus,
inaCommunication madetotheCouncilinOctober1977,theCommission
requestedthattheDecisionof18February1974shouldbeputinto
practiceinamoresatisfactory mannerand,withthisaiminmind,
proposedanimprovement inthemachineryforcoordinating budgetary,
monetaryandexchangeratepolicies(1).Thepursuitofmoreeffective
coordination ofnationaleconomicpoliciesisalsoinconformity with
theaimofrelaunching theideaofeconomicandmonetaryunionwhich
wasproposedbytheCommission initsCommunication totheEuropean
CouncilinBrusselsinDecember 1977(2).
6.5.AttheCouncilmeetingheldon21November1977,allthe
delegatesexpressedthedesiretoseeastrengthening ofthecoordination
oftheeconomicandfinancialpoliciesofMemberStates.Thecompetent
committees (theEconomicPolicyCommittee,theMonetaryCommittee,the
Coordination Group,theCommitteeoftheGovernorsofCentralBanks)
weregiventhetaskofexaminingtheCommission'sproposals.TheCouncil
willdiscusstheconclusions ofthisexamination inthecomingmonths.
(1)"Improvingcoordination ofthenationaleconomicpolicies";
COM(77)443Final.
(2)"Communication ontheprospectofeconomicandmonetaryunion";
C0M(77)620Final.

-43-
CONCLUSIONS
Althoughin1977progresswasmadeinreducingthehighlevels
ofinflation andinreducingbalanceofpaymentsdeficits,otherimportant
economicpolicyobjectives werenotachieved.Theeconomicrecovery
groundtoahalt,andunemployment increasedsharplyuntilthemiddle
oftheyear.
L •
Aself-sustaining andself-remforcmg recoveryhasnottaken
place,althoughthetrendoftheMemberStates'economicpolicieswas
inlinewiththegeneraleconomicpolicyguidelineslaiddownbythe
Council. •
Therearemanyreasonsforthecontinued weaknessofeconomi'cactivity^
ThegrowthofworldtradeoutsidetheCommunitysloweddownmorethan
expected,andthegrowthofintra-community tradeprovedevenweaker.
Thecoincidence ofcyclicaltrendshasbeengreater;differentiation in
growthratesbetweenCommunitycountrieswithstrongcurrencies andthose
withweakcurrencies wasnotachieved(withtheexceptionoftheUnited
Kingdom).Expansionary forces,particularly intheFederalRepublicof
Germany,wereforalongtimeoverestimated .Theshort-termeconomic j
policymeasurestakentostimulateprivateandpublicconsumption came
H !toolatetogivefirmsupporttotherecoveryin1977.
Onceagain,theMemberStatesoftheCommunity haveunderestimated
theeffectsofthelacaedegreeofeconomic .interdependence amongthe !
Europeaneconomies.Jheintensityandeffectiveness ofeconomicpolicy
coordination withintheCommunity werenotsufficient tomeetthechallenge
ofthepresentstabilization andrestructuring crisisaffectingallthe
MemberStates.

STATISTICAL ANNEX
Table 1-ECONOMIC POLICY TARGETS AND OUTTURNS FOR 1977
Table 2-DEVELOPMENT OFDOMESTIC DEMAND IN1977 "N.
Table 3-DEVELOPMENT OFINCOMES AND THE SAVINGS RATIO
Table 4-DEVELOPMENT OFPRICE AND COST INDICATORS
Table 5-UNEMPLOYMENT
Table 6-EXTERNAL TRADE AND DEVELOPMENT OFTHE BALANCE
OFPAYMENTS IN1976 AND 1977
Table 7-EXCHANGE RATES ,COMPETITIVITY ANDOFFICIAL RESERVES
Table 8-MONETARY TARGETS FOR 1977 AND OUTTURNS
Table 9-MONEY SUPPLY ,CREDIT ,ANDINTEREST RATES
Table 10-GENERAL GOVERNMENT BUDGETS (1975-1977 )
N.B. Except fortheFederal Republic ofGermany thenational
accounts figures for 1977 areestimates ofthe Commission'
..^Departments .The figures forBelgium donot take account
ofthe recent revision tothe National Accounts .

TABLE 1• •
ECONOMIC POLICY TARGETS AND OUTTURNS FOR1977
(%change onpreceding year )
1'«Gross domestic product (volume )
tDomestic
demandConsumer prices
(implied deflator ofDrivate consumot ion )
¿At
ite1977 targets
(1)-Annual
report ,Nov .761977 Targets
(2)Adjust ,
totheguide -
lines .March'771977 Outturn
(3)(3)(4)1977 targets
Annual report
November 19761977 Outturn
(3)1st half
1977
(5)2nd half
1977 "
(5)
penmark 3 2 1 -0.8t
8 101/2 9.0 13.4
FR:;Germany 5 5 2.6 2.5 41/2 3.9 4.0 3.7
Erance 41/2 <3) 2.3 1.3 7-8 9.3 8.9 8.8
Ireland 3 3 5.6 5.0 13 13.6 16.6 7.8
Italy (0) 3 1.8 r -0.2 17.5 18.5 21.1 12.9
Netherlands 41/2 4 2.3 4,9 7 7.0 7 7
Belgium 41/2 3 2·4 2.0 8-9 6.5 7.5 5.9
Luxembourg 41/2 3 1.1 1.7 8-8 1/2 6.7 6.7 5
United Kingdom
pi·.·3 1.5 -0.1 -1.5 11 14.9 19.9 7.5
Community 4 3.5 1.9 1.3 7-8 9.6 10.9 7.5
USA 5 4.9 5 5.6
Japan 61/2 51/2 4(1/2) 71/4
(1)Guidelines oneconomic policy fixed intheannual report ofNovember 1976 .
(2)Adjustments totheguidelines oneconomic policy for1977 (March 1977 )
C3>Estimates ofCommission 'sDepartments .
COPrivate andpublic consumption ,gross investment ,stock changes .
(5)Changes onpreceding periods atannual rates .

TABLE2
DEVELOPMENT OFDOMESTIC DEMANDIN1977(1)
■OXvolumechangeson1976)
DK D FEIINL ΒLUK EEC
Privateconsumption -0,22.92.24.51.53.53.02,5-0.91.9
Publicconsumption 2.31,04,02,01.82,42.62,101-?
Grossfixedassetformation -3.72,80.39,0-3,09.9-1.03.2-6.30.9
Enterprises -1.84,9-0.6 4,516-1,64.40.63.0
Dwellings -122,3-0.6 1.015.-20-13.7-0.5
Centralgovernment 1.2-3.41,8 1.6-8,93.04.2-24.5-4.0
Domesticdemand(includingchange)iη-0.82.51,35.0-0.24.92.01,6.-1.51.3
Contribution ofthedifferent components
tothegrowthofGDP
Domestic demand -0.42.42.05.41,84.42.02.8-1.71.6
Changesinstocks -0,40-0.70-2.00.30-0.90.2-0.4
Externalbalance 1-70.21,00.31,9-2^30.4-0.81,4Q-,7
Grossdomesticproduct 0.92,62,35.61.82,42.41.1-0.11.-9
(1)Estimâtes (nationalsourcesandCommission's Department s)„

TABLE3
DEVELOPMENT OFINCOMESANDTHESAVINGSRATIO
(%changeonprecedingyear)
Compensation
ofemployeesIncomefrom
propertyandCompensation ofemployeesper
employeeProductivity
(perPersonalsector
r' I
(Gross)businesses
iGróss)Nominal Realemployee)Disposableincome Savingsratio
1976197719761977197619771976,1977197619771976197719761977
Denmark13.59.01)
13.810.0Ί)11.58.52.8-1.82.706.31) 16,415.9
FRGermany 7.17.015.42.57.67.03.13.Ö6.12.66.45.914.313.4
France
Ireland15.4
2)
20.612.4
2)
17.712.3
24.811.7
26.114.7.
2)
(20.6)11.8
2)
(15.4)4.4
2)
(3.1)2.3
2)
(1.6)4.6.
2)
(3.2)1.8-
2)
(3.6)13.0
18.712.0
19.316.8
22.Õ17.0
22.0
Italy 22.622.025.1311/221.321.53.22.54.51.321.819.726.826.6
Netherlands 10.98.819.210.110.88.31.51.24.31.913.810.312.812.4
Belgium 10.78.713.011.911.79.12.62.43.92.812.39.817.017.1
Luxembourg 8.88.731.2-23.110.110.00.33.14.32.510.24.3•
m•
•
UnitedKingdom 14.59.332.117.815.29.5-0.2-4.73.40.115.212.114.613.3
Community 12.810.918.611.912.810.62.70.94.81.712.410.9
(1)Totalofprivatesector.
(2)Excludingagriculture .
:Datanotavailable.
Source:Commission'sDepartments .

TABLE4
DEVELOPMENT OFPRICEANDCOSTINDICATORS
(%changeonprecedingyear)
.Consumerprices
^implied ·indexof
privateconsumption )Developmenl
consumer ρof
•&ncesv ;Wholesale
»pricesCompensation of
employeesperunit
ofoutputImportprices
(impliedindex)
1976 1977(1)Dec.1976
Dec.1975Dec.1977
Dec.1976Dec.1976
Dec.1975Dec.1977
Dec.19761976 1977(1)1976 1977(1)
Denmark 8.5 10.5 13.1 12.5 8L67.08*3ξ.0 7.09.5
FRGermany 4.4 3.93.9 3.5 5.1 0.1 1.4 4.3 6.3 1.4
France 9.9 9.39.9 9.3 13.5 1.99.79.9 9.7 12.2
Ireland 17.0 13.620.6<2>10.8<2)22.511.6(3)(16.9)(11.5)17.4 18.7
Italy 17,5 18.522.0 14.0 31.5 9.516,119.8 24.5 17.8
Netherlands 9.2 7.08.3 5.6 9.0 4.7(2)6.26.3 6.3 3.5
Belgium 8.9 6.57.6 6.4 5.6-1.27.46.2 7.2 2.3
Luxembourg 9.8 6.78.5 4.3••••5.87.5 6.0 2.4
UnitedKingdom 15.4 14.9 15.012.1 17.7 15.9'11.4 9.4 22.0 15.9
Community 9.8 9.611.2 8.7 13.7 5.67.68.8 12.0 8.7
USA 5-35.6 4>8 6.8 4.7 6.14.86.0
Japan 8-5 73/410.4 4.8 6.1-1.4
CDEstimates.
<2)November/November.
(3)October1977/October1976.
':Datanotavailable.
Source;Commission'sDepartments .

TABLE5
\ ~
%
UNEMPLOYMENT (1)
!
Numberoftotal
unemployed (1000)%changeWomen,asapercentage
oftotalYoungpersonsunder25
year,asapercentaqeoftotalUnemployment
rateC2)
1976 19771976/1977 1976 19771977Jan.1978 1976 1977
Denmark
FRGermany
¡France
ÌIreland
ιItaly
Netherlands
!Belgium
!Luxembourg
UnitedKingdom118.2
1060.3
933.5
110.5
1181.7
210.9
266.6
0.5
1360.0147.0
1030.0
1071.8
109.0
1377.8
203.5
307.6
0.8
1483.624.4
-2.9
14.8
-,1.4
16.6
-3.5
15.4
79.6
9.837.2
46.6
52.5
19.1
37.3
24.2
57.0
38.6
24.842.2
49.8
53.4
20.0
39.0
28.6
59.6
39.8
27.921.6
28.6(3)
42.2
38.2
37.8
••
36.621.6(3)
37.5
•
•
40.5
38.1
52.5
•
•4.7
4.1
4.3
9.8
(6.0)
4.4
6.8
0.3
5.35.9
4.0
4.9
9.7
<7.0)
4.3
7.8
0.6
5.8
I
Community
1
;(5242.2)(5731.1)9.3 38.7 41.2•
m•
•5.0 5.4
(1)Sincethedefinitionsvary,itisnotpossibletocomparetheunemploymentratefromcountrytocountry.
(2)Numberofunemployedasapercentageofcivilianlabourforce.ForIreland:mid-April.
(3)September1976and1977.
:Datanotavailable.
Source:EUR0STAT

TABLE6
EXTERNAL TRADEANDDEVELOPMENT OFTHEBALANCEOFPAYMENTSIN1976AND1977
Exports Imports Termsoftrade
(%changeon
precedingyear)Currentaccountbalance
%change(Goodsandservices)
,involumeterms,overprecedingyearNational
currencybillionsf>
Ï
Intbillions AsXofGDP
19761977'T976 19/7>1976 1977197619771976 1977 19761977
Denmark 2.63.916.8-1.32.4-2.3-12.0
(1)-10.1
(ï:-2.0-1.7-5.1-3.9
Fj<Germany 11.44.711.4 4.6-2.60.39.2 6.03.72.60.80.5
France 9.46.319.5 1.0 0-0.6-29.1-14.7-6.1-3.0-1.8-0.8
Ireland 8.413.715.411.4 4*.0-2.3-0.15-0.15-0.3-0.3-3.4-2.8
Italy 12.65.513.1-2.0-3.82.3-2380 1800-2.92.0 1.71.0
Wetherlands 10.5-2.410.9 1.9 0-0.36.7 1.32.50.5 2.80.5
Belgium
Luxembourg8.0
3.23.9
1.610.7
0.23.1
2.4}0.7-13.0Ì-2.9i-0.3Î-0.ÏÌ-0.5)-0.1
UnitedKingdom 7.05.43.00.4 02.0-1.2 0.2-2.20.3-1.00.1
Community 9.74.311.6 1.8XX-7.60.4-0.5 0
USA 6.52.218.4 9.90.4-3 -1.4-18-0.1-1.0
Japan- 17.112.97.8 3.6-1.5 1.1 3.7 11 0.71.7
(1)AccordingtoBundesbankbalanceofpaymentsfigures:1976;8.5billionDM<3.4billionS).1977:8.2billionDM(3.5billionS)
• •

O TABLE 7 A
EXCHANGE RATES ,COMPETITIVITY AND OFFICIAL RESERVES
%changes ineffective %changes incompetitivity Official reserves (3)
* exchange rates (1) (2) tbillion (End-year )
Dec .1975 Dèe .1976 Dec .1977 IV 1975 IV 1976 IV 1977 1975 1976 1977
Dec .1974 Dec .1975 Dec .1976 IV'1974 IV'1975 IV1976
Denmark _0.8 +7.4 _ :5.9 +2.2 -5.7 +-5.3 802 842 1.588
FRGermany - -3.1 +15.4 +6.6 +6.2 -7.4 - .0.4 23.128 26,522 29.388
France +7.2 -9.5 -»1.5 -11.7 +.10*9 -0.6 8.440 5.605 5.887
Ireland -6.9 -11.7 +'4.4 -1.3 +"7.3 -5.0 1.513 1.818 2.352
Italy +0.3;-21.1 -6.5 +3.5 +2.2 +2.1 Î.3Û4 3.222 " 8.094
Netherlands -rO.8 +10.0 +0.8 -0.6 -'2.3 +0.2 4.893 5.188 5766
Belgium .*·*4) Lì
--3.1 +10.7 + .2.1 +5.0 --4.7 +1.8 4.152 3.724 4.599(4 )
United Kingdom -10.4 -.16.6 +5.6 -1.9 +'11.6 -17.2 3.17<κ 1.908 12956
•
Community 47.406 48829
• 70.630
USA . +S-2 +1.7 -.-6.2 --3.8 +0.2 +3.1 4.627 7.149 7.497(5 )
Japan +1.8 +6.1 +19.4 +6.1 -3.6 -10.8 11951
m15747
• 19_094(6 )
(1)Appreciation (+)ordepreciation (-)ofnational currency against theaverage ofallthe .other currencies .
(2)Gain (+)orloss (-)ofcompetitivity ^.Definition :thechange inacountry 'swholesale priceindexCor similar index )
corrected bytheappreciation ordepreciation ofthatcountry 'scurrency against thedollar ^compared withtheaveragechange inwholesale prices ,indollars /(calculated inthesameway)in theprincipal competitor *countries .
(3)Excluding gold ,gross value .
(4)BLEU .
(5)November .
(6)October .
Source :Commission 'sDepartments .

TABLE8
MONETARYTARGETS1977AM)OUTTURNS
«
•Denmark ■PRGermany PranceIreland Italy NetherlandsBelgium !>-■ ■ ■τ
UnitedKingdoa
*2Central
bank
moneyM2H3I'
Totalcredit·Mg
1
1M2Bankcredit;
tothepri-v
vatesectorI
SterlingDomestic
M,.credit
!expan­
sion
Targetsfor
1977proposed
bytheCommis­
sionintheAn-
nualReporton
theEconomio
Situationin
theCommunity
(October1976)less
than
+11-1255
(2)less
than
+9^-10$
(1)ffless
than
+16$
(2)1
1
1
1+18-19$
1(2)
1
1
1
1+11)6
(1)+223bil.PBι
I
I
I
+12$!-
(2)(6);
1
1
1
Official
targets
for
1977-+8$
(1)+12.5$
(2)-+306OObiIlitî
(3)¡-
4-1
^'+£7.7+9-13$'bil.
(5)¡<4)(5)
1
'+30000biI,Lit,
(4)!
Results
1977 +9$
(1)+12.5$
0.)+17%(e)
(2)ι
+35000bil.Lit«+2η
J(2)+8$(e)
(2)+210bilEB
(e)risks'+£4.5
exceedingbil.
+13%'(5)
fl)Annualaverage.
[2)December/December^
[3)FollowingthenegotiationswiththeEEC,(4)
(5)
C6)
Ce)Followingthenego
Asecond"letter0FollowingthenegotiationwiththeIMF(targetperiod:31/3-77-31/3-78)
Asecond"letterofintent"inDecember1977extendstheperioduntil
thefirstquarterofthe1978/79fiscalyear;bytheendofthisperiod
themoneysupplymayrisebyabout£6billion.
FiscalyearApril1st1977-March31st1978.
Olddefinitions,M3.
Estimates.

TAM.ff ▼
Γ>Οϊ<ί·ΤΠΙίΤΙ.Τ,ΟίίΓά^'Γ,Λ.'.ΌΤ!ΓΠΗΚ:".?Νντ!·Λ
♦Ί 1975 19761977·
^CountryIVjceniïor DecemberΚηroh Julio CcptrmVcr D^CTnVrr
Mdnryfcuj'pîy(l)(î>)
"1 "1 MzM1«2 "1 M2"iV"i*2
ïî^mirk 26.025.56.211.46.39.0 6.99.27.010.1 9.09.8
KW0.n,;uî\V 1%7 8.5 1.9P.47.89.2 5.77.79.1 9.ï11.t11.1
VYiiV.ZC 12.7l'j.97.Y12.87.712.3 5.910./,S.6•12.6 «-OCA»12.5(4)
lrclnivl 20.3 19.116.6 14.3lr,.2'IT·.316.2 !1 I24.V(4)16.4
Italy 12.523.620.1 20.718.419.5 20.120.6 21.220.7 19."19.714)
Kcthcrlnmta 19.7 5.7 6.822.77.020.2 16.811.4 20.2 7.813.9(4)7.8(4)
ÎU-lCit» 11.3 I5.O7.014.29.413.*6.812.1 10.210.810,8(4)10.5
21.47.813.311.3 8.80.313.68.1 12.26.319.89.2VA 4.18.85.7 10.56.110.6 6.210.3 7.8 I0.47,29.4
Binklendinetoprivatoooetor(2)*
foranark 14.3 11.8 9.« 11.3 10.5 11.8
FRO-.-rrcurvy 4.6 9.4 9.4- 9.ï 9.0 9.0
Krnnc* 14.2 I5.7 I5.7 14.8 14.1 13.3(4)
Ireland 16.3 27.2 29.8 : t 18.0(4)It*ly •19.0 22.6 21.0 19.9 15.3 S
îîcthorlande 12.2 21.1 22.1 21.0 18.7* 20.5(4}
Bclciua I3.9 15.7 15.« 14.8 13.5
UnitedXingâoa 0.7 ".5 12.8 13.0 1Î.2 12.3
USA -0.6 8.4 9.« 11.3 12.7 1
–►.·«*.♦· . .TJI ..» 1
•Internat r®to*(3)
ShoriLor.c
t«raShortLonc
tara
Donæiuric 4.513.213.5il?Ccrtrîiy 3.9 8.6 5.0
franco 6.5 10.2 10.4
Ireland 10.9 14.614.8
Italy 8.3 ■IO.516.8
■kthorlawls 4.47.6 6.4Bigv.ui 3.98.57.4
wiltedKingiica 10.2 14.813.8
USA 5.2 7.1•4.715.2
7.4
11.0
15.5
14.2
7.3
9.3
15.5
6.4Shortlong
ton
13.5
4.5
9.7
îo.e
16.5
5.5
5.5
9.7
«.715.5
7.0
10.9
12.7
14.8
7.6
9.1
13.3
7.8ShortLong
ter»
15.0
4.1
8.9
7.6
1/1.3
0.5
5.9
6.7
5.415.7
6.4
11.1
13.6
14.7
7.1
8.9
13.3
7.«ShortLong
tara
10.3
4.0
8.3
7.0
12.3
2.7
4.9
5.8
6.115.8
£.0
11.0
U.9
14.4
«.7
8.7
U.9
7.7ShortLong
ter»
19.0
3.2
i:è
11.1
4.9
7.2
5.3
6.6
(1)M,j:Notesandcoinsincirculation anddepositmoney;Mg(unitedKingdomandthe
FederalRepublicofGermany:M,):M„andnear-money.
(2)Percentage changeonsamemonthofpreviousyear.
(3)Short-term ra.tes:day-to-dayrate;long-terminterestrates:yieldonfixedinterest
securities . •"
(4)November.
:Datanotavailable . *
)
1

TABLE 10
GENERAL GOVERNMENT BUDGETS (1975-197 7)U)(2)
* I
κ Receipts Expenditure'Net balances
%rate ofchange %rate ofchange Innational currency In%ofGDP-· ·
Country
1975 I976 1977 1975 1976 1977 1975 1976 1977 1975 1976 1977
Denmark (Dkr *000mio) 3.1 13.7 11.7 20.5 14.3 11.3 -4.5 -1.3 -1.1 -2.2 -0.6 -0.4
PRGermany (DM'000mio) 2.0- 12.5 9.1 12.9 7.3 7.0 60.3 41.8 34.4 -5.8 -3.7 -2.9
Prance (PF'000mio) 17.3 20.2 14.5 25.6 16.2 15.0 -32.3 -13.3 -18.5 -2.2 -0.8 -1.C
Ireland (£'000mio) 22.8 34.1 18.4 27.7 21.7 16.8 -510 -461 -510 -13.9 -10.3 -9.5
Italy (Lit .'000mio) 15.4 32.0 23.7 30.1 25.2 22.4 -12907 -13442 -15750 -11.3 -9.4 -9.1
Netherlands (PI'000mio) 11.9 16.0,11.5.20.4 14.7 11.4 -6.1 -5.6 -6.2 -2.9 -2.4 -2.4
Belgium (PB'000mio) 19.7 12.7 13.3 24.0 15.3 14.5 -86.6 -125.5 -157.0 -3.8 -4.9 -5.6
Luxembourg (Flux '000mio) 11.7 16.3 14.6 23.6 18.3 1-.3 0.2 -0.7 -0.6 0.2 -0.7 -0.7
United Kingdom (Mio£) 29.7 17.0 14.2 . 3O.O 17.4 10.5 ■-4910 "-5906 -4673 -4.7 -4.8 -3.3
(1)Local authorities andsocial security system included .
(2)1977 *Estimates oftheCommission 'sdepartraents «
Source :Commission 'sDepartments .