COMVIISSION OF THE EUROPEAN CQMVIUNITIES 
VERSION CONSOLIDEE C0M(93) 164 final 
Brussels,22 April 1993 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth initiative) 
COMMISSION 
OF THE EUROPEAN 
COMMUNITIES 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
1. The Edinburgh declaration 
The current weak performance of the European economy is a matter of 
concern. Real GDP growth in the Community is slowing from only 1.1 % in 
1992 to 3/4 % in 1993, with employment falling sharply in 1993 for the 
second year in succession and the unemployment rate as a consequence 
climbing further towards 11 % on average this year. A worrying feature of 
the economic climate has been the sharp deterioration in business and 
consumer confidence during the course of 1992. More recent information 
suggests that in general, despite some brighter signs in a few countries, the 
development of economic activity in the Community in 1993 is likely to 
continue weak. 
Against this background of weakening economic activity in Europe the 
Commission proposed and the European Council, at its meeting in Edinburgh 
on 12 December last year, called for measures to be adopted at both 
national and Community level which would work to boost confidence, 
reinforce the fundamentals of economic growth and encourage the creation 
of new jobs (1). Early in February the Commission presented a 
communication to the Council on the implementation of the Community 
measures. It is now time for the ECOFIN Council to take stock of the 
package of measures and actions to help recovery, the "growth initiative", 
that have been announced by individual Member States . or agreed at 
Community level so far. These measures will start to take effect in 1993. 
Their aim, within the framework of appropriate fiscal, monetary, commercial 
and other economic policies, is to provide opportunities and encouragement 
and support in specific areas of weakness that are key to the Community's 
future economic prosperity, so that confidence can be rebuilt and the 
chances for recovery enhanced. 
2. Coordinated policies for stability, growth and employment 
The growth initiative includes measures at both Community and national 
level. They are part of a concerted effort, the impact of which will be greater 
than that of uncoordinated actions taken at different times in individual 
Member States. Because the linkages between Member States' economies 
are now so close (and are being developed further as a result of the Single 
Market) a stimulus to growth in one country also benefits its Community 
partners, while that country similarly draws advantage from the effects of 
(1) Conclusions of the Presidency - Edinburgh, December 12, 1992; Annex 4 to 
Part A, Declaration on Promoting Economic Recovery in Europe. 
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measures introduced elsewhere. The effect a Member State could harvest 
from individual action could be roughly doubled were it accompanied by the 
others, with budgetary costs also reduced. Moreover measures in the 
Community are being complemented by similar initiatives being taken by 
EFTA countries, and measures to boost recovery are also being introduced in 
the USA and announced in Japan. While efforts in individual countries alone 
would not have a significant impact, coordinated action throughout the 
developed world will help to hasten the global recovery. 
The measures being introduced in the package will provide short-term 
support to activity in the Community but in a way that improves the longer-
term growth potential. Thus expenditure increases are focussed on capital 
investment (improving infrastructures, encouraging private investment) and 
investment in human capital of a kind that will already have an impact on 
employment and unemployment this year while also having lasting beneficial 
effects on the supply potential of the Community. Other measures and 
reforms with less direct expenditure implications will help to make the 
economic system more responsive and restore the dynamic to Community 
output. 
The growth initiative measures are designed to come into effect as quickly 
as possible and will be concentrated in 1993 and 1994, although their 
effects will extend over a longer time. Many of the specific spending 
decisions announced by Member States are in the context of their budgets 
for 1993. There will be an opportunity for Member States' governments to 
reinforce these measures later in the year when national budgets for 1994 
are presented, based on an assessment of prospects, needs and constraints 
at that time. 
As stressed in the Edinburgh declaration, the underlying objectives of 
Member States' economic policies remain as set out in the Maastricht 
Treaty: an open market economy with free competition, sustainable growth 
respecting the environment, stable prices with sound public finances and 
monetary conditions and a sustainable balance of payments. The policy mix 
stemming from the Edinburgh declaration - exploiting the existing room for 
manoeuvre of budgetary policy; switching public expenditure priorities 
towards infrastructure and growth supporting expenditures; encouraging 
private investment; implementing structural reform; and achieving wage 
moderation - will enable growth to be resumed without jeopardizing the 
achievement of the Maastricht budgetary obligations. Member States remain 
determined to fulfil the convergence criteria established in the Maastricht 
Treaty and to comply fully with the convergence programmes submitted to 
the Council, including adherence to the medium-term goals of budgetary 
consolidation. 
In current circumstances there is limited scope for a boost to public 
spending, which even if it gave some short-term support to activity would 
add further to public indebtedness, put upward pressure on interest rates 
and damage longer-term growth prospects. Instead the emphasis of the 
measures is on selective actions and on shifting the structure of public 
expenditure towards those areas which are more growth-enhancing. 
Economic recovery, when soundly reestablished, will then facilitate the 
overall convergence process within the Community, especially on the 
budgetary side. 
Those Member States in a more favourable budgetary position are taking 
advantage of the room for stimulative action. On the other hand, those 
countries faced by large imbalances in their public finances can do most to 
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countries faced by large imbalances in their public finances can do most to 
restore confidence and improve the economic climate by credible pursuit of 
measures to bring budget deficits under control so as to achieve the 
medium-term targets set in the fiscal consolidation strategies of their 
convergence programmes. 
In the short term, however, the weakness of economic activity is depressing 
tax revenues and putting upward pressure on some categories of social 
expenditure, making progress in reducing budget deficits even more difficult. 
Except in those Member States facing very high deficits and public debt 
ratios, it is appropriate to allow some play to the automatic stabilizers, 
especially on the revenue side. This mechanism automatically gives support 
to domestic demand, which otherwise would be even weaker. But such an 
approach implies that when recovery does get under way budget balances 
must be improved rapidly to get back on track, both by allowing the 
favourable cyclical effects to operate and by continuing the necessary 
discretionary adjustment. 
3. Need for progress on other key economic policy issues 
Getting the Community economy back onto a satisfactory, sustainable 
growth path will be helped along by the growth initiative measures, but its 
effects would be significantly augmented by firm progress in resolving a 
number of other inter-related problems, both political and economic, which 
have caused much uncertainty during the last year and have depressed 
confidence and delayed expansion : 
- ratification of the Maastricht Treaty is urgently needed so that the way 
forward for the Community and its enlargement is clearly established; 
- further reductions in still very high European short-term interest rates are 
required, based on confidence that inflationary pressures are being 
contained and that budgetary positions can be consolidated over the next 
few years across the Community; 
- a return to steadier conditions within the European Monetary System, 
which is highly dependent on the two previous factors, will favour an 
environment in which fuller advantage can be taken of the opportunities 
opened up by the Single Market; 
- and in the international sphere, conclusion of the long-drawn-out GATT 
negotiations is needed with a comprehensive and balanced agreement 
which will offer much enlarged trading opportunities. 
4. The growth initiative package of measures 
A wide range of actions and measures has been announced and decided in 
the last few months at national and Community level for implementation 
during 1993; in some cases Member States are already taking advantage of 
the new or enlarged Community facilities agreed in Edinburgh. 
The main areas where national and Community action is being taken are : 
- greater priority in public expenditure on infrastructure and other capital 
investment and on other growth-enhancing spending (e.g. research and 
development); 
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- new facilities and incentives to encourage private investment; 
- improved support for small and medium-sized enterprises, which hold 
considerable potential for employment creation; 
- additional training and other schemes to prepare the unemployed for work 
and to improve the quality and skills of the labour force; 
- wage restraint, especially in the public sector so as to keep current 
expenditure under control, but also to encourage economy-wide wage 
moderation to improve competitiveness and help reduce unemployment; 
- structural reforms, to make markets work better (especially the labour 
market), increase competition and remove distortions. 
Besides the concrete measures they are taking, some Member States are 
also giving support to activity by not attempting to offset the effects of the 
cycle on their budget deficits. 
Moreover, it should not be forgotten that the rapid progress towards the 
completion of the Single Market, with the successful abolition of the internal 
frontiers from January 1993, is the biggest structural reform in the 
Community in recent time. It is making an important contribution to the 
functioning of the Community economy. 
The measures at Community level, detailed proposals for which have been 
put forward by the Commission and by the European Investment Bank, 
contribute especially to action in the first four areas above. Full information 
about Community level measures which have been decided and proposed are 
given in Annex A. Details of the growth initiative measures announced by 
each of the Member States, covering all the areas for action, are presented 
in Annex B. Important features of the main areas of action are highlighted in 
the following paragraphs. 
Priority to public investment 
A significant part of the growth initiative package concerns investment, 
with contributions from both Community and the Member States. While 
investment as a whole is a precondition for sustained growth, public 
investment'can bei activated' more rapidly. In previous period! of economic 
slowdown public investment has usually been one of the first categories of 
public spending to suffer cut-backs. This time Member States, conscious of 
the importance for long-term development of the economy as a whole of a 
modern, efficient public capital stock, are first seeking to protect capital 
spending from general budget economies and in addition have announced 
increases over earlier plans in selected areas of public sector capital 
expenditure, mainly on infrastructure projects. Besides its multiplier effect 
public investment will induce a crowding-in of private investment. 
Additional investment expenditures amounting in total to some 
ECU 6 billion in 1993 have been announced by Member States so far, with 
every single country making some additional effort. 
The Edinburgh European Council gave the green light to several new and 
enlarged Community schemes. A new temporary lending facility of ECU 5 
billion has been established by the European Investment Bank. A European 
Investment Fund with a capital of ECU 2 billion will be set up. Community 
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structural funds are to be significantly increased for the period 1994-1998 
and a Cohesion Fund was created with an amount of ECU 1.5 billion 
available for 1993. These will be making a significant contribution to the 
cofinancing of additional investment (both public and private), especially in 
the four cohesion countries (Greece, Spain, Ireland and Portugal) and in 
other less prosperous regions of the Community. 
Particular emphasis is being given to using the new Community financial 
instruments for capital infrastructure projects connected with trans-
European Networks (TENs), designed to make the Single Market work 
better and to improve links with Central and Eastern Europe. The 
Commission, after full consultation, has published the proposed guidelines 
(schémas directeurs) for road transport, for the TGV, for combined 
transport and for waterways. Consultation is well-advanced and the 
Commission will put forward within six months the proposed shémas 
directeurs for conventional rail, ports and airports, air traffic control and 
Vessel Traffic Systems (VTS). In two other important sectors, energy and 
telematic networks, guidelines or projects for action have also been 
proposed. The identification of projects which fall within the schémas 
directeurs is going ahead. In transport alone over ECU 40 billion is likely to 
be needed for projects of Community interest which could be initiated in 
1993/94, some of which will be eligible for loan or credit from the new 
Community schemes or for structural or cohesion fund assistance. The 
Commission has also taken steps to increase the financing by the 
international financial institutions (especially the EIB) of TENs-related 
projects in the countries of Central and Eastern Europe. 
The EIB has already approved loans within the Community under the 
temporary lending facility amounting to ECU 1.6 billion for 21 projects. 
Over 90% of this additional lending concerns TEN projects or related 
access infrastructure. In addition to these operations within the 
Community, the EIB has also agreed the financing of two projects in 
Central and Eastern Europe. 
Encouraging private investment and help for small 
and medium-sized enterprises (SMEs) 
Recovery in private investment will primarily be driven by improved 
business confidence about prospects for demand and profitability and will 
be helped by a lowering of interest rates. With the aim of encouraging the 
bringing forward of investment that would otherwise be delayed or which 
may be having difficulty in obtaining finance in present conditions, Member 
States' governments have announced a variety of new or enlarged 
incentives and schemes. Several countries have increased tax reliefs for 
investment (in some cases on a time-limited basis). Many have extended 
schemes which provide loan guarantees or credit on favourable terms, 
especially to small and medium-sized enterprises; it is estimated that the 
national schemes included in the growth initiative package could support 
investments by the private sector amounting to about ECU 6 billion in 
1993. 
The housing market is very depressed throughout much of the Community 
and several governments have take steps to encourage housing demand, 
often through reduced transaction taxes, and tax and other incentives for 
repair and maintenance, provision of rented accommodation, etc. 
A proportion of the enlarged Community financial resources will be used to 
support private sector investment projects. In particular the new European 
Investment Fund, plans for the setting up of which are now well advanced 
so that it should come into operation this autumn after ratification of the 
amended EIB protocol, will provide loan guarantees, e.g. for 
telecommunications, electronics and transport projects (TENs) and for SME 
projects. Preparatory work for the identification of projects is under way, 
so that decisions can be implemented before the end of this year. 
In addition to investment-related support, other measures to reduce 
administrative burdens and to provide advice, information and technical 
assistance to small firms have been announced or are under consideration 
at national and Community level. In particular the Commission has 
proposed a multi-annual programme of measures to support enterprises 
(especially SMEs). The programme envisages actions to facilitate the 
insertion of SMEs in the single market as well as measures to help SMEs 
adjust to industrial changes and to enhance competitiveness, based on the 
twin objectives of information and cooperation e.g. development of Euro-
Info Centres, BRE/BC net, and the "Europartenariat" and "Enterprise" 
projects, and promotion of transnational sub-contracting and the 
strengthening of technological potential. 
Making research and development more effective 
A more competitive Europe will be able to create more jobs. Research plays 
an important role in shaping the overall competitiveness of an economy. 
Given the economies of scale and nature of risks there is a case for some 
research expenditures to be made at Community level. In this light 
additional actions worth ECU 900 million are now being put in place by the 
Community; these actions include a substantive effort in favour of the 
employment of researchers (including, specifically, technicians currently 
unemployed) and will give rise to an improved competitive position for 
industry. A recent independent evaluation has shown that supplementary 
financing of research with widespread industrial application gave rise to 
ECU 2.5 billion of direct economic effects and ECU 800 million of indirect 
economic effects over a 5-year period. In addition, and in order to maintain 
steady support to research, the Community is currently preparing the fourth 
framework programme with a view to further projects of research and 
technological development which will have industrial application and an 
effect on efficiency and jobs. 
Adapting and reinforcing training and employment schemes 
The boost to investment resulting from the actions mentioned above will be 
a source of job creation. However, more decisive actions are also needed to 
counteract the current loss in jobs. National measures in the package aimed 
at employment include incentives for job creation, extension and 
reinforcement of training and labour market reform. 
Carefully targeted training measures are a key element in facilitating the 
adaptation of workers to the growing challenges of industrial change. Such 
measures can both increase competitiveness and combat unemployment. 
As industries adapt and modernise many of those who become unemployed 
are experienced and relatively skilled. The risk of such people becoming 
long-term unemployed can be minimized if early action is taken to retrain 
them and prepare them for alternative employment. 
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At Community level, the European Social Fund cannot presently intervene, 
except in areas eligible for Community regional development assistance, to 
help those who become unemployed unless they have been out of work for 
more than a year. Thus there is a risk not just for the people themselves 
who risk drifting into long-term unemployment but also for the Community 
that their potential and skills will be lost to the economy. Concrete 
proposals to apply the rules governing the Social Fund in a more flexible 
manner were approved by the Commission in March and their application 
can now be discussed with the Member States. A wider definition of long-
term unemployment will be applied in certain specified conditions. This 
derogation, the possibility of which is expressly foreseen in the Social Fund 
Regulation, will permit a more effective use of the Social Fund and 
constitutes an important response to the situation in the labour market at 
Community level. It could be possible to redirect ECU 200 million or even 
more in this context within the current Community support framework. 
Sharing the burden of the slow-down through wage moderation 
In relation to public sector pay, most Member States are achieving success 
this year in moderating wage increases compared with 1992. Notably tight 
wage policies are in operation in Germany, Greece, Italy, Spain, Portugal 
and the United Kingdom. Slower growth in the wage bill is needed to make 
progress with budgetary consolidation and to make room for other, more 
growth-enhancing public expenditures. 
Public sector wage moderation can also provide a lead to private sector 
wage setting, where the social partners are increasingly aware that wage 
increases out of line with productivity growth must be avoided so that 
international competitiveness can be maintained or improved and 
profitability safeguarded in order to encourage investment and employment. 
Wage moderation in the private sector is increasingly evident this year, and 
is especially welcome in Germany because of its implications for monetary 
policy. 
Implementing structural reforms to improve long-term growth potential 
Structural reforms to make the EC economies more flexible, responsive to 
change, innovative and efficient are an important part of the growth 
initiative and will play an increasingly decisive role in influencing 
performance in the Single Market in the coming years. Above all rigidities in 
EC labour markets are still very evident. The high level of unemployment in 
the Community is only partly due to the recent weakness of activity. 
Labour markets are not functioning properly. 
Measures have recently been announced in several countries intended to 
start tackling labour market problems, such as establishing a more 
appropriate balance between income support for the unemployed and 
incentives to work, allowing a wider and more flexible range of modes of 
working, reducing barriers to entry to certain activities and professions, 
improving employment agencies and job counselling, introducing greater 
regional and occupational pay differentials where justified, attacking 
obstacles to mobility between jobs and regions such as rigid pension 
arrangements and housing difficulties, and improving the skills of the work­
force. 
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This is a long-term process which will only slowly bear results and which 
will need to be pursued over many years, especially given the prospects of 
unemployment rates remaining at too high a level through the mid-1990s. 
Other areas of structural reform are also being addressed. Measures to 
improve the operation of competition policy have been introduced or 
proposed in Belgium, Germany, Greece, Spain, Ireland, the Netherlands and 
Portugal, to adapt to Single Market pressures, strengthen legislation or 
reduce barriers to entry. 
Proposals for a shift of public sector enterprises into the private sector 
(also with budgetary benefits) have been put forward in the privatisation 
programmes announced or extended in Belgium, Germany, Greece, Spain, 
France, Italy, the Netherlands and Portugal. 
5. The economic impact of the package 
Prompt implementation of the growth initiative package will have a positive 
impact on the Community economy. The combined impact of those 
measures being taken both at national and Community levels which can be 
directly expressed in terms of additional expenditure (mainly extra 
investment by public and private sectors) is assessed to add to growth in 
both 1993 and 1994, taking real GDP in the Community in 1994 to a level 
0.6% higher than it would have been without the growth initiative package. 
This extra value added in the Community represents some ECU 35 billion. 
Corresponding to this boost to economic activity would be employment 
creation over the two years of some 450 000 jobs, and an increase in the 
level of total fixed investment in 1994 of 3%. 
These results, already significant, account for only part of the full effects 
which can be expected from the package. By their nature the scale and 
timing of the positive effects of structural measures are difficult to quantify 
and no credit for them has been given here. Moreover, further cuts in 
interest rates are to be looked for in coming months based on evidence of 
inflation being brought under control, successful wage moderation and 
credible plans to reduce budgetary imbalances; but such falls in interest 
rates remain uncertain at present and the favourable impact they would in 
due course have on demand and debt servicing costs has not been allowed 
for in the quantitative assessment. Achieving a successful revival in 
business and consumer confidence may be more important for economic 
recovery than the direct impact of those measures that can be quantified. 
Also helping to combat the recessionary tendencies in the European 
economies is the decision by several Member States to offset only partially 
or not at all the deterioration in their budget deficits resulting from the more 
pronounced weakening of activity than they expected when they announced 
their budget plans for 1993 last autumn. The extent to which this has been 
done or is appropriate varies from country to country depending in part on 
starting conditions. In general it can be estimated that letting the automatic 
stabilizers operate will offset about one third of the reduction in output 
growth. 
6. A significant stimulus but the situation must be continuously monitored 
The very large number of measures at both national and Community level 
which have been decided in the few months since the growth initiative was 
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conceived already represent a significant stimulus to economic activity in 
the Community. 
Energetic follow-up is required in coming months to ensure implementation 
of decisions: the ratification procedure for the setting-up of the European 
Investment Fund needs to be completed as rapidly as possible; other 
Commission proposals, e.g. in relation to research and development and 
SMEs, await Council approval; the good start made by the Commission and 
national authorities in identifying projects eligible for financial support needs 
to be continued and rapid progress made in actually getting projects under 
way; legislation necessary for some of the national proposals has still to be 
passed so that practical application can begin. 
In the area of structural reform there is a wide agenda still to be considered. 
The measures announced recently (and those introduced in earlier years) go 
in the right direction but are only a beginning. While subsidiarity 
considerations suggest that often these issues are appropriately tackled at 
national level having regard to institutional specificities and traditions, a 
sharing of experience between countries and a parallel approach to reforms 
are likely to be fruitful. The design of reformed labour market policies to deal 
with high unemployment, which seems likely to persist even when economic 
recovery resumes, is a major challenge for European governments. On a 
remit from the ECOFIN Council, the Economic Policy Committee has already 
presented an opinion on "Improving the functioning of the labour market" in 
which it identifies a series of areas for concerted action. 
The economic situation in Europe will continue to be closely monitored in 
coming months to see whether recovery is getting under way, to assess the 
impact of the growth initiative measures already taken and to decide 
whether further action is required, e.g. at the time when budgets for 1994 
are being formulated. 
The actions being taken in the Community are an essential part of the wider 
efforts by the developed countries to get the world economy back on a 
soundly-based expansion path. Close consultation and cooperation with the 
other main actors (USA, Japan, EFTA countries) is to be pursued and the 
results will be assessed by the next Economic Summit in Tokyo in July. 

COMMISSION 
OF THE EUROPEAN 
COMMUNITIES 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
ANNEX A 
Actions and measures decided or announced 
at Community level 
1. EIB temporary lending facility 
2. European Investment Fund 
3. Training for the unemployed. Increasing facility of the ESF 
4. The place of SMEs in the growth initiative 
5. The contribution of Community research 
6. The contribution of structural measures 
7. The single market harnessed to the cause of growth 
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COMMISSION 
OF THE EUROPEAN 
COMMUNITIES 
EIB TEMPORARY LENDING FACILITY 
I. MAIN FEATURES 
1. The European Council in Edinburgh called for the establishment of 
a new and temporary lending facility of 5 billion ECU within the 
EIB to accelerate the financing of infrastructure projects, 
notably those connected with the transeuropean networks (TENs). 
2. The ElB's Board of Governors decided accordingly at the beginning 
of the year that the following kinds of investment would be 
el igible for the faclIity: 
- first and foremost, investments in TENs in transport, 
telecommunications and energy, using as a reference point the 
guidelines on priorities presented by the Commission to the 
Council. It was also decided that in the absence of such 
guidelines for particular categories of investment, the choice 
of projects would reflect an assessment of their contribution 
to improving intra-Communi ty flows-, 
investments in transport, telecommunications and energy 
designed to improve access to the TENs themselves (in line with 
Art. 129b.2 of the Treaty on the Union); 
investments in environmental protection and management. 
It was agreed that for qualifying projects the EIB would be able 
to finance up to 75% of total project cost (as against its normal 
ceiling of 50%); and where the Bank co-finances with a Community 
budget instrument (e.g. the ERDF), the ceiling on the combined 
contribution would be raised from the normal 70% of project cost 
to 90%. 
I I. PROJECTS APPROVED 
1. The EIB has already approved loans within the Community under the 
facility amounting to 1.6 billion ECU. These loans, which in some 
cases are raising the EIB contribution to between 70-75% of total 
project cost, are mostly of 15-20 year duration (longer than the 
maturities normally available from other sources). The facility is 
thus helping to ease the funding and to accelerate the 
implementation of 21 projects expected to be completed between 
1993 and 1997 with a total investment cost of over 9 billion ECU 
(Annex). The projects are estimated by the Bank to involve 
employment in construction of more than 70.000 man-years and the 
creation of over 11.000 permanent jobs. These figures take no 
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A - 2 
account of the major indirect effects on employment in the 
equipment industries, which are particularly important in the case 
of the telecommunications and energy projects concerned. 
2. Over 90% of the 1.6 billion ECU concerns TEN projects or related 
access infrastructure. In particular the Bank is helping to 
f inance: 
in teIecommunIca11ons: two major projects in, respectively, the 
new Lander and in Italy (each costing over 700 MECU) expanding 
the digital telephone networks; 
in energy: the renovation of a part of the gas transmission 
system in the new Lander (a project costing some 450 MECU); the 
part-financing of the Italian section of the Algerian-North 
Italian gas pipeline (a project of over 2 billion ECU); major 
projects to improve the electricity transmission and supply 
networks in parts of Spain, Portugal and Ireland; 
in transport : helping to construct sections of motorways in 
Denmark and France, modernising international rail links in 
Denmark, extending the air traffic control infrastructure of 
Eurocontrol and improving passenger handling facilities at 
three international airports. 
In addition to these operations within the Community, the EIB has 
also agreed the financing of projects in Central and Eastern 
Europe (road modernisation in Slovakia, Bulgaria and Romania and 
air traffic control in Poland and Bulgaria) which will benefit 
from the same financing conditions. 
III. FUTURE INVESTMENTS 
1. After full consultation with interested parties, the Commission 
has already published the proposed guidelines on TENs priorities 
for the high speed train, for road networks, for' combined 
transport and for waterways. Within the next six months, the 
guidelines for conventional rail, ports, airports, air traffic 
control and Vessel Traffic Systems (VTS) will also be put forward. 
In telecommunications, the Commission has already launched its 
proposals for telematic networks between administrations and 
expects shortly to come forward with further proposals on 
Integrated Systems Digital Networks (ISDN). As far as energy 
networks are concerned, the preparatory work by the Commission, in 
consultation with market operators, is at an advanced stage. 
2. The financing needs are considerable. In transport alone over 
40 billion ECU is likely to be needed for projects of Community 
interest which could be initiated in 1993-94. Some of these 
projects will qualify for structural or cohesion fund assistance. 
Others will be more natural candidates for finance from the 
temporary lending facility. Others may require a combination of 
grants and loans under the European growth initiative. 
3. Against that background, the EIB has been pursuing discussions 
with the Commission, national administrations and market operators 
on further potential candidates for finance. On present estimates, 
and in addition to the ElB's normal lending, over 2 billion ECU in 
A - 3 
further loans from the facility could be absorbed by the priority 
transport projects; at least a further 0.5 billion this year alone 
on major telecommunications projects, not counting possible new 
projects in the ISDN field; and a similar amount by energy 
transmission projects. These figures take no account of projects 
involving networks with neighbouring countries, notably in Central 
and Eastern Europe, or of environmental projects which may qualify 
for support. 
These estimates are being refined. They refer in most cases to 
projects that are mature enough to be launched during the next 
18 months provided that, where necessary, the appropriate 
administrative steps are taken by national and regional 
authorities and that the other complementary sources of finance, 
including government contributions in some cases, can be secured. 
In order to facilitate the creation of satisfactory financing 
packages, the scope for co-financing operations between the 
facility, the Structural Funds, the interim Cohesion Fund 
instrument and the budgetary provisions for TENs is being actively 
explored by the Commission and the Bank. 
3) 
Temporary Lending Facility: Projects Approved 
(up to March 1993) 
New Loans 
(Temporary 
FaciIity) (in MECU) 
Total EIB 
( incl . 
ear I 1er 
loans) Project 
Cost 
TRANSPORT 
- Supporting Eurocontrol to set up a unified 79 176 368 
system of air traffic control 
- Expanding and improving the passenger handling 136,1 346,7 1327 
capacity of three airports: Frankfurt, Paris-
Roissy, Torino-Case I le 
- Construction of Danish and French 220 493 795 
motorways and main roads 
- Modernisation of the Danish railways 150 460 688 
SUB-TOTAL TRANSPORT 585,1 1475,7 3178 
ENERGY 
- Algeria-Italy natural gas pipeline 
I talian sect ion 195,8 475,6 2246 
- Renovation of natural gas transmission system 78 230 445 
in the new German Lander 
- Upgrading the electricity grids of Ireland, 236,1 617,3 833 
Portugal and several Spanish regions 
SUB-TOTAL ENERGY 509,9 1322,9 3524 
TELECOMMUNICATIONS 
- Modernisation of trunk telecommunications 195,8 
in Italy 
- Extension of the telephone network in the new 153 
German Lander 447,6 
486 708 
709 
SUB-TOTAL TELECOMMUNICATIONS 348,8 933,6 1417 
ENVIRONMENT 
- Water treatment facilities in UK and Spanish 156 
regions; other smaller environmental projects 
SUB-TOTAL ENVIRONMENT 156 
TOTAL 1599,8 585,4 1114 
585,4 1114 
4317,6 9233 
A - 5 
EIB Projects Approved in Central and Eastern Europe 
benefitting from Edinburgh facility conditions 
TRANSPORT 
Roads rehabilitation in Bulgaria, 96 MECU 
Romania and Slovakia 
Upgrading of air traffic services 110 MECU 
facilities in Bulgaria and Poland 
TOTAL 206 MECU 
COMMISSION 
OF THE EUROPEAN 
COMMUNITIES 
EUROPEAN INVESTMENT FUND (EIF) 
I . FEATURES 
1. The EIF, with capital contributions from the European Investment 
Bank, the Commission (on behalf of the Community) and private and 
public sector financial institutions, is designed to facilitate 
investments in transeuropean networks (TENs), as well as projects 
by SMEs. especially in Community assisted areas. 
2. The main business of the Fund will be to provide financial 
guarantees on loans; a secondary business at a later stage will be 
the limited provision of equity, largely through financial 
intermediaries. With a subscribed capital of 2 billion ECU, the 
Fund will be able to provide guarantees of 5 - 10 billion ECU and 
thereby support 20 billion ECU of projects. 
I I . PREPARATORY STEPS 
1. At the beginning of January, the Commission made the necessary 
legislative proposals for the creation of the Fund1. Following a 
positive opinion of the European Parliament, an Intergovernmental 
Conference of the Member States took place on 25 March and agreed 
an addition to the Statute of the European Investment Bank which 
will now be presented to national parliaments for endorsement. The 
European Parliament has also given a favourable opinion on the 
question of Community participation in the Fund; the issue is now 
under examination by the Council itself. 
2. In the meantime, and following consultations with the Commission 
and prospective third party shareholders, the Statute of the Fund 
itself is close to finalisation by the organs of the Bank. A 
decision will be made during April following a special meeting of 
the Bank's Board of Directors. 
III. ACCELERATING THE CONTRIBUTION TO GROWTH 
1. Everything is on course to allow the EIF to make its first 
commitments in the autumn, provided that there are no unforeseen 
C0M(93) 3 final of 12 January 1993. Proposal for an Addition to the 
protocol on the Statute of the European Investment Bank empowering 
the Board of Governors of the EIB to establish the European 
Investment fund. Proposal for a Council Decision on Community 
Membership of the European Investment Bank. 
Rue de la Loi 200 - B-1049 Brussels - Belgium 
A - 7 
delays in the remaining legislative process at national and 
Communi ty level. 
In order to maximise its potential impact this year, however, the 
Commission intends to propose the immediate establishment of an 
Interim Board of shareholders of the Fund. This Board will work on 
the further arrangements for the entry into force of the Fund (its 
internal rules, administrative provisions etc.). Most Importantly, 
it will also begin discussions right away with project promoters, 
financial institutions and national/regional administrations on 
specific potential candidates for support. At the same time, 
appropriate information on the Fund directed in particular at 
SMEs,including the practical steps to be followed for submitting 
projects, should be disseminated throughout the Community. On this 
basis, the necessary groundwork will have been done to allow a 
maximum of operations to begin immediately the legislative process 
is completed. 
COMMISSION 
OF THE EUROPEAN 
COMMUNITIES 
TRAINING FOR THE UNEMPLOYED 
INCREASED FLEXIBILITY OF THE ESF 
As part of the growth Initiative, the Commission decided on 24 March 
1993 to increase the effectiveness of the European Social Fund in 
combatting the growing problem of unemployment by increasing 
flexibility in the use of the ESF so as to permit training throughout 
the Community of those who have become unemployed. 
I. TRAINING MEASURE 
Training will play an important role in the growth initiative. 
Carefully targetted training measures are a key element in facilitating 
the adaptation of workers to the growing challenges of industrial 
change. Such measures can both increase competItivity and combat 
unemployment. As industries adapt and modernise many of those who 
become unemployed are experienced and relatively skilled. The risk of 
such people becoming long-term unemployed can be minimized if early 
action is taken to retrain them and prepare them for alternative 
employment. 
Until now the European Social Fund has not been able to intervene, 
except in areas eligible for Community regional development assistance, 
to help those who become unemployed unless they have been out of work 
for more than a year. Thus there is a risk not just for the people 
themselves who risk drifting into long-term unemployment but also for 
the Community that their potential and skills will be lost to the 
economy. The Commission has therefore decided, on 24 March 1993, to 
apply the rules governing the Social Fund in a more flexible manner. A 
wider definition of long-term unemployment will be applied in certain 
specified conditions. This derogation, the possibility of which is 
expressly foreseen in the Social Fund Regulation, will permit the most 
effective use of the Social Fund and constitutes an important response 
to the situation in the labour market at Community level. 
It will be for the Member States to bring forward proposals to avail of 
this new flexibility and the Commission will encourage them to do so. 
The indications are that ,there is considerable interest in this 
flexibility at Member State level. 
II. POSSIBILITIES FOR COMMUNITY ACTION 
In the context of increasing unemployment, and under existing Community 
measures to combat unemployment, a number of Member States have asked 
the Commission to make use of its powers under the terms of the first 
indent of Article 2(a) of ESF Regulation 4255/88 concerning Objective 3 
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A - 9 
which lays down that the period of 12 months used to define long-term 
unemployment "may be reduced in specific cases to be decided upon by 
the Commission". 
At its meeting on 19 February 1993, the ESF Committee declared itself 
in favour of adopting such a derogation. 
The Commission has decided to apply the derogation provided for in 
Article 2(a) of ESF Regulation 4255/88 within the limits set out below. 
The aim is to take account of unemployed people experiencing particular 
difficulties on the job market, resulting in them in due course joining 
the long-term unemployed. These difficulties relate to personal 
characteristics (age, disability, insufficient vocational 
qualifications, etc.), a geographical environment dominated by economic 
recession and a significant increase in unemployment, and structural 
factors associated with industrial change, all taking place against the 
background of a changing economic and political environment at 
internat ional level . 
Workers who have been made redundant and find themselves in 
difficulties on the labour market because of their age, or a disability 
or because of insufficient vocational qualifications , can benefit from 
this derogation if they meet one of the following two criteria : 
those who face an unfavourable geographical environment 
(employment area in severe recession, sharp rise in unemployment); 
those facing major difficulties due to changes in the economic 
environment, particularly with regard to the international 
situât ion. 
Since the people in question would in all probability remain unemployed 
for more than 12 months, the aim of combating long-term unemployment 
requires action to be taken as quickly as possible. 
This derogation is intended to apply a priori to all sectors and 
regions of the Community, subject to the criteria above being met. The 
Member States that wish, therefore, to benefit from this derogation 
should, in the context of the programming or re-programming of the 
existing CSF's in agreement with the Commission, take these criteria 
into account . 
III. CONTEXT 
The derogation relating to long-term unemployment is not an isolated 
measure. On the contrary, it forms part of Community policy, which 
takes account of changes affecting the market for goods, services and 
jobs and, in order to remedy imbalances in these markets, proposes 
concerted Community measures ( the growth initiative ), measures aimed 
at restructuring certain branches of activity, and measures relating to 
human resources intended to accompany the industrial changes gradually 
affecting many of the Community's economic activities. 
The European Parliament has, for its part, decided to support the 
efforts of the Commission, having voted credits of 45 MECU in 1993 for 
training measures under the KONVER programme, in order to come to the 
aid of regions affected by structural change in the arms industry and 
A - 10 
by the closure of military installations. The derogation in question 
will also apply in the context of this programme. 
The Commission has proposed a new Objective 4 for the Structural Funds 
to make it easier for workers to adapt to industrial change and to 
changes in production systems, involving anticipatory and preventive 
measures to reduce the risk of unemployment in particular through 
training and retraining programmes. Article 123 of the Treaty on 
European Union will explicitly add this task to the traditional role of 
the European Social Fund. 
IV. FINANCIAL ASPECTS 
From the financial point of view, the derogation relating to the 
duration of unemployment places no additional financial burden on the 
European Social Fund for 1993, as the resources used would be those 
available under the CSFs for the Member States concerned. The 
Commission is inviting and encouraging Member States to make full use 
of the possibilities offered by the derogation. A number of Member 
States have already expressed an interest in the proposed flexibility. 
The Commission estimates, depending on the flexibility available in the 
light of the implementation of current Structural Funds programmes and 
on the priorities of Member States, that it could be possible to 
redirect 200 MECU or even more in this context, within the current 
CSFs, some of which might otherwise have gone unspent. 
In other words, the Member States could revise certain existing CSFs so 
that the financial resources for Objective 3 (long-term unemployment) 
can be used to help those unemployed as a result of restructuring. Seen 
from this point of view, the derogation relating to long-term 
unemployment partly anticipates the ESF reform envisaged by the 
Commission applicable, in principle, as from 1994. 
COMMISSION 
OF THE EUROPEAN 
COMMUNITIES 
THE PLACE OF SMEs IN THE GROWTH INITIATIVE 
I. CONTENT OF THE COMMISSION'S PROPOSALS1 
In order to ensure that Community enterprise policy involves a 
significant value added element and to enable it to contribute to 
economic revival, the actions most closely geared to the situation of 
enterprises must be greatly developed and the interaction of 
instruments intensified. 
In the context of the Europeanization and internationalization of 
enterprises, the effect of strengthening instruments is therefore a 
crucial factor for growth. It must be based principally on the 
fol lowing areas. 
The development of Euro Info Centres (EIC) to facilitate access to 
Community information 
Widely available information is vital to the proper functioning of 
the internal market. To this end, the aim is to adapt the EiC 
network so that it can fulfil the role of providing information 
and practical assistance to enterprises wishing directly to 
exploit the opportunities offered by Community programmes and 
increasingly open markets. 
The development _o_L non-conf identla I and conf ident ial 
partner-search networks: the Business Cooperation Centre (BRE) and 
the Business Cooperation Network (BC-Net) 
The common 
instruments 
qua I I tat ive 
process of 
industr ial 
coopérât ion, development strategy for the two partner-search 
(BRE and BC-Net) will include improving the 
approach, which sets out to encourage the ongoing 
seeking alliances between enterprises in different 
and services sectors relating to all types of 
bearing in mind the complexity of the economic 
structure and the novelty of this type of activity. 
Stepping UP activities to out businessmen in direct contact with 
one another under the Eurooartenarlat and Interprise programmes 
and prompt ino cross-border subcontracting 
Activities to put businessmen In direct contact with one another -
which have already had some success - will be stepped up, with 
greater emphasis on seeking a structural impact by organizing a 
"The enterprise 
(C0M(92) 470 final) dimension essential to European growth" 
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A - 12 
methodical follow-up over time so that any potential identified is 
consolidated and is turned into a durable contribution to European 
growth. In this context, European and international alliances are 
a means of developing economic complementarity and of stimulating 
and coordinating cross-border relations via intermediate support 
bodies, in particular employer and trade organizations, chambers 
of commerce etc. 
The promotion of cross-border subcontracting should also be an 
important element in the modernization of enterprises, the aim 
being to establish new inter-industrIal relationships based on 
flexibility and total quality not only in products and services 
but also in firms' organization. 
Improving the administrative and legal environment of enterprises 
Turning the internal market to account also requires an increased 
effort to create a more favourable business environment in terms 
of both administrative simplification and assessing the impact of 
proposed measures. A special effort to coordinate activities and 
establish a partnership between the Community, the Member States 
and trade bodies should enable significant results to be achieved. 
Promoting Community instruments 
The increased communication and promotion effort should make for 
the widest possible participation by SMEs in the various 
programmes and measures which exist to support enterprises wishing 
to take advantage of the opportunities resulting from the size and 
diversity of the internal market. One priority will be to 
strengthen SMEs' technological potential, in particular as regards 
their wider and more rapid exploitation of the results of 
research. 
The proposal for a Council Decision on the 1993-96 programme is 
currently under discussion at the various institutional levels. It 
should be adopted at the Council meeting on industry on 4 May 1994. 
Adoption will make the SME contribution to growth more immediately 
visible across the various measures. These measures should also, in 
the medium term, make it easier for PMES to adjust to developments in 
interindustrial relations resulting from the internal market, thus 
helping them to be competitive. 
II. SPIN-OFF EFFECTS 
All the Commission's activities in the area of enterprise policy are 
based primarily on the network effect, with the Commission relying on a 
variety of intermediate bodies to provide most of the funding. 
Community measures are thus a crucial stimulant, generating major 
investment by partners In the public and private sectors. 
For example, the total cost of the Euro Info Centres is estimated at 
between ECU 40 and 50 million a year, of which the Community 
contributes only some 25%. The EICs form part of a whole range of 
services within the host structures, services which also benefit from 
the European I zing effect of the EICs' activities. Consequently, if 
account is also taken of the costs of these related services, the 
Community's contribution is reduced still further. 
A - 13 
Likewise, charging for the services provided by BC-Net will also enable 
the cost of this instrument to be significantly reduced while at the 
same time enhancing the homogeneity and efficiency of this network of 
600 consultants located throughout the Community and beyond. 
The same applies to the Europartenariat programme, which aims 
specifically to develop cooperation between enterprises situated in 
Objective 1, 2 and 5b regions and enterprises in other Community 
regions. Given that the Member State concerned pays a third of the 
budget and that participating enterprises meet travelling and 
subsistence expenses themselves, the multiplier effect can be estimated 
at 300%. 
To this should be added the exchanges of experience and know-how within 
the networks between financial bodies, chambers of commerce and 
industry, chambers of trade, private consultants and employer and trade 
organizations. Greater spin-off will be obtained by encouraging 
convergence between activities and cooperation between instruments and 
programmes and between the various partners anxious to increase the 
efficiency of SMEs' contribution to the functioning of the internal 
market. 
III. FINANCIAL ASPECTS 
For the period 1993-96 the cost of the "growth" element of Community 
activities has been estimated at ECU 85 million, with the following 
breakdown: 
Development of Euro Info Centres (EICs) 
to facilitate access to Community information ECU 34 million 
Development of the partner-search networks 
BRE and BC-Net ECU 4 mi I I ion 
Stepping up activities to put businessmen 
in direct contact with each other under 
the Europartenariat and Interprise programmes 
and promoting cross-border subcontracting ECU 30 million 
Improving the administrative and legal 
environment of enterprises ECU 5 million 
Promoting Community instruments 
strengthening SMEs' technological potential ECU 12 million 
These activities will be developed under measures to ensure the 
continuity of enterprise policy with the aim of facilitating the 
adjustment of enterprises to the induced effects of the internal 
market, for which a total amount of only ECU 28 million has been 
allocated over four years (1994-97). It is obvious that they can only 
stimulate and innovate and will not achieve critical mass unless the 
SME aspect is Incorporated into other Community programmes and 
Community activity is dovetailed with national policies. 
COMMISSION 
OF THE EUROPEAN 
COMMUNITIES 
THE CONTRIBUTION OF COMMUNITY RESEARCH 
As part of the Community research programme and flanking and follow-up 
measures to promote research a series of measures is being proposed to 
respond to the growth initiative decided on in Edinburgh. 
These proposals take advantage of the additional ECU 900 million 
allocated to the framework programme in 1993 and 1994. 
These projects were selected with the aim of achieving an immediate 
positive effect on growth and employment. However, as is generally 
recognized, research activities also have major economic spin-off in 
the medium and long term. 
Having regard to the contribution of the additional funds and the 
3rd framework programme, the proposals from the competent Commission 
departments would make it possible to assist 
4 000 doctoral or post-doctoral research 
grants at a cost of ECU 200 million 
200 grant-holders ECU 12 million 
600 technicians ECU 20 million 
3 000 established researchers ECU 600 million 
and give rise to the medium-term economic effects an estimate of which 
is presented in point III. 
I. CREATION OF JOBS FOR AND THROUGH RESEARCH 
The objective is to improve the quality of scientific and technical 
staff in the Community and increase employment opportunities in this 
area. 
As regards the Human Capital and Mobility Programme, the additional 
funds make it possible to achieve and maintain a level of 2 000 
doctoral and post-doctoral grants in 1993 and 1994 at a cost of 
ECU 200 mi 11 ion, an amount which includes part of the associated 
research expenditure. This programme, which was adopted only in 1992, 
has expanded rapidly. It now accounts for more than 60% of the 
research grants awarded every year under the framework programme. The 
additional funds will allow specific research programmes to provide 
100 grants in 1993 and 1994 for an estimated amount of ECU 12 million. 
The Industrial and Materials Technology Programme will take on the 
employment and retraining of 300 unemployed technicians each year for a 
period of two months to two years at an estimated cost of 
ECU 20 million. These persons will be trained on the actual research 
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A - 15 
projects administered by the programme. Low-impact technologies and 
flexible production are regarded as the most promising areas. 
In general terms, and based on the evaluation of the possibilities of 
direct employment provided by shared-cost actions supported by the 
additional funds and administered by the concerned Commission services, 
the estimate is of some 3 000 established researchers' posts over 
two years. This is in addition to the 2 500 grant-holders mentioned 
above. 
In conjunction with the programmes of the Human Resources Task Force, 
particularly C0METT, the enterprises involved In Community research 
programmes in the area of generic technologies will be eligible for 
assistance to improve training and technical employment and speed up 
technological developments in line with the conclusions of the European 
Council, thus helping to create jobs as a result of an expansion in 
research and the development of capacities. 
I I. MARKET IMPACT 
The Industrial and Materials Technologies Programme (TIM) is planning 
to launch a series of targeted research projects guaranteeing close 
links between researchers and users to speed up the adoption of generic 
technologies by the industries involved. Projects have been identified 
in the areas of clean technologies and flexible production including 
light, low-emission vehicles, machine tools and new-generation 
prototypes. So far, 41 projects have been selected at a cost of 
ECU 147 mi I I ion. 
The results obtained may be offered to other European programmes to 
improve both the dissemination of results and consideration of the 
needs of "upstream" Community research. As a general point, the 
Commission is proposing that some of the additional funds should be set 
aside for Eureka projects, which on the question of generic research 
are of a very high quality. This approach should guarantee a more 
immediate transfer of technologies. 
The additional ECU 43.6 million granted to the agro-Industry research 
programme (biomass) will be allocated by way of priority to non-food 
uses of agricultural products. The creation of markets outside the 
traditional sector of agriculture and agro-industry is a fundamental 
aspect of this programme. Research will concern both the development 
of new crops, new species and the non-food use of conventional 
agricultural varieties. Around thirty proposals of a high standard 
could be assisted. 
In an associated area, the use of biomass for energy production, it is 
estimated that 25 to 35 000 jobs could be created on a 
million hectares, or 7% of the land in the Community which is currently 
not in use. The actual economic effects depend on a number of factors, 
of which market conditions are one. Research work in this sector, as 
in the development of new and renewable energies, which are receiving 
additional funds, will increase the chances of gaining access to these 
new markets; much is at stake here, and the aim is to reduce by at 
least 20% the production cost differential compared with other energy 
sources. 
A - 16 
As regards aeronautical technology, studies by the concerned Commission 
services show that research funded under the TIM programme in areas 
such as composite materials and the reduction of engine emissions could 
improve the competitiveness of the European aircraft industry and as a 
consequence its market share. 
III. MEDIUM-TERM BENEFITS 
The recent evaluation by the BETA team at the University of Strasbourg 
of a wide range of research projects with Industry involvement 
concludes that the share of the additional funds granted to the 
projects presented in the introduction alone will generate, In terms of 
direct economic effects (sale of new products or processes, cost 
reductions), around ECU 2 500 million and in terms of Indirect economic 
effects (transfer of know-how) around ECU 800 million over a period of 
f ive years. 
COMMISSION 
OF THE EUROPEAN 
COMMUNITIES 
THE CONTRIBUTION OF STRUCTURAL MEASURES 
Bearing in mind that the Structural Funds are intended to finance 
measures to resolve structural rather than cyclical problems and that 
their impact is over the medium to long term, they will contribute to 
the growth initiative in the following way: 
I. 1993 : NEW FINANCIAL INSTRUMENT FOR COHESION 
From 1 April 1993 and for the rest of the year, the Commission will 
have a total of ECU 1.5 billion available under the new Financial 
Instrument for Cohesion to finance major schemes relating to transport 
and the environment proposed by the four cohesion countries. 
Investments in transport infrastructures, where masterplans for the 
trans-European networks are being developed, and in environmental 
projects will have a particular Impact on growth in the four countries. 
The new EIB loan instrument may also be applied in this field. 
II. LAUNCHING OF THE NEW GENERATION OF STRUCTURAL FUNDS 
Since the reform in 1988, the Structural Funds have been operating 
through the Community Support Frameworks, 1993 being the last year of 
implementation of the first phase. This year, some ECU 20 billion will 
be committed. The Commission is endeavouring to develop synergies 
between the growth initiative and the structural measures already 
planned, and to speed up their application on the ground, while in 
conformity with budgetary limits. 
The considerable increase in the resources of the Structural Funds for 
1994-99 decided at Edinburgh brings the total budget to 
ECU 27.4 billion for 1999 and ECU 141 billion for the six years. In 
addition, there is the Cohesion Fund with ECU 2.6 billion in 1999 and 
ECU 13.65 billion for 1994-99. These instruments will allow additional 
investments to be made in such key sectors as infrastructures (notably 
transport, energy and telecommunications), human resources, rural 
development, improvement of agricultural and fisheries structures, 
chiefly but not only in the less-developed areas of the Community. It 
is worth noting here that there will also be a positive effect on the 
economies of the more prosperous regions which, although not direct 
recipients of the aid, will benefit from an increase in the demand for 
exports. 
Following the conclusions reached at Edinburgh, the Commission has 
proposed amendments to the existing regulations on the Structural Funds 
with a view to the next generation of CSFs, due to start on 
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A - 18 
1 January 1994. The proposals are aimed, among other things, at 
simplifying, improving and speeding up not only the procedures for 
planning new programmes, and having them approved by the Commission, 
but also their implementation. One of the aims of the amendments is to 
stimulate a rapid acceleration of public investments by Member States. 
As regards the social field, especially the need to combat unemployment 
in the Community, the Commission has proposed a new Objective 4 
intended to help the workforce adapt to Industrial changes and 
developments in production systems. 
It is essential to avoid a hiatus in financing at the beginning of 1994 
and to reduce to a minimum delays in starting the new projects that 
will be included In the new Community Support Frameworks (1994-99). To 
that end, the Commission will endeavour, with the assistance of the 
other institutions, to secure the adoption of the regulations before 
the summer and has encouraged the Member States to submit proposals for 
the financing of major projects forthwith. 
COMMISSION 
OF THE EUROPEAN 
COMMUNITIES 
THE SINGLE MARKET HARNESSED TO THE CAUSE OF GROWTH 
The single market is now in place. It constitutes the basis for 
achieving the new objectives of economic and monetary union and 
European citizenship set out in the Treaty on European Union. 
In eight years, the Community has established a new economic 
environment for firms. This environment is based on: 
freedom of movement, 
the easing of regulatory constraints. 
Firms have supported this major drive and have in part anticipated its 
effects. They must now be given a chance to benefit fully. Starting 
from what has been achieved, steps must be taken to improve the 
operation of the single market and inject renewed vigour into its 
development in order to restore a climate of economic confidence. The 
further development and deepening of the single market will also 
contribute to the economic and political integration of the Community 
as a whole. 
The creation of this climate of confidence will depend in particular on 
the Community's capacity to press ahead with its resolve to reinforce 
economic integration and to create public awareness of all that is 
being done to implement that resolve. These moves constitute a 
coherent whole: supplementing them with these measures can produce the 
expected effects, just as the measured introduced by the White Paper 
programme produced an anticipatory effect. Those moves must therefore 
be built into an overall strategic programme. The main components of 
this programme are as follows: 
1. a drive to promote transparency: firms must be given easier 
access to Community rules and regulations and in particular to the 
procedures for implementing them in the Member States. This is 
especially necessary in connection with the free movement of 
goods; 
2. implementation of Community legislation: in addition to the 
transposition of directives into national law, economic agents 
must have the assurance that the rules are properly applied. This 
means arranging on-the-spot controls that are tailored to the 
specific circumstances obtaining in each of the fields in question 
and that are consistent with the spirit of partnership. 
Application of the rules must be coupled with monitoring of their 
effects so as to ensure that they do in fact meet the needs of 
economic agents; 
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A - 20 
Implementation of mutual recognition: mutual recognition promotes 
simplification and deregulation, but its implementation is being 
impeded by a lack of political will, legal certainty and trust 
between authorities of the Member States-, 
speeding-up the work on standardization: standardization does not 
only serve the interests of the functioning of the single market 
but also meets an industrial need. Additional measures will have 
to be taken to ensure that the standardization process in Europe 
Is effective by reinforcing the role of the standardization 
bodies. This speeding-up hinges on the commitment of firms, which 
Is itself linked to the drive to promote transparency. In order 
to contribute to this speeding-up process, the Commission intends 
to allocate to this action the necessary budgetary resources; 
an ever more favourable business environment: the adoption of the 
European Company Statute and the elimination of double taxation 
will contribute to the simplification of cross-border cooperation. 
Similarly, improved protection for intellectual and industrial 
property will contribute to research and creativity and will 
ensure maximum legal certainty for cooperation between firms. 
Furthermore, the resumption of discussions on the elimination of 
tax distortions would help to provide firms with a level playing 
field-, 
partnership as a means of assisting firms: the adjustment effort 
required of the great majority of firms (standardization for 
example,) must not be underestimated; before yielding benefits, 
this effort carries a cost which is particularly difficult to 
accept at a time of contracting activity and financial problems. 
If firms, and in particular SMEs, whose significant contribution 
to the European economy is widely recognized, are left to make 
this adjustment effort alone without receiving the necessary 
guidance and support, the Community and the Member States might 
have difficulties in pursuading economic agents that the current 
upheavals are worthwhile. 
A concerted effort is therefore needed to support firms through 
specifically targeted measures and improved access to financial 
markets, thereby making them aware of the European dimension of 
the market in which they are operating. This stimulatory effort 
can be made only by coordinating Community and national 
initiatives and "Europenizing" policies and measures to assist 
SMEs, in parallel with the efforts to administer the regulations 
connected with the single market; 
infrastructure benefiting individuals and firms: the 
trans-European networks are a key component of the functioning of 
the single market, of the cohesion of the Community and especially 
of economic growth because of the increased efficiency they bring 
for firms in particular. Adoption of the strategic plans and 
major guidelines envisaged in the Maastricht Treaty should 
guarantee consistency in the use of the Community funds, the 
European Investment Fund and the EIB lending facility by placing 
individual projects in a trans-European context that enhances 
their economic effectiveness. The interoperability of networks and 
cooperation between firms should ensure that the networks do in 
fact function across frontiers. 
A - 21 
The Commission is in the process of reassessing the progress made in 
the above-mentioned fields and will present appropriate proposals if 
necessary. 

COMMISSION 
OF THE EUROPEAN 
COMMUNITIES 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
ANNEX B 
Actions and measures decided or announced 
at national level 
(Contributions presented by Member States) 
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PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
ANNEX B 
Actions and measures decided or announced 
at national level 
(Contributions presented by Member States) 
Pages 
Be I g 1 urn 
Denmark 
Germany 
Greece 
Spa in 
France 
Ireland 
Ital ie 
Luxembourg 
The Nether lands 
Portugal 
United Kingdom 1 - 4 
5-7 
8-12 
13 - 16 
17 - 22 
23 - 27 
28 - 34 
35 - 37 
38 - 39 
40 - 42 
43 - 49 
50 - 55 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
BELGIUM 
I. PUBLIC INVESTMENT 
1. At national level, the main areas of public investment are the railways 
and telecommunications. 
The SNCB's ten-year plan for 1991-2000, which includes the Star 21 
programme and the TGV, provides for investment of BFR 175 billion, of 
which BFR 91 billion are for infrastructure and BFR 80 billion for 
rolling stock. Investment for 1993 is expected to total BFR 18 billion. 
The central government's share of the financing will be BFR 144 billion, 
of which BFR 15 billion in 1993. 
in addition, the Belgacom programme will probably amount to 
BFR 25 billion in 1993. Belgacom has applied for an EIB loan, including 
use of the Edinburgh lending facility. 
2. At regional level, the Flemish Community budget provides for an increase 
in investment of some BFR 15 billion in 1993 compared with 1992, 
bringing the total to BFR 106 billion. Of this increase, BFR 6 billion 
will be spent in infrastructure (mainly ports and roads). 
In the case of the Wal loon Region, investment wi I I increase by about 
BFR 3 billion in 1993 (to some BFR 21 billion). Nearly 65 % of the 
investment programme will be allocated to public works, natural 
resources and the environment. 
As regards the Brussels Region, the increase in the Investment programme 
in 1993 will be BFR 206 million (from BFR 8.014 billion to 
BFR 8.220 bill ion). 
I I. LABOUR MARKET 
1. Belgium attaches great importance to the labour market study carried out 
by the Commission within the framework of the Economic Policy Committee 
and would point out that the OECD is also examining this question. 
A substantive discussion is thus called for at Council level. 
2. Domestically, the Conference on Employment brings together the Federal 
Government, the Regions and the two sides of industry. 
The Conference focuses on : 
job creation : at national level no margin for manoeuvre seems 
avai I able-, 
- organization of work : adjustments can be implemented as the rules in 
this area are legally set at national level; 
labour costs. 
BELGIUM 
A nian for re-entry work ("pian d'accompagnement) has been Introduced 
whereby young unemployed persons will receive intensive training with a 
view to f inding a job. 
The plan addresses the following concerns : 
- better balance between supply and demand; 
- penalties for refusing to take part in the scheme; 
- incentive In the form of a reduction in employers' social security 
contributions for firms taking on unemployed persons. 
Some 100 000 unemployed persons are affected. 
The plan mainly concerns SMEs and the non-market sector, but large firms 
will probably be added. 
The plan will probably be financed by contributions from employers. 
Under the inter-trade agreement, firms will devote 0.25 % of gross wages 
and salaries in 1993 and 0.3 % in 1994 to promoting employment as 
fol lows : 
a) in 1993 and 1994, a contribution of 0.1 X to the financing of the 
plan for re-entry work. 
b) in 1994, a contribution of 0.05 % to the financing of initiatives 
relating to child-care facilities; 
c) in 1993 and 1994, a contribution of 0.15 % (details to be specified 
in an industry-1 eve I or company-1 eve I employment agreement). 
Following the agreements on constitutional reform (the Saint-Michel 
Agreements), the Flemish Government intends to allocate BFR 8.5 billion 
to employment for the three-year period 1993-95 : BFR 0.5 billion in 
1993, BFR 4.5 billion in 1994 and BFR 3.5 billion in 1995. 
The final decision, however, depends on the conclusions of the 
Conference on Employment. 
The Walloon Region recently decided to mobilize BFR 2 billion to support 
directly productive employment through selective recovery. 
An initial amount of BFR 1 billion will be released in consultation with 
the managers of companies in which the Region has a majority holding and 
will be earmarked for labour-intensive sectors. 
The remaining BFR 1 billion will be prefinanced by inter-municipal 
economic development associations in order to speed up the rate of 
activity. 
III. WAGE MODERATION 
1. The Law Safeguarding Competitiveness of 6 January 1989 is a key feature 
of the Belgian system. 
It empowers the King to take a series of temporary measures where the 
legislature finds that the competitiveness of Belgian firms Is 
threatened. 
B - 2 
BELGIUM 
This power has never been exercised since the Law acts essentially as a 
safety net. 
The Law should be regarded as providing internal flexibility and as a 
counterpart to Belgian exchange-rate policy, which is anchored to the 
German mark. 
Notably as a result of the major adjustments in exchange rates, the 
Belgian economy has become less competitive. This was noted by the 
Central Economic Council in its opinion of 12 March 1993, submitted in 
accordance with the procedure laid down in the Law Safeguarding 
Competitiveness. Government, employers and unions will have to discuss 
any measures to be taken. 
The inter-trade agreement of December 1992 specifically mentions the 
desire that competitiveness should be preserved as a condition for 
expanding economic activity and employment. 
IV. SMALL AND MEDIUM ENTERPRISES 
1. A plan for SMEs was approved by the Council of Ministers at the end of 
January. 
Its principal objectives are : to improve monitoring of SMES activity, 
coordination at national/regional level, relations with the authorities 
(ombudsman) and the business situation of the self-employed; to ensure 
the continuity of small family businesses; to find appropriate solutions 
to the problems associated with the social status of SMEs and their 
social security position. 
The plan provides in particular for a set of new institutional 
arrangements, improved information for SMEs, and the adaptation of 
legislation and regulations on business activity. 
2. Belgium considers that the new European Investment Fund should take du© 
account of the role of SMEs in creating employment and should, 
therefore, devote an appropriate share of its resources to them. 
V. PRIVATIZATION 
The Privatization Commission is currently focusing its work on public credit 
institutions. The privatization target for 1993 is BFR 25 billion. The total 
privatization target is BFR 60 billion, and this will mean widening the net 
to cover more than just public credit institutions. 
VI. COMPETITION 
The Law Safeguarding Competition was amended in August 1991. It prohibits 
practices which limit competition, i.e. any agreements between firms and any 
concerted practices whose object or effect is to prevent, restrict or 
significantly distort competition on the market. A Competition Council will 
be set up and empowered to issue opinions on matters to do with compliance 
with the Law. 
B - 3 
BELGIUM 
VII. HOUSING 
The Regions apply a housing subsidies policy. In the Flemish Region, Domus 
Flandria, a partly publicly owned company, was set up in September 1992 to 
achieve various housing objectives. 
B - 4 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
DENMARK 
The Danish economy Is closely Intertwined with the economies of the EC and 
the Nordic countries and Is therefore highly Influenced by economic 
developments In foreign markets. 
Danish economic policy Is based on the membership of the ERU and an open and 
liberal trade regime. Denmark will continue to base policies on these two 
pi Ilars. 
The Danish Government attaches a great priority to a reduction In 
unemployment and Is convinced that there is room for maneuvre to increase 
employment. 
The reorientation of Danish economic policy was initiated by the agreement on 
the Budget for 1993, giving high priority to the Improvement of growth 
perspectives for the Danish economy. The Budget for 1993 is expected to 
contribute to a lasting improvement of the employment situation. 
At present the Government is preparing some further initiatives designed to 
increase employment and decrease unemployment. The initiatives will be 
launched before summer. 
Focus is primarily on actions that will strengthen long term growth and 
supply capacity of the economy. In the short run high priority is given to 
instruments that will reverse the trend of increasing unemployment. The 
initiatives are guided by the risk that the Job qualifications of unemployed 
persons may deteriorate - within a relatively short period - leading to an 
Increase in the structural unemployment. At the same time, it is a primary 
objective for the Government that the Danish international competitiveness 
should be improved. 
The main fields of initiatives are the following: 
Increase in public investment 
Incentives for small and medium sized enterprises 
Incentives to Increase activity In the residential sector 
Structural reforms in labour market and taxation 
Actions already taken will be strengthened by the Government this spring. 
Below is given a survey of the initiatives included in the Budget for 1993 
and an indication of the initiatives to be implemented by the Government . 
I. INCREASE IN PUBLIC INVESTMENT 
The 1993 Budget will increase public investment by about 4 billion DKK 
originally planned for the years after 1993. Both central government and 
local government activities will be affected. 
DENMARK 
The extra investment wi I I cover a broad range. Investment in infrastructure 
(traffic; approximately 1 1/2 billion DKK), environment and energy (sewer and 
energy saving measures; aproximately 1 billion DKK), culture and education 
(i.e. before Copenhagen Cultural Capital 1996; total aproximately V* billion 
DKK), building maintenance (aproximately fc billion DKK) and public 
investments in facilities for children and old age (aproximately M billion 
DKK) are pr ior i tated. 
Public investments of this kind will give a positive effect on private 
investments. 
The Government plans a further speeding up of investment in both 1993 and 
1994. The following elements are under consideration: 
1. Increased public investment at the local level. 
2. Speeding up of the investment in landfaciIities of the bridge project 
across the Sound (to Sweden). 
3. Infrastructure investments and building projects in Copenhagen. 
II. INCENTIVES FOR SMALL AND MEDIUM SIZED ENTERPRISES 
The Government gives high priority to small and medium sized firms and it is 
recognized that there are important barriers to growth for these firms. To 
increase the flow of risk capital to small and medium sized firms an 
arrangement for guarantees for loans is included in the budget for 1993, as 
well as efforts to strengthen the know-how and quality in these small firms 
and means to increase their potential for exports. Total expenditure of 
approximately Vz billion DKK is foreseen. 
The Government plans to add a favourable loan scheme for small and medium 
s i zed enterpr ises. 
In addition to this the Government is considering the possibility of 
establishing a venture fund with a mix of private and public guarantees. 
Specific structural initiatives were taken in the Budget for 1993 with 
respect to agriculture and fishery. 
Further initiatives aiming at alleviating the interest burden and debt ratio 
in industry, agriculture and fishery are being put forward by the Government. 
III. INITIATIVES TO INCREASE ACTIVITY IN THE RESIDENTIAL SECTOR 
The activity in the Danish building sector has been depressed for several 
years. The Budget for 1993 provided for an increase In the subsidy for 
private maintenance expenditure, increased public and private urban renewal 
and a more flexible mortgage system, both in terms of borrowing limits and 
schedule of amortization. Private pension funds were given better 
opportunities for investment in urban renewal. The Budget will allocate more 
than 1 billion DKK for this purpose. 
In order to improve the housing market the Government plans a further 
liberalisation of the mortgage system. It is expected that this initiative 
B - 6 
DENMARK 
will decrease first year cost for house buyers significantly. Stamp duties 
will be lowered. 
Stimulus is also given to the maintenance and renewal of rental appartments. 
Tenants will be given stronger incentives to Improve their flats. 
IV. STRUCTURAL REFORMS IN THE LABOUR MARKET 
Several activation schemes for unemployed have been implemented in 1992, 
including a package of training schemes for young people. Early in 1993 the 
activation schemes were expanded with better possibility for leave of 
absence. 
The Government has set up a committee of ministers to prepare initiatives to 
combat unemployment. One of the major issues is structural labour market 
reforms. 
It is planned to change the system of active labour market measures 
completely to a decentralised and more flexible system adapted to the 
individual needs of the unemployed. The ambition is that the system shall 
contribute to a major improvement of the skills of the unemployed. 
An improvement of the possibilities for leave of absence to (among others) 
educational activities is also planned. 
The measures require a restructuring and widening of the capacity in the 
education and training systems. 
V. OTHER STRUCTURAL REFORMS 
A main objective of the new Government is a restructuring of the income tax 
system, aiming at lower marginal tax-rates on personal income. This 
restructuring will be partly financed by increased environmental duties and 
labour market contributions. 
An objective of the Government is further to reduce the structural barriers 
to growth in the service sector, due to unfair competition from black labour 
and do-it-yourself activities. This is regarded as important for the 
employment outlook in the longer run. 
VI. THE EFFECT OF AUTOMATIC STABILIZERS 
As a supplement to the specific measures taken, economic activity in Denmark 
will continue to be supported by automatic stabilizers. The effect is 
expected to be slightly positive in 1993, but less than In 1992. 
VII. THE WAGE AGREEMENT IN SPRING 1993 
The preliminary experience from the wage negotiation round early this year 
indicates very moderate wage increases for the coming years. For the public 
sector annual wage increases in 1993 and 1994 are expected to be 
approximately 2 per cent. 
B - 7 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
GERMANY 
The most important German contribution to the Edinburgh initiative is the 
solidarity pact which invites all major economic agents to contribute to an 
improved growth performance. Within this context, the Federal Government has 
initiated the Federal Consolidation Programme (hereafter refered to as FKP). 
It is designed to provide a sound financial basis for an upswing in East 
Germany, to continue the fiscal consolidation, to settle the issues of 
ailocating debts emanating from German unification and of adjusting the 
fiscal relationshlp between all layers of government. In the short-run, 
efforts will be made to stabi I ize the economy, e.g. by doubling the volume 
available for the building modernization programme to DM 60 bn. Also, instead 
of raising taxes, the Federal Government will let automatic stabiIizers work 
and accept an increase in government borrowing this year. 
Recently, the Federal Government, ail the heads of the Lander governments and 
the leaders of the major political parties agreed upon the major elements of 
the FKP. The agreement, the clear framework thus provided and the decision 
not to raise direct taxes before 1995 are expected to have a positive Impact 
on private sector confidence and growth. In the draft of the 1993 supplement 
budget the short-run stabiI izing elements have already been put In place. 
Within this overall framework, a great many of more specific budgetary, 
structural and other measures have already been decided upon or are pending. 
The list below provides an overview. 
I . BUDGETARY MEASURES 
1 . Pub I ic investment 
Continuing emphasis on overhauling the eastern capital stock (1992 
east/west investment ratio almost 30%), but also substantial Investment 
in west Germany, e.g.: 
federal capital spending of DM 13bn on transportât ion infrastructure, 
- Telekom investment amounting to more than DM 15bn on western 
communication infrastructure (digitalIzation, broadband cabling and 
mobile telephones) this year. 
Furthermore, there are various projects which appear suitable for EIB 
financing (temporary lending facility decided on in Edinburgh; list 
aval I able). 
2. Promotion of private investment, also through SME 
Programmes in favour of eastern investment, partially upgraded as of 
1993. 
GERMANY 
Support for SME is focussing on east Germany: 
- Investment supplement (up to 20%), 
- special depreciation allowances (up to 50%), 
- Investment grants (up to 23%), 
- capital assistance, 
- credits at préfèrentIal rates administered via the ERP - credit 
programme (additional DM 1.8bn in commitment appropriât Ions to reduce 
the Interest burden of SME In the eastern Lander). 
Besides this, the Treuhand activities of déconcentration and 
privatization are highly conducive to the emergence of SME. 
In addition, measures to consolidate public finances, with e.g. the FKP 
as the most Important endeavour, contribute to growth via their impact 
on interest rates and (business and consumer) confidence. 
3. Tax facilities for enterprises (Including SME) 
Some reductions in various taxes as of 1993 (reduction and 
simplification of corporate wealth tax, higher allowances and other 
reductions with respect to a special corporate tax (Gewerbesteuer)). 
The law to Improve the investment environment (St andartslcherungs-
gesetz) can be viewed as stage two of the reform of corporate taxation. 
In this context it is planned to reduce corporate profit tax to 44% as 
of 1994. Given budgetary problems the target ted net Impact on the budget 
is zero (tax dépréciât ion allowances to be stretched out). In addition, 
the Standartslcherungsgesetz Includes measures In favour of SME: 
- further reductions of inheritance tax faciIItate the transition from 
one generation of owner-entrepreneurs to the next, 
the introduction of a combined dépréciât ion/savings mechanism is 
particularly helpful for SME to overcome their specific problems with 
raising funds. 
In 1995, the solidarity surcharge on income/corporate profit tax will be 
re-introduced, at a rate of 7.5% (to help finance the unification 
related debts). 
4. Measures in favour of housing 
After their extension in 1992, there are now plans to reduce some tax 
allowances in order to foster consolidation (FKP-proposal). However, 
mainly within the recent FKP-declsions, extensive housing support to 
Initiate growth was agreed upon: 
- the programme to modernise housing, administered by the specialised 
banking Institute Kreditanstalt fur Wiederaufbau (KfW), is now being 
boosted by a further DM 30 bn to DM 60 bn (after being Increased DM 
5bn in the 1992 supplementary budget and DM 10 bn in the 1993 
budget). 
B - 9 
GERMANY 
the entitlement to a 50% special depreciation allowance for Investors 
In eastern housing will be extended by another two years (until 
1996), 
an additional sum of DM 250 mln has been committed for the 
construct ion of social housing, 
privatization of eastern housing Is being supported massively by 
interest subsidies and debt relief (DM 31 bn out of DM 51 bn). 
I I. STRUCTURAL MEASURES 
1. Labour market 
Structural adjustments (spending cuts) on various training programmes as 
of 1993. 
Issue of escape clauses for wage contracts pending. 
Easier access to liberal professions planned. 
Employer's initiative "training"in eastern states. 
Another DM 2 bn wi I I be spent on active labour market policies in 1993. 
2. PrI vat izat ion 
Ongoing sales by Treuhand. 
Continuing western privatization, including railways, telecom and 
motorways. The privatization of the railways (Bahnreform) has already 
been launched. 
3. Comoet i t ion policy 
Various deregulation measures are pending. 
III. WAGE MODERATION 
1. General government and private sector 
There has been wage moderation compared to 1992 settlements in west 
Germany. 
A re-orIentat ion in wage settlements is emerging: the settlement in the 
public sector (west) of 3% (based on an annual average, civil servants 
get only 2% more) after 5 to 6% In the years before is signal Iing this. 
Appendix: SolIdarity pact agreement 
B - 10 
GERMANY 
Append i x 
Results of the Federal Chancellor's closed meeting 
with the Lander heads of government 
and the party and parliamentary group chairmen 
held in Bonn from 11 to 13 March 1993 
The financing of Germany unity in a generally difficult economic situation 
necessitates great efforts from the Federal Government, the Lander and the 
municipalities, partly in order to give the private sector a reliable 
framework. This requires an effort of solidarity on the part of all Germans. 
The participants agree on the long-term financing of German unity from 1995. 
The main points of this agreement are: 
1. The fiscal allocation of the new Lander and their municipalities is 
guaranteed by transfers of DM 55.8 billion in 1995. In addition the 
division of tax revenues between the Federal Government and the Lander 
is rebalanced. 
2. Additional efforts are to be undertaken to eliminate old ecological 
debts and to safeguard and renew the core industries. With this 
objective in view, the Treuhand's credit limit is increased. 
3. The suitability of the relevant instruments and the scale of financial 
resources necessary to promote sales of products from the new Lander is 
to be examined. 
4. Basic agreement exists on the need for reform of the railways. 
5. To increase residential construction in the new Lander the following is 
agreed: 
- The solution of the question of old residential construction debt 
could be achieved: 
Capping at DM 150 per square metre-, the sum of DM 31 billion produced 
from capping is added to the inherited debt fund. The proceeds from 
housing privatization are used to cover corresponding burdens in the 
inherited debt fund. 
The corresponding interest rate subsidies amount to DM 4.7 billion 
for 1994 and DM 2.35 billion for 1995 and are borne by Federal 
Government and new Lander in equal amounts. 
- So long as housing enterprises can not be entered as owners on the 
Land Register, transitional guarantees are granted. 
- The Federal Government's Reconstruction Loan Corporation programme 
will be boosted by DM 30 billion to DM 60 billion. DM 10 billion of 
this will be used to improve systems-built dwellings with an interest 
subsidy of 3 percentage points; for the remaining DM 20 billion an 
interest subsidy of 2 percentage points applies. 
- As part of the promotion of urban building in eastern Germany, 
improvement of the living environment Is continued. 
B - 11 
GERMANY 
- The Assisted Area Law is extended by two years for investment in the 
building of privately-owned housing (50% special depreciation 
allowance in the first five years). 
6. The Federal Government will make an extra DM 2 billion available to keep 
an active labour market policy in operation in 1993. 
7. Standard social benefits are not reduced. 
Strenuous efforts will be made to combat abuse in the area of social and 
economic services. 
8. It Is agreed that expenditure cuts and the reduction of tax subsidies 
must yield savings of over DM 9 billion. The additional savings 
necessary will be decided In the working party of the four Lander 
Finance Ministers with the Federal Minister of Finance which will 
consult representatives of the parliamentary groups in the Bundestag and 
will have full negotiating authority. 
9. In introducing a 7.5% solidarity surcharge from 1 January 1995 there is 
agreement that a social component which exceeds the basic allowance is 
provided for. The private wealth tax is increased and the allowance 
adjusted from DM 70 000.00 to DM 120 000.00. It is agreed that the 
result will be an extra DM 28 billion available to the Federal 
Government in 1995. 
10 It is agreed that for 1993 the Federal Government and the old Lander 
will make available their additional revenue from the withholding tax on 
interest income (Zinsabschlagsteuer) (DM 855 million and DM 1.3 billion 
respectively) to cover the fiscal need of the new Lander. In addition to 
this, the Federal Government and the old Lander will make a further 
DM 1.55 billion available, to be shared equally between them. As a 
result, the German Unity Fund is provided with an extra DM 3.7 billion 
altogether in 1993. 
The Federal Government and the old Lander wish to provide additional 
amounts to stabilize the yield from the German Unity Fund for 1994 as 
well. The working party of Finance Ministers is to discuss this with the 
object of producing a decision for the Federal Chancellor and the Lander 
heads of government. The Federal Government will contribute a sum of DM 
5.35 billion to these discussions. The old Lander are studying whether 
they will make additional amounts available for this over and above a 
promised sum of DM 3.5 billion. 
B - 12 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
GREECE 
I. COMPETITION POLICY 
Priority has been given to the lifting of administrative and legal 
barriers to market entry and competition (including those applying to 
professional associations). According to Law 2065/92, this was to be 
done by Presidential Decrees. A Decree opening up the profession of 
auditors was issued and restrictions on the baking and the sale of bread 
were lifted in July 1992. Another Decree liberalising shopping hours was 
issued in September 1992. On the basis of Law 2065/92 barriers to entry 
and restrictive practices in a number of other professions and 
industries are being examined, with a view to eliminate those that are 
considered to be unjustified. These added to earlier measures to 
liberalise the labour market with the introduction of part-time work and 
of restrictions to trade-union activity (Law 1915/90) and the gradual 
lifting of rent controls since 1991. 
In the area of liberalisation and deregulation a major step has been the 
establishment of a regulatory framework for telecommunications (Law 
2075/92), following the abolition of the state monopoly. Furthermore the 
banking system has been strengthened by the provisions of the Banking 
Law which incorporated the second banking directive, and by a major 
restructuring in the asset position of state banks. Moreover, all 
current transactions are now free of exchange controls and long-term 
capital movements have been liberalized. Finally, all price controls 
were lifted in May 1992, with the exception of pharmaceuticals, 
following the liberalisation of the oil market earlier. 
11 WAGE MODERATION 
Law 2026, voted in April 1992, empowered the Minister of National 
Economy to impose limits on the wage bills of all public enterprises and 
entities in 1992. Under the tax bill voted in July 1992 the Law was 
extended to 1993 and 1994. For 1992 a wage-freeze applied in the public 
sector, while in 1993 a 4% increase has been granted. The cumulative 
decline in real wages in the public sector in 1991-93 has been more than 
14 %. 
III. TAX REFORM 
1. Law 2065/92 introduced a favorable tax treatment of depreciation 
allowances for firms : 
- As from 1/1/93 regular depreciation becomes optional, Implying that 
new firms may postpone depreciation until they become profitable. 
- For assets exceeding Drs 200,000 an accelerated depreciation system 
applies. Machinery and equipment may be depreciated within a period 
GREECE 
of no more than four years thus enabling firms to replace and 
modernize their machinery more frequently. 
- Exceptionally, all industrial, handicraft, mining and quarrying 
enterprises, may in the two fiscal years following 30/12/92, carry 
our depreciation of their machinery and equipment acquired before 
30/12/92 using any depreciation rate, provided that the overall 
depreciation rate of their fixed assets is not higher than 20 % of 
the industry's aggregate net profits in any fiscal year. 
2. The same Law simplified the system of direct taxation, reduced marginal 
income tax rates (the highest rate declined to 40 %) and introduced a 
significantly reduced flat rate of 35 % for corporate profits. Also, it 
provided for a number of penalties, incentives and other measures to 
help combat tax evasion, broaden the tax base and speed up the payment 
of tax arrears. 
3. In the area of indirect taxation, the Special Tax on Banking Turnover, 
which adds about three percentage points to the borrowing costs, will be 
abolished as of 1/1/94, thus reducing borrowing costs by about three 
percentage points. 
4. From 1/1/94 specific consumption taxes will be indexed for expected 
inflation. Moreover, an increase in revenue from the reduction of VAT 
evasion is expected, following the implementation of a series of 
structural and organisational measures in the process of assessment, 
control, cross-checking and collection of taxes. This is expected to 
yield one extra percentage point of GDP annually in 1993 and in 1994, 
thus offsetting the revenue loss from the abolition of the special tax 
on bank turnover. 
IV. PRIVATISATION 
Two cement companies and two shipyards have already been sold, another 
shipyard and a textiles company are in the process of being sold or 
liquidated, while several other smaller companies have been disposed of. 
This year, the two state refineries will also be privatized. 
Regarding public enterprises, the sale of shares of the OTE has been 
assigned to a major international investment bank and the transaction is 
expected to be completed in 1993, through a sale to a strategic partner 
and an IPO. The award of two licences for mobile telephony was completed 
in August 1992 for a record fee. 
The 1993 Budget envisages privatisation proceeds of Drs 330 billion, 
while a further Drs 200 billion is expected in 1994. 
V. INFRASTRUCTURE INVESTMENT 
There has been a major shift in priority from public consumption towards 
public investment projects. A major effort concerns the 100 % absorption 
of the Community Structural Funds. Consequently : 
1. In 1993, expenditure of the Public Investment Budget is projected to 
increase to 5.6 % of GDP, from 4.8 % in 1992, while for 1994 and 1995 
the annual rates are projected to be 6 % of GDP. These rates are 
expected to be achieved via the thorough absorption of the Funds of the 
B - 14 
GREECE 
Delors II package, and their rational allocation to a wide range of 
large Infrastructure projects, such as : 
- The Metro of Athens (already under construction), 
- The Metro of Thessalonica, 
- The Athens Airport at Spata, 
- The Rio-Antirlo bridge, 
- The Ancheloos River irrigation project, 
- The modernisation and electrification of the existing railways, 
- The dams of Rivers Evinos and Smocovos, 
- The Mount Hymmetus tunnel, 
- The Thessalonica water system, 
- The Patras sewage system, 
- The new Higoumenitsa harbor, and 
- The modernisation of the Patras harbour. 
The total cost of these projects has been budgeted at Drs 1,278 billion. 
There are also ten more projects concerning construction and completion 
of road transport networks whose total cost has been budgeted at Drs 
1,292 bi I I Ion. 
In addition, a large number of smaller road transport networks are 
already under construction, while a series of other small projects are 
expected to start as from 1/1/94. 
It should be noted, however, that in the cases of the Athens Airport, 
the Metro of Thessalonica and the Hymmetus tunnel the participation of 
public funding is quite small as they will be constructed on a BOT 
basis. 
B - 15 
GREECE 
Major Infrastructure Projects [1993-1998] 
ROADS AND SECTIONS OF ROADS Length Expenditure 
in KM in DRA bi M ion 
Modernisation of the National Road to turn it into 
a mortorway in the section Ylikl to Katerini 350 460 
Construction of Egnatia Road in the section 
Igoumenitsa to Kavala 403 400 
National Road in the section Antirio-lgomenitsa 190 120 
Completion of the Northern road axis of Crete 90 50 
Outer Ring Road of Thessaloniki 20 26 
Rong Road of Patras 20 25 
Motorway between Tripolis and Kalamata 90 46 
I I : 
Improvements in the motorway between Corinth and Patras 15 
Eleusis - Stauros - Spata and the peripheral road of 
Hymettus (completion of Athens Ring Road) [expenditure 
additional to self-financing] 35 
Tunnel under Mr Hymettus 
[expenditure additional to self-financing] 15 
i 
OTHERS 
Athens Metro stages A and B 500 
Thessaloniki Metro 
[expenditure additional to self-financing] 40 
Diversion of the river Ache loos 120 
Modernisation and electrification of the railways 370 
Rion-AntirrIon Junction 
[expenditure additional to self-financing] 40 
New Athens airport 
[expenditure additional to self-financing] 25 
Dam on the river Evinos 40 
Modernisation works in the Kopais basin 25 
Thessaloniki water works 15 
Patras sewage works 10 
Smokovo dam 30 
New port of Igoumenitsa 10 
Modernisation of the port of Patras 23 
Western Attica Hospital 30 
SPAIN 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
SPAIN 
I. GENERAL APPROACH 
Spain's economic growth has recently suffered a significant deceleration, as 
has been the case in other European countries. The growth rate recorded in 
1992 (1.0% according to the latest data) is clearly lower than our growth 
potentIal; however, structural inefficiencies In our labour market and the 
evolution of real wages in the last three years have destroyed employment and 
pushed our unemployment rate well above that of other countries. 
During the last months, there have been some considerable improvements in 
some of our macroeconomic disequiIibria, mainly in the fields of inflation, 
external deficit, and public sector borrowing requirements. Moreover, a great 
part of the structural reforms contained In the Convergence Programme have 
already been presented to Parliament. Nevertheless, the Government believes 
that a new package of economic measures could help to Improve activity and 
employment création, if It is embedded in the European initiative and does 
not affect the Convergence Programme targets. 
The measures adopted by the Spanish Government can be grouped in three areas: 
1. Measures favouring the financing and investment capacity of small and 
medium sized enterprises, in order to enhance economic growth and 
employment creation. 
2. Measures directed to increase Infrastructure Investment without putting 
in Jeopardy fiscal consolidation. 
3. Labour market measures. 
The next section includes a detailed description of the measures. 
Nevertheless, it is important to stress that the Spanish contribution to 
the Initiative Is not going to entail any kind of deviation from the 
convergence path described in our Convergence Programme. 
First, because the measures are but a deepening in the structural 
reforms described In the Programme as being necessary for increasing the 
Spanish potential growth. 
Second, because the budgetary impact of the tax reduction and the 
additional financing for private enterprises will not alter 
significantly the results otherwise obtained, because the measures are 
restricted to new enterprises and new investments, and because they will 
help to counteract the effects on budget deficit otherwise derived from 
the automatic stabiI izers. 
Third, because the financing of the additional public investment will 
come from EC funds and resources, and EIB loans will be devoted to those 
projects with capacity to generate enough returns for repayment. 
B - 17 
SPAIN 
Finally, because the restoratIon of agents' confidence may have 
favourable effects on the rate of growth, reinforcing the intensity of 
economic recovery. 
II. DESCRIPTION OF THE MEASURES 
1 • Financial measures In support of Small and Medium 
Sized Enterprises (SMEs) 
These companies suffer from the difficulty to find adequate financing. 
Lack of access to capital markets, insufficient guarantees provided to 
credit institutions and scarce information and advice facilities, render 
SMEs financing much more difficult. They have to rely on bank financing 
which is usually more costly. 
Therefore, some mechanisms to facilitate their financing capacity are 
needed, by promoting se If-financlng or making their access to other 
sources easier. To this purpose, the Government proposes the following 
measures: 
a) Credit Lines to SMEs 
i) Preferential credit from the Official Credit Institute (ICO) 
ii) A line of 100.000 million PTA for SMEs is committed, to be 
disbursed in the course of 1993-94. It is meant to finance 
long-term productive investment with the intermediation of Banks 
and Savings Institutions. 
iii) ICO will obtain the funds from its profits and bond issues. 
b) Interest rate subsidies 
The government will set up a 10.000 million PTA credit line in 
concessional conditions for SMEs high-technology equipment. 
c) EIB loans 
i) The EIB will provide funds through "global loans" channelled by 
credit institutions amounting to 50.000 million PTA in 1993-94. 
ii) In order to increase the percentage of "Global loans" in the 
total number of EIB loans to Spain, and to reduce their cost, 
the Government will undertake the following measures: 
- Favour any procedure enabling to make more flexible the 
concession of EIB Global loans, and their channelling to SMEs. 
- Create risk reduction mechanisms in coordination with the EIB 
to reduce financial institutions margins. 
- Foster the role of Regional Governments and Commercial 
Chambers, because their proximity to companies allow better 
knowledge of their needs. They may, on the one hand, provide 
information on EIB financing possibilities, and on the other 
hand, act as intermediaries in project selection. 
B - 18 
Reinforcement of Reciprocal Guarantee Companies 
The role of Reciprocal Guarantee Companies (RGC) Is very much related to 
the strategy of increasing resources to SMEs. These companies provide 
guarantees allowing SME's access to bank finance, make their access to 
concessional financing easier, negotiate better credit conditions with 
financial institutions and offer them information and advice. 
The government also believes that these companies can play an important 
role In improving SMEs access to financial resources from the EIB. 
a) RGC legal framework 
The Council of Minister approved on the 23rd of December 1992 the new 
Law on RGC regime. 
The Law is now being considered in Parliament. It provides SME with 
better financing possibilities through mutual guarantees enhancing 
their negotiation capacities with financial institutions, reducing 
credit costs and opening their access to a wide range of financial 
serv ices. 
b) Establishment of a new Reinsurance Company 
In order to provide RGC with enough liquidity and solvency, we need 
to create a mechanism for reinsuring RGC guaranteed Credits. 
This new company will result from the merger of two existing 
companies: the mixed Company for Second Guarantees and SOGASA. Its 
equity will then be enlarged to 3.000 million PTA. 
c) New Joint-venture fund in the ICO 
The ICO will create a 10.000 million PTA fund earmarked for taking 
minority stakes in newly created enterprises and providing 
participative loans. 
d) SMEs access to Stock Exchange Markets 
The Government, after a previous report by the Stock Exchange 
National Commission, may create special stock negotiating areas for 
variable or fixed assets launched by SMEs. 
Fiscal measures to support Investment and enterprises 
The fiscal measures that the Government includes in the context of the 
European Initiative for Growth are mainly focused on promoting creation 
of new enterprises and investment in the existing ones by means of 
reduction of their tax burden. 
Four different types of proceedings are proposed : 
a) In the field of fiscal Incentives to investment, the measures are 
meant to facilitate an accelerated process of depreciation of 
equipment. 
i) A Ministerial Order will be immediately published, which 
increases official coefficients. 
B - 19 
SPAIN 
ii) A 50% increase in the new maximum repayment coefficients will be 
allowed for investment carried out during the next two years. 
b) In the field of new managerial activities : 
I) The present five year limit for loss compensation in the 
Corporate Tax will be abolished for all those enterprises 
created during 1993 and 1994. The managerial activities 
launched under the Initiative will benefit from an unlimited 
horizon to compensate losses In their tax payments. 
II) Three year 20% allowance of the net revenues of the "ob lect Ive 
estImatIon system" for those enterprises created during the life 
of the Initiative for Growth. 
c) In the field of small individual enterprises, 10% general reduction 
of the 1993 net revenues of the "objective estimation system" will be 
applied. This measure is introduced in order to consider the 
specific situation of small individual enterprises, and to correct 
the 1993 net revenues in the light of the characteristics of the 
current situation. 
d) In the field of enterprise financing, in order to finance the cost of 
the special lines of credit established in the "Official Credit 
Institute" for small and medium enterprises, this Institute will be 
exempt from the Corporate Income Tax for the next four years. 
Measures to enhance investment in infrastructure and 
environment. 
The Government proposes that the financing from the EIB additional line 
be used to carry out 100.000 million PTA of additional investment for 
1993 and 1994. These investments will be focused on those 
organizations, entities and public enterprises capable of generating 
enough revenue to cover the service of the indebtedness. 
The following investment programs have been selected : Airports, Ports, 
Motorways, Confederaciones Hidrogrâficas, Postal Service, Electric 
Energy and Pipelines. 
In addition to this package of investments, financed with the credits 
obtained by the organizations and public companies, the public 
investment pipeline will be increased with regard to previous scenarios 
for 1993 and 1994, by 200.000 million PTA, mainly financed by Cohesion 
Fund resources. 
Spain will probably receive from Cohesion Fund, 250.000 million PTA in 
1993 and 1994. Spain has presented a 350.000 million PTA project 
pipeline detailed In Table 1. In the Table, the 20% Spanish cofinanclng 
requested by the Community has already been taken Into account. The 
important volume of the pipeline and its adequacy to the Fund 
objectives, allow to foresee that It will be possible to obtain the 
volume of resources mentioned above. 
The main characteristics of the projects Spain is proposing to finance 
with the Cohesion Fund are the following : 
B - 20 
SPAIN 
a) Proceedings In the field of transport represent 70% of total 
projected investment, and those In environment represent 30%. 
b) Environment. The Investment effort In environment this year will 
amount to 50.000 million PTA. Investment to improve water cycle 
management, investment in National Parks and aid to promote clean 
technology use In the industrial sector are the main domains taken 
into account. 
c) Transport Infrastructure. The projects in the field of transport 
will use up to 114.000 million PTA In 1993. The projects are focused 
on the improvement of the road network, railways, and airport and 
port infrastructure in the Islands. 
5. Labour market measures 
The strong worsening of the Spanish Labour Market urgently requires a 
comprehensive and deep review of the legal framework, that has proved 
incompatible with the requirements of the European project. 
The measures here proposed obviously do not suffice to undertake the 
reform required. However, the Government's main target for the moment 
is to cushion the negative effect on employment of the current 
situation. Therefore, these measures have to be understood as a means 
to avoid a further worsening of the labour market conditions. 
The measures are the fol lowing : 
a) Possibility of extension to 1 year of the temporary contracts that 
expired during 1993. Employers may receive a 250.000 PTA subsidy if 
temporary contracts are transformed into indefinite. 
b) Part-time contracts signed after the implementation of the measures 
and until December 1993 will benefit from subsidies under the 
Indefinite contract promotion scheme; working hours minimum 
requirements are between 1/2 and 2/3 of the ordinary time-table. 
Subsidies will be determined according to timetable length. 
c) Changes will be introduced in apprenticeship and training programmes 
to finish their reform process. 
d) Temporary Work Companies will be allowed to actively participate in 
labour market intermediation. 
B - 21 
SPAIN 
INVESTMENT IN INFRASTRUCTURE AND ENVIRONMENT PROGRAMME 
(Mi I I ion PTA) 
PROJECTS 1993 1994 
A) TOTAL TRANSPORT 113.997 129.255 
1. ROADS 91.697 107.120 
Main Roads 56.228 89.300 
Conditioning 6.867 8.000 
City access 29.102 11.197 
2. RAILWAYS 14.900 10.500 
Railway infrastructure 14.900 10.500 
3. PORTS 400 1.500 
4. AIRPORTS 7.000 10.135 
Infrastructure 6.600 9.335 
Air Navigation 400 800 
B) ENVIRONMENT 50.450 56.150 
Water quality 4.000 11.000 
Sea Shores 6.950 7.000 
Hidrology - forestry 2.500 2.500 
Hldrologlc works 21.000 5.000 
National parks 3.000 3.000 
P.I.T.M.A. 3.000 10.000 
Reforestation 10.000 14.650 
TOTAL TRANSPORTS + ENVIRONMENT 164.447 185.405 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
FRANCE 
Since last autumn, France's international environment has worsened : the 
OECD, which in June 1992 was predicting 3 X growth for Its members in 1993, 
has revised Its forecast down to 1.9 X; the deterioration in the economic 
climate is a particularly sensitive matter for Community Member States. The 
OECD is now predicting growth of 1.2 X for the EEC in 1993. The Commission is 
even more pessimistic (0.8 X). 
This highly unfavourable international context will inevitably affect the 
economic situation in France where growth in 1991 and 1992 was export-driven 
to a significant extent. In 1992 the French external trade balance showed a 
surplus of FF 30.5 billion, i.e. an improvement of FF 60 billion over the 
previous year. 
Growth in France cannot therefore be expected to be driven by external trade 
in 1993. However, the progress made by France over many years in improving 
its competitiveness will mean that its external accounts will remain in 
surplus in 1993. 
Growth In 1993 will also be underpinned by the sustained level of private 
consumption (increase of approximately 1.5 X per year) which will in part be 
stimulated by the purchasing-power gains made by wage and salary earners as a 
result of the success which has been achieved on the inflation front 
(consumer prices rose by 2 X over 12 months in 1992) and which should be 
sustained in 1993 and reinforce the economy's competitive potential. 
France should see growth and domestic demand levels above the average for 
Community countries, and this will make a positive contribution to activity 
in the Community. 
Despite the successes achieved on the inflation, competitiveness and external 
trade fronts, growth will still not be sufficient to prevent unemployment 
from rising unless resolute and sustained action is taken. This disturbing 
phenomenon Justifies the Government's efforts to combat long-term 
unemployment through the examination of the 900 000 individual cases recorded 
last year and the recent measures to encourage firms to increase the number 
of part-time Jobs. 
However, quite apart from the necessary efforts to secure a better 
distribution of working time and more flexibility in the labour market, the 
Government is convinced that only Increased and non-Inflationary growth Is 
capable of curbing the rise in unemployment by creating lasting Jobs. 
Having been aware, since the spring of 1992, of the seriousness of the 
deterioration in the world economic situation, the Government has adopted a 
two-pronged strategy : 
on the revenue side, the "automatic stabilizers" must be allowed to 
function to the extent compatible with the Government's medium-term 
objectives, and In particular the criteria laid down in the 
Maastricht Treaty; 
FRANCE 
without engineering an overall boost to the economy, specifically 
targeted measures must be adopted to assist certain sectors. 
I. OPERATION OF THE "AUTOMATIC STABILIZERS" 
Public finance provides powerful support for economic activity. The free play 
of the automatic stabilizers will limit the deterioration in firms' cash 
positions and In household incomes. The positive contribution made by public 
finance to growth in 1992 can be put at more than half a percentage point. In 
1993 the impact is likely to be less but should still be positive. 
The rise in non-debt public spending remains moderate, and its structure is 
not being unfavourably affected : government current expenditure as a 
proportion of GDP has remained stable for a long time-, France's public 
investment effort has been maintained over a long period and exceeds that 
made by most of its trading partners. 
France's medium-term objective is to maintain a public finance situation that 
is healthy and compatible simply with balanced economic growth. 
II. SPECIFICALLY TARGETED MEASURES 
The support being given to the economy is selective : 
it is directed primarily at firms which are affected by the contraction 
in international demand and whose cash positions are impaired by the 
level of short-term interest rates. Households have benefited from the 
highly positive Impact of lower than expected inflation, which secured 
them substantial purchasing-power gains in 1992; the purchasing power of 
the hourly wage rate rose by more than 1.5 % between the end of 1991 and 
the end of 1992; 
government action Is designed to promote Investment since this will 
reinforce the country's long-term supply and growth capacity. 
In the light of these objectives, the French Government, being aware of the 
cyclical slowdown and having drawn the attention of Its European partners to 
that fact, has concentrated its action in three directions since the autumn 
of 1992 : 
assistance for small and medium-sized enterprises, including those in 
industry; 
the development of Infrastructure networks; 
support for the property sector, which has been particularly affected by 
the cr isis. 
1. Assistance for small and medium-sized enterprises. Including those in 
industry 
In addition to general measures for alleviating the burdens on small and 
medium-sized enterprises - the most recent of which was the partial 
reduction in the one-month time-lag between the payment of VAT and the 
refunding of the tax on input (cost : FF 11 billion) - France has 
adopted specific measures designed to promote investment by such 
enterprises. 
B - 24 
FRANCE 
In October 1992 France set up a guarantee fund for investment by small 
and medium-sized firms, the aim of which is to provide a 50 % guarantee 
for FF 20 billion of loans to such enterprises which have a turnover of 
less than FF 2 billion and which implement industrial investment 
programmes. 
This guarantee fund has been allocated FF 500 million by the Government. 
It Is administered by SOFARIS, a private-law company a majority of whose 
shares are held by credit institutions and which underwrites with its 
own capital the risk of the guarantee fund being exhausted. The 
experience of this company should therefore ensure control of the risks 
Incurred. 
Guarantee applications are submitted by the credit institutions and 
processed by SOFARIS. 
The basis for calculating the guarantee is the amount of funding 
provided for the tangible or intangible investment programme and the 
increase in working capital resulting from that investment. 
The credit institution must pay a guarantee commission, which ensures 
that use of the guarantee fund is targeted on business investment 
projects carrying above-average risks and therefore covers the marginal 
areas of industrial investment at reduced cost. 
This fund should make it possible to : 
- boost the level of lending to firms by relieving banks of some of the 
financing risk and so contributing effectively - but without direct 
subsidy or aid - to the taking-on of greater risks by private 
operators; 
- stimulate Industrial investment and therefore promote 
non-inflationary growth. By guaranteeing FF 20 billion of loans out 
of a total of some FF 150 billion of annual industrial investment by 
small and medium-sized enterprises, this stimulatory measure Is truly 
macroeconomic in scale. 
The guarantee fund technique presents two main advantages : 
it is inexpensive because it exerts a substantial leverage effect, 
and only those firms which ultimately fail, which are still small in 
number, represent a real financial cost; 
It is a differential procedure, i.e. it is targeted on investment 
projects which would have had the least chance of being carried out 
without it. The payment of a guarantee commission causes the banks 
not to apply for guarantees on investment projects which they are 
prepared to finance alone. 
Although these arrangements have only just begun, the Initial results 
reflect the real interest being shown in them by credit institutions. 
Infrastructure measures 
Infrastructure investment has a particularly favourable Impact on 
completion of the single market and promotes long-term growth. 
B - 25 
FRANCE 
At the same time, it bolsters activity in the construction and public 
works sectors. 
The public enterprises in the transport and energy sectors and the water 
companies have been encouraged to invest FF 165.1 billion in 1993. 
This volume of investment Is at a historically high level, having grown 
by 7.3 % compared with 1992. 
Of that total, FF 80 billion will have a direct impact on the 
construction and public works sectors and will help to maintain or 
create jobs. 
This investment programme will Improve motorway infrastructures and add 
to the TGV network, both of which are of European importance. The 
studies on the launching of the Mediterranean TGV project will in 
particular be financed in 1993 (estimated cost : FF 27 billion). 
In the same spirit, the Government decided on 10 February to launch the 
TGV East project, which will involve an investment of FF 20 billion. 
Finally, investment by the water companies is to increase by almost 17 % 
In 1993, which represents a major effort in the environmental field. 
3. Investment in the property sector 
a) In the autumn of 1992 measures were taken to boost investment in 
property for letting purposes in order to satisfy the needs of 
households and to bolster the construction industry : 
- the Quilès-Méhaignerle arrangements under which natural persons 
investing in new housing intended for letting are eligible for tax 
relief have been extended in the case of housing where rents do not 
exceed a given level; 
- the legal status of the "sociétés civiles de placement immobilier" 
(SCPIs, collectively administered property investment organizations 
benefiting from tax transparency) has been radically altered. Loans 
granted under housing-1 inked savings plans can now also be used to 
finance the purchase of shares of SCPIs specializing in housing. The 
development of the SCPIs, which have channelled some FF 10 billion of 
savings per year to property investment in recent years, will be 
boosted considerably by these two measures; 
- special attention has been paid to subsidized rented housing. This is 
reflected In the increase in the appropriations allocated to such 
housing : 90 000 HLM housing units (financed through subsidized loans 
for rented property) will be built In 1993, as against 80 000 in 
1992. These measures will bolster activity in the building industry. 
b) Similarly, the Government has sought to promote home ownership : 
a new home-ownership assistance system is to be set up at the 
beginning of 1993 : the "Fonds de Garantie de l'accession 
sociale" (FGAS - assisted home-ownership guarantee fund). This 
will enable some 150 000 people aspiring to own their own homes 
to be granted loans at moderate rates, with the Government 
B - 26 
FRANCE 
partially underwriting the risk incurred in respect of such 
loans; 
legislative and administrative measures have been taken to speed 
up, during the first part of 1993, the introduction of the 
subsidized ownership loans ("prêts aidés à la propriété" or PAP) 
which will provide funding for 35 000 dwellings for households 
with modest incomes in 1993 : 24 000 loans should be granted 
during the first half of the year. Similar measures have been 
taken with regard to the subsidized loans for rented property 
("prêts locatifs aidés" or PLA). The aim of this measure is to 
concentrate assistance at the time when growth is likely to be 
weakest and thus to provide a boost for the construction sector; 
the top rate of duty on transfers for valuable consideration is 
to be cut in the case of housing by 0.5 % per year up to 1995. 
c) Finally, measures have been taken to enable those working in the 
property sector to adapt to the crisis affecting the property market, 
particularly in Ile de France, and to pave the way for a soundly 
based recovery in that market : 
the maximum period during which property dealers may hold 
buildings free of duty on transfers for valuable consideration 
has been increased. This measure will enable such dealers to 
spread their property selling programmes out smoothly over the 
next few years. Property market prices will be less affected as 
a result, which should benefit all those active in the sector 
and their creditors; 
the SICOMIs, companies specializing in property leasing, will be 
granted tax relief over a wider field of operations. These 
companies have the capacity to carry out a large number of 
operations, and this measure will thus bolster the market; 
the administrative approval procedure for the establishment of 
office tenants In I le de France has been suspended. This measure 
will provide support for the Parisian property market by 
boosting the attractiveness of Paris as a location, particularly 
among large foreign companies. 
The French Government has thus adopted a series of measures which form part 
of a coherent strategy and which should provide short- and medium-term 
support for activity in those sectors most sensitive to cyclical changes in 
the economy. 
Taken together, these measures should lessen the negative impact of the 
worldwide economic slowdown on the French economy and contribute to growth in 
Europe. 
B - 27 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
IRELAND 
Despite the weakness of the International economy, Ireland achieved GDP 
growth of almost 3% In 1992. This Is estimated to have been the highest 
growth rate In the European Community. 
Consumer spending grew by some 3,5% in 1992, helped by strong growth In real 
disposable incomes. Consumer prices rose by 3%, well below the EC average. 
Total Investment remained unchanged, being adversely affected by weak 
international conditions and high real Interest rates. Ireland's trade 
surplus rose substant ial ly and was equivalent to over 12% of GNP. 
Employment held up well relative to the general international performance, 
with a modest increase in numbers at work outside agriculture. Employment 
performance was nevertheless far short of what Is necessary for our 
exceptional employment needs. Unemployment rose substantIally as a result of 
the numbers of returning emigrants and the large natural Increase In the 
labour force. 
Ireland appreciates the desirabiIity of providing a stimulus to the economies 
of the Community and particularly of Improving the employment situation in 
the Community. Accordingly, we welcome the European Council's initiative for 
economic recovery and in support of It we are taking the actions described in 
the following paragraphs. 
I. BUDGETARY MEASURES: PUBLIC INVESTMENT 
1. Growth Expectations for 1993 
Ireland's expectation is for GDP growth of 2,5% in 1993. This will 
again be well above the Community average. 
2. Overall Budgetary policy 
Severe difficulties surrounded the framing of the 1993 Budget. These 
arose from the international recessionary conditions, necessary Single 
Market tax changes, currency turbulence and the related high interest 
rates. Nevertheless, Ireland is maintaining firm budgetary discipline, 
demonstrating our determination to adhere to the Maastricht criterion 
for the General Government Deficit and to secure early resumption of the 
trend decline in the overall debt-to-GDP ratio which was adversely 
affected by the devaluation of the IRL at end-January 1993. This policy 
is aimed at easing interest rate pressures and producing a positive 
effect in the markets, thereby assisting growth through improved 
investment and consumer confidence. 
Accordingly, the General Governemnt Deficit target for 1993 is 3,4%. 
This compares with an outturn of 2,5% for 1992. The increase reflects 
higher unemployment-related spending and the use for employment purposes 
of the available budgetary room for manoeuvre, through Increased Public 
Capital Programme expenditure. The GGD figure remains well in line with 
IRELAND 
the average level in other Member States in the narrow band of the 
Exchange Rate Mechanism. 
3. Public Capital Programme 
A key feature of the Edinburgh Council's initiative is the call to 
switch public expenditure priorities towards infrastructure and other 
capital investment expenditures. Ireland has responded to this call by 
increasing our Public Capital Programme by nearly IR£ 500m to IR£ 2340m, 
or 27% more than 1992, helped by significant aid from the EC Structural 
and Cohesion Funds. This extra IR£ 500m will be spent mainly on roads, 
public water and sanitary services, and local authority housing 
(IR£ 149m); provision of a gas interconnector and improvement of gas 
network (IR£ 143m); refurbishment of electricity generation plant and 
improvement of transmission networks (IR£ 73m); improvement of rail 
lines and bus transport (IR£ 64m); and improvement of telecommunications 
networks (IR£ 41m). 
4. Construction Content of Capital Expenditure 
A total of IR£ 1367m out of the Public Capital Programme expenditure of 
IR£ 2340m relates to the construction sector. This represents an 
increase of IR£ 251m, or over 22%, on 1992. This Increased expenditure 
is expected to generate up to 3500 direct and indirect jobs in 
construction in 1993. 
5. Hous i no 
Expenditure on local authority and social housing will increase by 
IR£ 31m, or over 40%, to IR£ 107m. This will provide for 3500 local 
authority housing starts, compared with 1500 in 1992. 
Two taxation measures announced in the Budget will also help housing. 
First, the ceilings on mortgage interest relief are being increased by 
25%, and the percentage Iimit applying to the relief is being increased 
from 80% to 90% for the 1993/94 tax year; this figure will be 100% for 
first-time buyers in the first three years of their mortgage. Secondly, 
the level of stamp duty on larger new houses is being reduced. Taken 
together, these measures will cost over IR£ 18m in 1993, and should 
provide a further significant boost for the housing sector. 
6. EC Cohesion Fund 
The extra IR£ 500m capital expenditure includes IR£ 148m in projects 
proposed for aid under the EC Cohesion Fund. About IR£ 126m of the 
IR£ 148m total is expected to be reimbursed from the Cohesion Fund. The 
concrete investments to be financed by the Cohesion Fund will result 
from the negotiations with the Community. A full breakdown of how the 
Irish authorities are proposing to spend IR£ 148m is attached. 
7. County Enterprise Partnership Boards 
The 1993 Budget provides IR£ 25m for these proposed Boards. Their 
mandate will be to support local initiatives through small business 
start-ups. 
8. Jobs Fund 
The Programme for a Partnership Government contains a commitment to 
B - 29 
IRELAND 
promote recovery and job creation through the creation of a Jobs Fund. 
This commitment is being met by the Cohesion Fund-related expenditure, 
the expenditure on the proposed County Enterprise Partnership Boards and 
the increase in the Exchequer element of the Public Capital Programme in 
1993. 
National Development Plan 
A National Development Plan Is being prepared which will set out the 
Government's proposals for the use of EC Structural Fund and Cohesion 
Fund aid for Ireland 1994-1999. The central objective of the Plan will 
be to increase the sustainable growth rate of the economy and expand 
self-sustaining employment within the context of respecting the economic 
and financial criteria for participation in moves towards EMU. 
BUDGETARY MEASURES: PROMOTION OF PRIVATE FUND 
10. Financial Institutions' Enterprise Fund 
The Government has been seeking a greater contribution from financial 
firms to economic development In the State. Already the banks and life 
assurers have agreed to establish a fund of IR£ 100m to promote 
enterprise in the State. 
11. Development Capital from Pension Funds 
The 1993 Budget announced that urgent discussions will be opened with 
the pension funds in the State to seek a corresponding initiative by 
them in this area. 
BUDGETARY MEASURES: TAX FACILITIES FOR ENTERPRISES 
12. Business Expansion Scheme 
The BES, due to expire in April 1993, is being extended to 1996. The 
lifetime cap of IR£ 75,000 on individual investors is being abolished. 
The annual investment generated by the BES is estimated at up to 
IR£ 30m. 
13. Special Investment Accounts 
These accounts, introduced from 1 February 1993, are designed to 
encourage collective investment in Irish companies and direct personal 
investment in quoted companies. They are taxed at 10% on all income and 
capital gains. A small but increasing percentage must be held in 
smaller companies. There is an extra incentive, of complete exemption 
from income tax and CGT, for investment in venture capital companies. 
14. VAT on certain labour-intensive Services 
The Budget reduced the rate on these (garage services, repair and 
maintenance services and various personal services) from 16% to 12,5%. 
15. Car-hire 
A scheme of partial repayment of Vehicle Registration Tax is being 
introduced for cars In the short-term car hire sector, to underpin 
capacity for growth in tourism. 
B - 30 
IRELAND 
I I. STRUCTURAL MEASURES : LABOUR MARKET 
1. Tax Reform In recent years 
Taxation of income has been significantly reformed in recent years, 
essentially by widening the tax base, reducing tax rates and extending 
the standard band. Budgetary constraints meant that the process of 
income tax reform had to be Interrupted this year. However, despite the 
severe financial pressures and the necessity to maintain fiscal 
discipline, the Government in framing the 1993 Budget were careful to 
limit the taxation of income and instead mainly concentrated on taxation 
of expenditure, while making special provision for the low-paid via the 
income tax exemption limits. 
2. Taxation of Disability Benefit (DB) 
DB, a short-term Social Welfare benefit not taxed up to now, will be 
treated as income for tax purposes from the 1993-94 tax year. This will 
improve work incentives, broaden the tax base and improve equity of 
treatment as between different sources of income. 
3. Family Income Supplement 
This scheme will be further improved in order to secure its 
effectiveness in maintaining the incentive to work, at a cost of over 
iR£ 5 million in a full year. 
4. Occupational Pension Schemes 
New regulations, effective from 1 January 1993, improve the provisions 
relating to preservation and transfer of pension entitlements when 
employment is terminated or interrupted. 
5. Work Incentives 
Improvements in Replacement Ratios over a wide range of incomes and 
family circumstances, arising from the 1993 Budget changes in Tax and 
Social Welfare, have improved the incentives for the takeup of 
employment. 
6. "Standards Reached" Apprenticeship Scheme 
The details of and funding for a new "Standards Reached" apprenticeship 
scheme are being put in place. The new scheme will replace the existing 
"Time Served" scheme. It will require apprentices to complete set 
curricula and attend "off the job" training for up to 40 weeks over the 
apprenticeship period. The training will lead to a national craft 
certificate, internationally recognised. 
7. National Training Scheme 
A "National Training Scheme" is also proposed, under which structured 
training will be provided which will incorporate work experience on 
employer's premises and will lead to national certification. 
These two schemes are intended to bring about a more structured and 
employment-1 inked training framework. 
B - 31 
IRELAND 
STRUCTURAL MEASURES: ASSET SALES 
8. Asset Sales 
The 1993 Budget arithmetic includes receipts of IR£ 150 million in 
respect of proposed sales of State assets. In carrying through these 
sales, the Government will be guided by the principles set out in the 
recently concluded Programme for a Partnership Government. 
STRUCTURAL MEASURES: COMPETITION POLICY 
9. Competition Act. 1991 
The Competition Act, 1991 applies competition rules to the domestic 
market on the lines of Articles 85 and 86 of the EC Treaty. It covers 
all sectors of the economy. 
The coming into operation of the Act is expected to yield significant 
benefits in the drive to produce a more competitive and efficient 
economy. 
10. Competition In the Financial Services Area 
A stream of legislation in the past five years has opened up the banking 
and financial markets to new forms of competition. In addition, 1 
January 1993 saw the implementation of the EC Second Banking Directive. 
Further, the regulation of financial services has been streamlined by 
making the Central Bank the principal regulator for all financial 
services, except insurance. 
This approach of liberalisation and efficient regulation will be 
continued in forthcoming legislation on the Stock Exchange, Investment 
Services and Financial intermediaries. 
11. Third Banking Force 
The Programme for Government envisages the creation of a third banking 
force by merging the State Banks to give them the critical mass to 
compete with the four main retail banks which dominate the Irish market. 
In this proposed merger, the Government does not rule out the 
involvement of a major International banking group to add strength and 
expertise to the new structure. 
OTHER STRUCTURAL MEASURES 
12. Taxât Ion 
Recent years have seen very substantial reforms of taxation in Ireland, 
with the objective of Improving the structure of the tax system while 
contributing to the overriding task of budgetary correction, supporting 
the achievement of wage moderation and facilitating Ireland's full 
participation in the Single Market. These reforms will continue to 
underpin Ireland's economic and budgetary performance over the years to 
come. 
B - 32 
IRELAND 
13. Tax Reform for the Future 
Tax reform - Including widening the standard tax band, removing the low-
paid from the tax net altogether and making the tax system more 
supportive of enterprise and employment - will continue to be a priority 
for the Government. Integration of the tax and Social Welfare systems 
wi11 be studied. 
14. Exchange Controls 
A phased programme of reducing reliance on exchange controls over recent 
years culminated in the complete abolition of exchange controls at end-
1992. 
15. IndustrIal Pol Icy Review Group Report 
A major Report on Industrial Policy was published in 1992. It set out a 
wide range of recommendations for reform of industrial policy and for 
reforms in other areas affecting Ireland's economic performance. The 
Government will be following up vigorously the recommendations of the 
Report of the Industrial Policy Review Group and the Task Force Report 
on its implementation. A special committee of Ministers has commenced 
work on the timetable and priorities for implementation of the many 
recommendations in the Report. 
16. Regional Authorities 
New regional authorities are planned to be established in 1993. 
17. Food Industry 
A development programme for the food Industry will be implemented 
following consideration early In 1993 of a report from a Expert Group on 
the industry. 
III. WAGE MODERATION 
1• Pub IIc Sector 
No provision Is being made for improvements in pay or conditions - apart 
from those already fully committed - of public servants this year. In 
addition, the Government intend to discuss with the public sector trade 
unions a radical change In the public sector pay determination process, 
to provide for greater transparency, less frequent recourse to 
adjudication, more weight on budgetary considerations and greater 
efficiency and effectiveness in the public sector. 
2. Private Sector 
Wage developments In the private sector In 1993 will be determined by 
the provisions of the three-year Programme for Economic and Social 
Progress which expires this year. The Programme provides for a basic 
increase in 1993 of 3,75% which is in line with expected inflation. It 
also allows for the possibility of local bargaining, subject to defined 
limits. Both the basic increase and the local bargaining element are 
subject under the Agreement to employers' ability to pay. 
B - 33 
Measures IRELAND 
Proposed Cohesion Fund Expenditure 1993 
Exchequer Non Exchequer Total 
£ m £ m 
Internal External 
National Roads 
Improvements to Include 
Northern Cross, Co Dublin 
SIigo/Co Ilooney, Co Sllgo 
Lucan/KII cock, Co Kildare 
and Drumsna/Jamestown, 
Co Leitr I m 40.000 40.000 
PubI le Water Supply and 
Sanitary Services 
Improvements to include 
Cork City, Dub I In and 
Galway main drainage 
Environmental Services 
Mainly for waste management 
facility in the Dublin area 42.400 42.400 
7.000 7.000 
Investment in Key 
Commercial Ports 
Including developments at 
Cork, Dublin and Waterford 1.514 11.586 13.100 
Improvement works at 
Ross I are Harbour 4.800 4.600 
Raliways 
Main line Rail Track Renewal 29.300 29.300 
Aer Rianta Airport 
Investment in freight related 
facilities at Dublin Airport 2.900 2.900 
Pord Gals Ejreann 
Environmental improvement 
related spending in respect 
of decontamination 
developments at certain 
Bord Gals sites 
EJSB add it ional allocation 
for Energy related Cohesion 
funded projects 5.800 5.800 
2.300 2.300 
0PW Heritage Protects 
Additional IR£ 0.400 mi 11 ion 
allocation in respect of 
National Parks and Wildlife 
Service environment 
protection developments. 0.400 0.400 
TOTAL 82.800 1.514 63.686 148.000 * 
About IR£ 126m 
Cohesion Fund. of this IR£ 148m Is expected to be reimbursed from the 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
ITALY 
The International economic outlook has progressively become less optimistic 
with respect to the expectatIons prevalIIng in the first months of last year. 
Growth estimates have been revised downwards, specially In Europe, where 
structural problems affect to a greater extent the prospects of recovery. 
These negative trends have been accompanied by increased uncertainties about 
the working of the ERM and the difficult les of the Uruguay round. 
The economic policy response to the weak cycle has been characterized by 
insufficient coordlnation among member countries and inward looking measures, 
aiming at the solution of the most important national problems. 
In Italy, the crucial area of the government actions has been the public 
finance. Following the currency turmoil of last September, which made the 
economic picture even more difficult, the Government adopted a programme to 
correct the major disequiIIbrla of the economy, in particular the persisting 
imbalances In public sector finances. Beside the fiscal adjustment , the 
policy package included structural measures affecting the main areas of 
expenditures and revenues, that is pensions, health care, public sector wages 
and local finances. 
Since the first months of the current year have confIrmed the weak trend of 
output and internal demand, the Government is now trying to deal with the 
mounting concern about rising unemployment. The enterprises have coped with 
these difficult les by reducing the employment levels. For the first time 
since 1988 there has been a substant ial reduction in employment figures, in 
particular In major enterprises, which have cut their personnel by 6 per cent 
In the last twelve months. 
Taking into account the constraints in public finances, the Government policy 
to promote employment has been based on the following main lines of action. 
I. BUDGETARY MEASURES 
In February the Government decided by decree to broaden the category of 
workers who are eligible for the wage supplementation fund (cassa 
integrazione guadagni). The budgetary impact of this measure in 1993 will be 
very Iimited. 
Since the Government is committed to respect the public finance targets 
indicated in the consolidation program connected with the Council decision 
granting the loan to Italy, any stimulus to growth through public investment 
expenditure is submitted to precise limits. The most significant measure 
adopted by the Government in this field is the speeding up of arrear payments 
to enterprises and of budgeted investment in the public sector, including 
ENEL and Ferrovie dello Stato. 
The new procedure which will speed up the investment expenditure requires: a) 
identification of "risk areas"; b) programs specifying the objectives, the 
modalities and the timing of investments; c) financing by the budget of the 
ITALY 
public institutions concerned and by structural funds of the European 
Commun!ty. 
Moreover the Italian authorities are making all the steps necessary to speed 
up the access to the Edinburgh facility for the following Investment projects 
in the fields of transports, energy, telecommunications: 
Enlargement of Caselle - Torino airport and strengthening of related 
services. 
Construction of the section Mazara del Vallo-OrIcola of the Algeria -
Italy gas pi peline. 
Extension and improvement of SIP telephone network, specially for the 
major urban areas. 
Installation of automatic toll machines on the Italian motorways. 
I I. STRUCTURAL MEASURES 
The second line of action is related to structural measures concerning the 
labour market, privatisation and reforms of pensions, health care, local 
finances and public employment In order to rationalize the working of these 
sectors and to reduce public expenditure in the medium term. 
As concerns the labour market, the Government is negotiating with the Unions 
and Confindustria a package of measures to increase the flexibility of the 
market and stimulate the enterprises to hire young workers. The aim is to 
achieve an "overall social pact" consistent with last summer's labour cost 
agreement, that Is the permanent end of wage indexation. So far the agreement 
abolishing the "sea I a mobile", signed last July, has been implemented, 
notwithstanding the subsequent sizeable depreciation of the exchange rate of 
the lira. 
In the public sector wages have been frozen for 1993 and in the private 
sector the rate of increase of contractual wages has continued to decelerate 
in the course of 1992 and is now below the CPI Inflation rate. 
III. PUBLIC EXPENDITURE 
As concerns the reforms of public expenditure, the Government has already 
adopted all the decrees implementing the enabling law approved by Parliament 
last year. 
The pension system has been reformed in the following direction: 
a) the retirement age for the standard old age pension will be gradually 
raised to 65 years for men and 60 for women; 
b) the minimum contribution period requirement (old age pension) will be 
gradually raised from 15 to 20 years; 
c) the reference period for pensionable salary will be gradually lengthened 
from 5 to 10 years. 
B - 36 
ITALY 
The Parliament is also examining a recent government decree on the setting up 
of pensions funds. This reform is to be considered as long term contribution 
to alleviate the public financial burden for pensions. 
The health system has been reformed according to the following guidelines. 
a) local health units and major hospitals will be converted into public 
corporations; 
b) local authorities responsible for health services (Regions) will take 
full responsibility for funding any expenditure above a minimum level. 
In order to make local authorities more responsible for their public 
finances, a municipal tax on buildings has been introduced at rates that the 
municipalities will be allowed to set in the range from 4 to 6 per thousands. 
Finally, public employment has been reformed in order to make the control of 
spending on staff more effective and to improve efficiency. The key 
provisions are the application of private law to public sector employment 
relationship and a larger role for the mobility procedure for filling 
vacancies. 
IV. PRIVATISATION 
The privatisation program is an essential element of the structural policy. 
The legal framework has already been completed with the setting up by decree 
law of a new Ministry for Privatisation. The ratification of the decree by 
the Senate is under way. 
Before the end of the month a program will be approved by the Council of 
Ministers for the quotation on the stock exchange of some ENI related 
companies. Negotiations are under way to conclude as soon as possible the 
privatisation of Credito Italiano, S.M.E., Nuovo Pignone, Istituto National 
Assicurazioni, ENEL (Ente Nazionale Energia Elettrica). 
B - 37 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
LUXEMBURG 
PUBLIC FINANCES (1993 BUDGET) 
automatic stabilizers to be allowed free play, except In the case of 
Indirect taxation influenced by Community obligations (motor fuel 
excise-duty level higher than the Luxembourg minimum); 
maintenance of the high level of public investment. 
II. LABOUR MARKET FLEXIBILITY 
tripartite assessment of competitiveness, including the wage-adjustment 
mechanism (February/March 1993); 
measures to assist the occupational rehabilitation of handicapped people 
(aid for firms) and to speed up the integration of migrant workers-, 
further steps to combat illegal employment (March 1993). 
III. STRUCTURAL MEASURES 
reform of the sickness funds: limitation of the Government's financial 
contribution (January); 
adjustment of the early retirement arrangements; 
setting-up of a high-level finance council on general government funding 
needs (first half of 1993). 
IV. HOUSING 
extension of the duration of the selective interest-rate subsidies 
(social aspect), the general interest-rate subsidies (family aspect) and 
the increased tax deductions (January 1993). 
SMEs 
1993 budget: extension of the duration of: 
- the early reinvestment of capital gains on fixed assets; 
- the increased relief for parent companies and subsidiaries; 
- the reduction in the general tax rate to 33%; 
- the abolition of the additions to the municipal trade tax in respect 
of third-party funds; 
- the abolition of the subscription tax. 
LUXEMBURG 
New measures: first half of 1993 
increase in the operational resources of the Société Nationale de 
Crédits et d'Investissements; 
- extension of the favourable venture capital tax arrangements to new 
technologies; 
increased interest-rate subsidy for new investment; 
- elimination of the economic double taxation of investment income 
(dividends). 
B - 39 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
THE NETHERLANDS 
Cyclical conditions in Europe, and notably in Germany, have worsened 
considerably in the second half of 1992. This of course has not left 
unaffected the very open economy of the Netherlands. 
Dutch economic growth is projected to decelerate, from 1 3/4X in 1992 to 
approximately 1/2X In 1993, with adverse consequences for employment 
perspectives and the development of unemployment. In view of the rather low 
rate of labour participation this outlook for the labour market Is all the 
more worrying. 
Public finances also are negatively affected by the current weak stage of the 
business cycle, putting further deficit reduction under severe pressure and 
raising questions as to the budgetary objectives for 1993 and 1994. set out 
in the 1989 coalition accord. 
Moreover, there is a risk that the process of strengthening the structure of 
the Dutch economy comes to a (temporary) halt In times of weak economic 
growth. Conditions for private and public Investment should be further 
Improved so that employment opportunities can Increase in the short and 
medium term. 
It is necessary to continue to break down structural Impediments, hampering a 
good performance of I .a. the labour market, and to improve the dynamics and 
functioning of (product-)markets through more competition. 
I. GOVERNMENT POLICY 1993-1994 UNDER CONSIDERATION 
It is against this background that the government Is currently engaged in a 
decision making process concerning economic and budgetary policies for 1993 
and 1994, in a medium-term framework. 
The focus is primarily on policies to reverse the worrying trend - also in 
the medium term, given the substantial growth of labour supply - of 
increasing unemployment. A crucial element here is a moderate development of 
wage costs in order to prevent further erosion of profits, promote investment 
and employment opportunities, and to protect and enhance international 
competitiveness of the Dutch economy. 
To support a moderation of inflation and wage claims in 1993 the general VAT-
rate was lowered in October 1992. In addition employers, trade unions and the 
Government agreed In November 1992 to a wage pause until March 1993. During 
that period no wage bargaining has taken place in order to give social 
partners more time to consider their positions In view of the deteriorated 
economic and employment outlook. To support wage moderation the Government 
adopted, in addition, a policy of income moderation for civil servants and 
social benefits recipients. 
Additional support of wage moderation through reduction of income-tax rates 
and/or social security contributions may be considered in the period ahead. 
THE NETHERLANDS 
As to funding of tax relief measures a very important question relates to the 
availability of room for manoeuvre given the need for further deficit 
reduction. Within the limits of the budgetary constraints a lowering of tax-
rates and a shift in the structure of taxes in favour of a reduction of taxes 
on labour may be considered. 
Necessary expenditure cuts in the social security area could provide for 
another source of financing a reduction, or at least preventing a rise, in 
social premiums. 
Infrastructural investment is crucial to employment growth as well, both on 
the short and medium term. Infrastructural expenditure in the budget will 
therefore be protected as much as possible. In addition, the scope of 
accelerating projects in 1993 and 1994 is currently being investigated. This 
may be supplemented by investment programmes for the years 1994-1998 
- totalling up to at least 7 to 10 bn gld (1 1/2% to 2% GDP) -, to be 
financed by extra natural gas revenues and the sales of government assets. 
Even though the allocation of funds has not yet been decided upon, procedures 
have already been started to select investment projects. Once finances will 
be made available, the implementation of projects can start immediately. 
As to budgetary objectives for 1993 and 1994, the budget deficit will 
continue to be a downward track. Current insights indicate that the deficit 
target for 1993 - as set out in the 1989 coalition accord : 3 3/4% of Net 
National Income (NNI) -will be met, provided that additional deficit 
reduction measures will be taken. Though the government will maintain its 
policy of budget deficit reduction, some relaxation of the target for 1994 
(3 1/4% NNI) may be proposed. The budget proposals for 1994 will likely 
result in a deficit level of 3 1/2% NNI, which complies with the relevant 
EMU-criter ion of 3% GDP for general government net borrowing. 
Furthermore, last November a policy approach has been adopted to take account 
of the fragile cyclical situation, also in the design of adjustment measures 
needed to keep public finances within the above-mentioned budgetary 
constraints. This approach - in addition to the above mentioned special 
emphasis on investment - consists of the general line of taking, in the 
immediate future, half of the necessary measures In the form of "incidental 
measures" (e.g. asset sales) rather than structural expenditure cuts. As a 
consequence, in the medium term structural expenditure cut backs will 
gradually have to increase. 
With the policy approach as described above a further reduction of the 
deficit can be achieved in 1994, to a level of 3% GDP. This approach aims 
- even in the current, cyclically weak period - at reinforcing the basis for 
more employment and a strengthening of the economic structure, by i.a. 
allocating a substantial part of additional revenue resources to a 
significant multi-annual Investment impulse. A solid budgetary policy can 
thus go hand in hand with a 1994 budget aimed at employment and economic 
vitali ty in the future. 
II. MEASURES AND INITIATIVES ALREADY DECIDED UPON 
Below a number of measures and initiatives are listed, on which decision­
making has already taken place. 
B - 41 
THE NETHERLANDS 
1. Promotion of private investment 
A public/private partnership fund (named "industrial facility") is 
foreseen to be operational by the end of 1993. This revolving fund, 
which will raise resources to an amount of 0,9 bn gld, will provide 
loans on market terms to basically viable firms (including medium-sized 
firms). 
2. Increase of public investment 
A so called natural gas fund has been established in January 1993. The 
fund will contribute to infrastructural projects with significant impact 
on Dutch economic performance. The fund's finances will be raised by an 
increasingly large share of natural gas revenues and some other sources 
of revenues. This fund will become effective from 1995. 
3. Structural measures in the labour market 
Recently the sickness and disability system has been reformed with a 
view to better containing volumes and costs in the sickness and 
disability area. A bonus/ma I us incentive system for firms has been 
implemented. The disability scheme has been adjusted resulting in 
significantly lower levels of benefits and more restrictive entitlement 
rules for new entrants. 
Legislation is considered which should relax to some degree the strict 
regulation concerning lay-offs; in particular abolition of the 
preventive check on firing requests by employers is contemplated. 
4. Pr ivatizat ion 
Decisions have been made to sell government shares of PTT. 
5. Competit Ion polley 
Competition policy (and its enforcement) has recently been significantly 
upgraded. Streamlining of the business establishment law is currently 
being prepared. 
B - 42 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
PORTUGAL 
The current bleak outlook for the Community economy strengthens the need for 
effective coordination of national economic policies, and particularly 
structural policies. The difficulties in giving these policies concrete 
expression require to show greater déterminât ion and persistence. 
The deteriorat ion in the world economy Is also having adverse effects on 
Portugal. To minimize these adverse repercussions and with a view to speeding 
up recovery and restoring confidence in European integration, the 
Portuguese Government is taking an approach of: (I) speeding up structural 
reforms; while, (ii) safeguarding the other two objectives, namely 
macroeconomic stabiIity and social consensus. 
The political stability that Portugal has enjoyed since 1986 has enabled it 
to pursue a strategy of gradual adjustment that will make possible the timely 
achievement of convergence with the best European standards of performance. 
This strategy is underpinned by: (i) macroeconomic stability; (ii) structural 
reforms; and (Hi) social consensus. 
For the case of Portugal, It would be inappropriate to adopt counter-cyctleal 
policies. Yielding to the temptation of pursuing such policies would run 
counter to the objective of convergence and would quickly give rise to 
persistent imbalances in the economy. 
As far as structural reforms are concerned, two lines of action should be 
highlighted: 
(I) implementation at national level of measures in the framework of the 
Edinburgh growth initiative: this Community initiative will hasten 
structural reforms which, by improving efficiency, will help minimize 
the adverse effects of current economic conditions; 
(ii) continuation of the structural reforms already under way: the many 
structural reforms in progress - privatizations, measures to make the 
labour market more flexible and financial Iiberalization - wi11 be 
continued and intensified. 
On April, 5th, the measures aiming at structural reform have been presented 
to and debated with social partners in the Economic and Social Council. 
I. STRUCTURAL MEASURES FOR 1993 
These comprise the following: 
Infrastructure (physical infrastructure and human capital); 
Support for the restructuring and internationalization of enterprises; 
Housing sector initiatives; 
PORTUGAL 
Tax incentives to promote investment; 
Support for conversion of the agricultural sector; 
Incentives for Industry and foreign trade; 
New credit lines for tourism industry. 
These structural measures will imply additional spending in 1993 amounting to 
almost 1 % of GDP. The Cohesion Fund is the principal source of financing for 
the new spending. 
1. Infrastructure development 
- Physical infrastructure 
The 1993 budget includes a considerable increase in Investment in 
large-scale projects to modernize the rail and telecommunications 
networks and the main harbour installations. 
Investment in the modernization of the rail network and rolling stock 
will be some 50% higher than last year, while investment in harbour 
facilities should Increase by about 70%. 
This investment effort will in large part be funded from the 
Cohesion Fund. 
The preliminary list of projects that could qualify for assistance 
from the Cohesion Fund will cost around ESC 537 billion for the 
period 1993-98. For 1993, planned expenditure on these projects 
amounts to ESC 78.5 billion, or 0.6% of GDP, a 14.7% increase in 
budgeted public investment. Of this year's total, it is proposed that 
some 85% be allocated to road and other communications improvements 
and the remainder to environmental projects. 
- Human capital: support for in-service vocational training and 
investment in research and development. 
Vocational training support measures entered In the 1993 budget 
Involve expenditure of ESC 106 billion, with assistance from the 
European Social Fund, representing an increase of around 18% on last 
year and around 45% on 1991. 
2. Funds for the Restructuring and Internationalization of Enterprises 
(FRIES) 
The FRIEs are a new financial instrument whose main aim is to support 
companies or their foreign subsidiaries wishing to implement 
restructuring or internationalization plans by acquiring holdings in 
their capital. 
The Government has launched two FRIEs, with initial capital of 
ESC 11 billion, of which 50% is subscribed directly by the Government 
and the remainder by the different creditor banks of the enterprises 
being restructured. One is to be managed by Norpedip and the other by 
Sulpedip. 
A third FRIE, endowed with ESC 9 billion, has already been set up by the 
Banco de Fomento Exterior, and a fourth one Is about to be launched on 
B - 44 
PORTUGAL 
the initiative of the Grupo Caixa Gérai de Depôsitos/Banco Nacional 
Ultramar ino. 
A number of private financial institutions have also expressed an 
interest in participating in these Funds. 
3. Financial and tax Incentives for Investment In housing 
a) Incentives have been created to help people buy or rent residential 
property. Measures relate to financing (subsidized loans geared to 
the gross annual income of the family unit) and taxation (tax 
concessions). 
As regards the rules on helping families to buy their own homes, the 
eligibility conditions have been updated and the level of assistance 
to young people buying their first home has been raised. The main 
legislative measures adopted in 1992 and to be maintained in force in 
1993 have introduced financial incentives for rent ting accommodation 
to the young and have made it easier for housing cooperatives to 
finance property for rental to the same age group. 
b) On 9 March 1993 the Government announced a package of measures to 
support the housing construction aimed at clearing slum housing in 
the metropolitan areas of Lisbon and Oporto and supporting private 
schemes for housing low-Income families. 
Under the slum clearance part of this programme, 25 000 housing units 
are to be built between now and 1999, involving total investment of 
some ESC 150 billion, at 1993 prices. The programme of low-cost 
housing and housing development contracts envisages total investment 
of some ESC 120 billion over the next six years. 
The whole package will generate total investment in housing of some 
ESC 270 billion, which, on an annual average basis, is equivalent to 
around 1.5% of gross fixed capital formation. 
4. Investment Incentives: negotiated tax concessions for investments made 
UP to 1995 (amendment of Article 49a of the Rules on Tax Concessions) 
The tax incentives are targeted at enterprises located in regions 
affected by the economic and social repercussions of the restructuring 
of certain designated sectors. These incentives, for which only projects 
carried out up to 1995 are eligible, will be established on a 
contractual basis according to the merits of each project. Following a 
decision by the Council of Ministers designating the textile and 
clothing industries as sectors undergoing restructuring, enterprises in 
these two sectors are eligible for the tax incentives. 
5. Programme of support for the marketing and processing of agricultural 
produce 
This programme provides direct support for farmers and farming 
organizations and brings in measures to assist the recovery of viable 
enterprises and the implementation of new business initiatives for 
improving the marketing of domestic production in the agri-food sector. 
The seven measures that make up this programme include a venture capital 
fund, a subsidized line of credit for marketing, a fund for promotional 
activities, and finance to support the setting-up and operation of 
B - 45 
PORTUGAL 
producer groups, as well as measures to promote quality control and more 
professional management of cooperatives. 
The package of measures involves total investment of some 
ESC 220 billion over a five-year period (1993-97), of which 
ESC 20 billion is to be spent on the immediate launching of the 
programme. 
Promotion of foreign trade and the internationaiization of Portuguese 
Industry 
Announced on 24 March 1993, the package of measures for industry, and 
SMEs in particular, comprises ten support programmes to promote the 
strengthening of trade relations and investment, particularly in new 
markets. 
With a view to helping firms boost their exports to non-traditional 
markets, financial packages totalling some ESC 220 billion and backed by 
Government guarantees have been put together to assist exports to 13 new 
markets. 
Support for trade missions and the development of business cooperation 
is also available; a credit scheme has been set up for investment 
projects, and tax and financial incentives have been created, including 
through participatory bonds, for investment in internationalization 
projects. Lastly, the finance earmarked for promotional campaigns in the 
main traditional export markets has been increased. 
It is estimated that these support measures, in the form of 
non-repayable aid, will cost over ESC 5-bill Ion in 1993. 
Tourism Industry 
A programme Including several new credit lines totalling ESC 5 billion 
for the tourism industry has been announced on April, 5th. The financial 
measures are intended to stimulate investment in the following areas: i) 
energy savings; il) computer systems; ill) common networks; and iv) 
secur i ty systems. 
II. CONTINUATION OF STRUCTURAL REFORMS 
The continuation of structural reforms already under way, will complement the 
measures at the national level in the framework of the Community growth 
initiative. 
The extension of structural reforms has the following scope: 
1. Improvement of market efficiency 
a) Privatization: the weight of the public enterprise sector ahs 
declined from 16 p.c. of GDP in 1991, to 12 p.c. in 1992. 
In the next three years, it is projected to decrease further to 
9 p.c. 
b) New bankrupcy law. 
B - 46 
PORTUGAL 
2. Financial liberalization 
a) Elimination of all remaining restrictions on capital flows -
16 December 1992. 
b) New banking law - 31 December 1992. 
c) Cancelation of the overdraft facility of the Treasury at the Banco de 
Portugal - 31 December 1992. 
d) New legal framework for the Insurance sector - In preparation. 
3. Improvement of labour market flexibility 
a) Legislation aimed at fostering mobility in the public sector. 
b) Professional training. 
c) Lay offs: harmonization with EC legislation. 
d) New legislation on cancelation and interruption of individual labour 
contracts. 
e) Improvement of the monitoring of absenteeism. 
4. Improvement of the efficiency In the public sector 
a) Measures to strengthen expenditure control. 
b) Participation of the private sector in the National Health Service. 
c) Reduction of over staffing in the public sector. 
d) Reform of the Public Accounting system. 
e) Centralization of debt management. 
5. Wage and financial moderation 
a) Wage increases of 5-5 1/2 p.c. for civil servants, approximately half 
the increase given in 1992. 
b) Guidelines on similar wage moderation for public enterprises. 
c) PSBR (including revenue from privatization) reduced to the equivalent 
to 3.3 p.c. of GDP, as compared with 4.8 p.c. in 1992. 
d) Issuance of long term fixed rate public debt instruments. 
e) Resumption of access to external financing. 
f) Legislation aimed at Improving transparency in banking competition. 
B - 47 
PORTUGAL 
PRELIMINARY LIST OF PROJECTS WHICH COULD BE 
ELIGIBLE FOR THE COHESION FUND IN 1993 
(Escudos billion, 1993 prices) 
COMPLETION 
TERM 
TRANSPORT INFRASTRUCTURES 
HIGHWAYS 
Usboo-Porto-Valenco-Vioo 
IP1/Crui-6raga 
IP1/3rd track Alverca-V.F. XIra 
IP1/3rd trock V.F. XIro-Carregado 
IP1/3rd trock Vila Feiro-Carvalhos 
IP1/3rd trock Carvalhos St* Ovfdio 
IP1/Braga-VaIenca 
IC23/Int«rnal Ring-Porto 
IPI/Frelxo Bridge 
IP1/Frelxo Bridge approaches 
FIoueIro do Foz-Choves-Vertn 
IP3/Flgueira da Fox-Sta. Eulâlia 
IP3/VH° Real-Lamego 
IP3Aall-Tond«la 
IP3/TondeIa-Gestosa 
IP3/RaIva-Gestosa 
IP3/Fall/IP5 
Pp r 19-6 rqggnçg-Bonqyon t o-Zgrno rg 
IP4/PenafleI-Amarante 
IP4/EN4-Aguas Santas 
IP4/Golfelras-Pontoo de Lamas 
IP4/Franco-Golfel ras 
IP4/Vila Real-Vila Verde 
IP4/VHa Verde-Franco 
IP4/Corgo River Bridge 
IP4/Tlnhela River Bridge 
Ave I ro-V Mar Fo rmoso-Sa I amonco 
IP5/Plrâmides-Barra cross-roads 
Tgrrw Noygr-Cqatglp Brqncg 
-Seouro-Ptqzé'nclo 
IP6/AIcaneno-Ata I aIa 
IP6/AtaIaIo-Abrantes 
IP6/Atalaia Stream Bridge 
IP6/Abrantes-MourI seas 
LIaboq-Etvq«-Mé>tda 
IP7/Pa I me I o-Marateca 
I P7Ala ra t eca-Mon t eroo r 
IP7/3rd track Almada-foguetelro 
IP7/Elvas-Caia 
Uabgg-Y.R.S. Antfrilp-tiuttLYfl 
IPI/Marateco-Grândola 
IP1/V. Gula-Faro 
IP1/New Tagus Bridge 1993/95 
1993/95 
1993/95 
1993/95 
1993/95 
1993/98 
1993/94 
1993/95 
1993/96 
1993/94 
1993/97 
1993/95 
1993/96 
1993/97 
1993/97 
1993/97 
1993/96 
1993/93 
1993/95 
1993/95 
1993/95 
1993/94 
1993/94 
1993/94 
1993/94 
1993/95 
1993/95 
1993/95 
1993/95 
1993/96 
1993/95 
1993/96 
1993/97 
1993/93 
1994/97 EXPECTED 
EXPENDITURE 
1993 
67.1 
56.7 
17.1 
8.9 
4.0 
0.4 
0.1 
0.5 
1.0 
1.0 
0.7 
0.5 
3.8 
2.1 
0.4 
0.7 
0.2 
0.2 
0.2 
7.2 
1.2 
1.2 
2.0 
0.8 
0.8 
0.5 
0.4 
0.3 
0.3 
0.3 
3.9 
2.3 
1.0 
0.3 
0.3 
9.7 
5.8 
2.7 
1.1 
0.1 
6.7 
0.7 
6.0 
0.0 TOTAL 
COST 
442.2 
387.4 
10.8 
7.0 
1.8 
7.4 
1.7 
32.8 
2.0 
4.9 
15.0 
2.4 
6.0 
1.5 
1.5 
3.0 
3.0 
10.7 
3.3 
2.0 
2.5 
3.5 
3.5 
0.5 
0.9 
1.0 
2.9 
3.0 
1.2 
2.5 
7.3 
19.6 
3.9 
2.4 
26.4 
6.0 
160.0 
FnmqMcgq (IP1Ï-V.P. Aquinr 
-Chqves-Vertn 
IC5/Fama11cSo-RIo Ave 
IC5/Fafe branch 
Guordq fIP5ï-C. Brqnco flPfiï 
IP2/Alpedrlnha-Castelo Branco 
IP2/Fundào-Alpedrlnha 
IP2/Gardunha Tunnel 
Eatrwioz (IP7)-fqrg (IP1) 
IP2/Albernoa-Castro Verde 1993/96 
1993/96 
1993/96 
1993/96 
1993/96 
1993/95 6.6 
6.4 
0.2 
0.9 
0.4 
0.1 
0.4 
0.5 
0.5 6.9 
3.4 
3.5 
4.0 
4.0 
1.7 
RAILWAYS 
North Line - Modernization 
BeIra Line - Modernization 
Llsboa/Algarve Line - Cargo It in. 1993/96 
1993/96 
1993/97 8.5 
5.8 
1.6 
1.1 38.7 
21.6 
10.1 
7.0 
PORTS 
Leixoes - Recovery of south wharf 
Leixoes - Equipement for contain. 
Leixoes - Embankment recovery 
Aveiro — Terminal 
Sines — Coal Terminal 1993/96 
1993/96 
1993/96 
1993/94 
1993/94 1.2 
0.1 
0.5 
0.1 
0.2 
0.3 12.3 
2.0 
4.0 
1.7 
4.0 
0.6 
AIRPORTS 
Ponta Delgada 1993/96 0.7 
0.7 3.8 
3.8 
ENVIRONvENT 
WATER-ENVIROMCNTAL DIMENSION 
Sabugal Dam 
Minutos Dam 
Odelouca Dam 
Water supply to Barlavento 
WATER-OAJALITY 
Water supply to Oporto Region 
Dispollution of Trancao River 
Western pipeline to Sotavento 
SOLID WASTE 
Incineration station In Oporto 1993/97 
1993/96 
1993/97 
1993/98 
1993/98 
1993/97 
1993/94 
1993/96 11.4 
3.2 
0.7 
0.5 
1.0 
1.0 
5.2 
2.5 
1.2 
1.5 
3.0 
3.0 94.5 
10.0 
3.5 
17.0 
8.0 
42.0 
20.0 
17.0 
5.0 
14.0 
14.0 
TOTAL (TRANSPORT INFR. + ENVIRONyBJT) 78.5 536.7 
PROMOTING ECONOMIC RECOVERY IN EUROPE 
(The Edinburgh Growth Initiative) 
UNITED KINGDOM 
Measures taken In the UK consistent with the Edinburgh European Council 
Declaration on economic recovery are set out below corresponding to each of 
the objectives agreed for action by Member States. These measures include 
principally those of the Autumn Statement of 12 November 1992 and the Budget 
of 16 March 1993 <*). 
I. OBJECTIVE 1 
Take every opportunity, according to their national circumstances, to exploit 
the limited margins of manoeuvre available as concerns budgetary policy. 
1. The Autumn Statement sets out the Government's expenditure plans for 
1993-94 to 1995-96. The Chancellor took action to reaffirm the 
Government's control over public spending, in order to maintain sound 
public finances. Changes to the system of public expenditure control 
were introduced, to ensure that the Government meets its medium-term 
objective of reducing, over time, the share of national income taken by 
public spending. Despite the constraints imposed by the budgetary 
position, the Chancellor was nevertheless able to announce some specific 
and time-limited measures to boost confidence, growth and Jobs. These 
are described further below. 
2. The Budget set out a programme for raising revenue over the medium term, 
to reduce the budget deficit and thereby help to ensure that the 
recovery is sustainable. Little net change is proposed in 1993-94 in 
taxes as the priority is to cement recovery. The Budget measures 
provide further help for business and the unemployed in the early stages 
of recovery, building on the substantial reduction in interest rates and 
the measures announced in the Autumn Statement. 
II. OBJECTIVE 2 
Switch, to the extent possible, their public expenditure priorities towards 
Infrastructure and other capital investment and growth supporting 
expenditures which earn a worthwhile return. 
1. The Government altered the rules governing the use of capital receipts 
by local authorities, so that all new receipts obtained between 13 
November 1992 and December 1993 could be used to fund capital 
expenditure (previously, local authorities were required to set aside a 
substantial proportion of the receipts from asset sales for debt 
(*) The Autumn Statement 1992 document and the Financial Statement and 
Budget Report 1993-94 give further details. 
UNITED KINGDOM 
redemption). This change is expected to increase local authorities' 
capital expenditure by about £ 1.75 billion. 
2. The Government believes that these measures will have given a boost to 
increase general government (central government plus local authorities) 
asset creation In 1992-93 and 1993-94. 
3. The Government also made important changes to the arrangements for 
privately raised finance, in order to find new ways of mobilising the 
private sector to meet needs which have traditionally been met by the 
pub I ic sector. 
4. The changes in the arrangements for privately raised finance announced 
in the Autumn Statement led to announcements in the Budget that : 
(a) the Channel Tunnel Rail Link would proceed as a joint venture 
between the public and private sectors, an increase in 
infrastructure investment of £ 2.3 billion; 
(b) a joint venture had been agreed between British Rail and BAA pic 
to construct an express rail link between Heathrow Airport and 
central London-, 
(c) a review would be conducted of Crossrail, a new rail link across 
London, so that the private sector can become involved to the 
greatest possible extent. 
Other Infrastructure measures 
On 4 February the Government announced the 41 new national road schemes 
that will start in 1993-94 and a feasibility study into a privately 
financed second Forth road bridge. Following the Budget, Lord James 
Douglas Hamilton announced the appointment of advisers on involving the 
private sector in a package of measures around the Firth of Forth, 
including the new road bridge, and also in the Central Scotland 
Fasti ink, which will connect the north east of Scotland to main routes 
to the south. 
III. OBJECTIVE 3 
Implement measures to encourage private Investment, especially by small and 
medium sized enterprises. 
1. The Budget set in hand a programme of tax reform, simplification and 
deregulation to stimulate business activity, particularly among small 
and medium-sized enterprises. This includes a new entrepreneurs' 
relief from capital gains tax where the gains from the sale of a 
person's own business are reinvested in other unquoted trading 
companies; changes to the Loan Guarantees Scheme to cut the cost and 
improve the availability of bank finance for small business; a 
substantial easing in the penalty regime of VAT; and consultation on 
easing audit requirements for very small firms. 
2. The President of the Board of Trade announced on 3 December a trial of 
15 "One Stop Shops". The aim is to bring together organisations which 
support small firms, so as to improve access by SMEs to high quality 
business advisory services. The Government has implemented several 
B - 51 
UNITED KINGDOM 
measures announced in the 1992 Budget to deal with the problem of late 
payment of bills. Changes have been announced to the Small Firms Loan 
Guarantee Scheme to enhance its operations in inner city areas and (in 
the Budget) to make the scheme more attractive to SMEs. outside inner 
city areas, especially established businesses seeking to expand. 
IV. OBJECTIVE 4 
Act to Improve further the efficiency of their economies, for example through 
action to reduce subsidies and measures to enhance competition and market 
flexibility. 
Labour ma.rk.et flexibility 
1. The Autumn Statement provided for an Increase in the proportion of 
school leavers in youth training programmes; the introduction of a new 
adult training and work experience programme; and a substantial increase 
in measures to help the unemployed find jobs. 
2. The Budget contained a further major package worth £ 230 million to 
improve the labour market, particularly focused on the needs of the 
long-term unemployed. Taken together these measures will provide 
100,000 new opportunities for work in the Community, vocational 
education, and business start-up. New Employment Service measures had 
previously been announced to help an extra 500,000 people presently 
unemployed find and prepare for work, mainly through the new Job Plan 
Workshops to provide individually centred assessment and guidance for 
those reaching 12 months unemployment. Taken together, the Budget and 
Autumn Statement plans mean that there have been 600,000 new 
opportunities announced for 1993-94, bringing the total to 1.6 million -
over 50 per cent of the total - being helped. 
3. The Government has launched a substantial programme of structural reform 
which will affect labour market flexibility. Measures inciude : 
- The Investors in People standard will be developed to encourage 
larger employers to invest in developing their training strategies so 
that the skills of the workforce are improved. The aim is to have 
9,000 companies committed to the Investors in People standard by 
1995-96. 
- The Citizen's Charter encourages action in greater pay delegation in 
the public sector. The Citizen's Charter has also encouraged 
delivery of services more efficiently and effectively by encouraging 
a regular and direct link between pay and performance. 
- A new, more flexible adult training and work experience programme, 
Training for Work", will provide places for more than 300,000 
entrants in 1993-94. Priority is to be given to those more than 12 
months unemployed. Training and Enterprise Councils will be able to 
decide the balance of training/work experience required in the light 
of local labour market needs. 
- A new Childcare initiative to provide out-of-school and holiday 
chiIdcare. 
- A Government guaranteed training place to all 16 and 17 year olds not 
in work or full time education. 
B - 52 
UNITED KINGDOM 
- Career Development Loans aval table to trainees who want to invest in 
their own training. The scheme encourages individuals to take 
responsibility for their training. 
- A two-year pi lot programme of Assessment Credits. Individuals can 
use vouchers to "buy" assessment and guidance services. 
- National Vocational Qualifications - a national framework of 
standards-based vocational qualifications. 
- The Business Start-up programme provides an allowance and 
introductory briefing for unemployed people who wish to become self-
employed or start up a business. 
- The number of employees covered by Profit Related Pay (PRP) schemes 
eligible for tax relief has risen to nearly 1 million. The scheme 
facilitates relating part of pay to profits of the business in which 
the employee works. 
- The "Rent a Room" scheme introduced in April 1992 provides tax 
exemption for the first £ 3,250 of rental income from lodgers. It 
encourages the supply of flexible low-cost accommodation to 
facilitate geographical labour mobility. 
In addition, the measures designed to assist the housing market would 
also be expected to have a beneficial effect on labour market 
f lexibiIity. 
Tax reform 
In addition to the tax reform measures to benefit small businesses, 
referred to in paragraph 9, the Government has announced a number of 
further reforms to simplify and broaden the base of the tax system, to 
remove subsidies, and to improve both the environment and the allocation 
of resources within the economy. Principal measures include : 
- from April 1994 tax relief on mortgage interest will be limited to 20 
per cent instead of 25% and tax relief given by the married couple's 
allowance, and other linked allowances, will also be limited to 20 
per cent instead of applying at the taxpayer's marginal rate; 
- the rate of petroleum revenue tax rate will be reduced from 75 per 
cent to 50 per cent from July 1993, and abolished altogether for new 
fields; 
- VAT will be charged oh domestic fuel and power at 8 per cent from 1 
April 1994 and 17 1/2 per cent from 1 April 1995; 
- the Chancellor announced that duty on petrol and other road fuels 
will be raised on average by at least 3 per cent in real terms in 
future Budgets following the rise of 10 per cent proposed in this 
Budget. 
In the Autumn Statement, first year capital allowances for investment in 
plant and machinery were increased from 25 per cent to 40 per cent from 
1 November 1992 until the end of October 1993. This and other measures 
will provide additional reliefs of £ 200m In 1993-94 and £ 500m in 1994-
95. The 5 per cent special tax on cars was abolished on 12 November 
B - 53 
UNITED KINGDOM 
1992. The cost Is to be recovered from other motoring taxes in 1993-94 
and future years. This measure is expected to increase activity in the 
car market, and hence investment by manufacturers. 
In addition, further progress was made in cutting the marginal rate of 
income tax, to improve work incentives. The 20p band for income tax is 
widened by £ 500 to £ 2,500, cutting the marginal rate of tax for 1 
million people by 5 per cent; it will be widened by a further £ 500 in 
1994-95. 
The Government has also introduced the following measures to improve the 
housing market, help business and promote recovery : 
- The Autumn Statement made an extra £ 750 million available in 1992-93 
to promote activity in the housing market. This was expected to 
encourage investment by the private sector. In the Budget, the stamp 
duty threshold for houses, land and property will be doubled to 
£ 60,000. This should give a boost of £ 220m to promote activity in 
the housing market and as a result improve labour mobility; 
the Budget contained further business rate relief for the UK worth 
£ 370 million. In 1993-94 no business will see a real increase in 
rates; 
- the Budget contained a number of measures to ease the problem of 
surplus advance corporation tax (ACT). The rate of ACT will be 
reduced from 25 per cent by 1994-95 in two steps. This will give 
dividend-paying companies a £ 2 billion cash flow boost over the next 
two years. A scheme is also proposed for companies to reclaim 
surplus ACT arising from dividends paid out of foreign income. 
OTHER STRUCTURAL REFORM MEASURES 
Competition and deregulation 
9. The Government's Green Paper on competition law, especially regarding 
abuse of market power, was published at the end of November 1992. This 
canvasses among other options a prohibition on abuse of market power by 
companies in the United Kingdom, along the lines of equivalent 
provisions in the Treaty of Rome. 
10. The Government Is committed to a reinforced deregulation initiative. 
Legislation should not be put forward to Parliament without providing at 
the same time an assessment of the compliance cost for businesses. The 
aim is to encourage cost-effective regulation. 
Trade 
11. The DTI will launch "Business In Europe", pulling together work on 
promoting the Single Market with previously separate provision of export 
services to the European market. This is to ensure that the internal 
market works to the benefit of all Community citizens and enterprises, 
an objective endorsed at Edinburgh. The initiative will include pursuit 
of complaints by business against competitors (and their governments) 
within the Single Market. 
B - 54 
UNITED KINGDOM 
Pr ivat isat ion 
12. In the Citizen's Charter, the Government committed itself to reduce the 
level of the letters monopoly from £ 1 to a level closer to the price of 
a 1st class stamp. The Post Office's parcel service is to be 
privatized. Further progress is in hand on BR privatisation to transfer 
BR's freight and passenger services to the private sector, and to create 
a new right of access for Independent operations on the rail network. 
The Government is committed to the privatisation of British Coal. The 
Financial Secretary has announced that he will be examining the scope 
for privatisation of central government functions. 
V. OBJECTIVE 5 
Make efforts to achieve restraint in wage settlements within the public 
sector. 
1. In the Autumn Statement, the Chancellor announced that public sector pay 
settlements in the year from 12 November 1992 would be restricted to 
between 0 and 1 1/2 per cent. Thereafter, public sector pay policy will 
be designed to avoid catching up settlements, and the Government will 
pursue its long-term objective of increasing flexibility of the public 
sector pay systems and strengthening the link between performance and 
pay. 
B - 55 


ISSN 0254-1475 
COM (93) 164 final 
DOCUMENTS 
EN 10 
Catalogue number : CB-CO-93-195-EN-C 
ISBN 92-77-55042-2 
Office for Official Publications of the European Coimnuaities 
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