ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(74)100
Vol.1974/0017

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COMMISSION OF THE EUROPEAN COMMUNITIES
COM(74)100 final
Brussels ,2}January 1974
 
SITUA TATTON OF THE COMMUNITY ": URGENT MEASURES
(Communicati onfrom the Commission tothe Council )
COM(74 )100firial

1# The member States ofthe Community now have toface dangers
which ,ifnotaverted ,are "bound totake onacharacter ofexceptional gravity .
2. Since the middle oflast year considerable difficulties
have been evident asaresult ofthe general reduction intherate ofgrowth
and changes inexchange rate relationships among the industrialised countries .
Later ,thevulnerability ofthe European countries inthematter ofsupplies
ofenergy and other rawmaterials was revealed initstrue proportions .
Exceptionally large andrapid price rises ,even ifinthefuture they should
bepartially modified , have inany case made inevitable adeterioration
inthe terms oftrade somassive astoaffect profoundly the external
sectors oftheir economies and,through the external sectors ,their rates
ofgrowth and levels ofemployment .
3. Perhaps ,however ,itisnotthis deterioration ofthe external
account which poses thegreatest threat tothe Community .The most disturbing
fact isthat the enhanced dependence ofEuropean countries individually
with regard totransactions accross national frontiers has not been accompanied
bythe introduction ofcommon policies aimed atmaking them less vulnerable as
agroup todisturbances originating intherest ofthe world .
4« Itistherefore quite possible that member States may beled
toadopt unilateral measures having incalculable political and economic
repercussions ,inaddition totheir disruptive effect onthe Community .
5» Inview ofthis situation the Commission considers that the
Council should immediately
-remind member States ofthedeterioration already Buffered andofthe dangers
which threaten ,
-propose the establishment andthe immediate introduction ofcountervailing
measures .

-2-
The highest priority must begiven toCommunity action to
prevent arapid dislocation ofall types ofeconomic transaction and inparti­
cular of "both trade within the Community and trade "between member countries
and the rest ofthe world .
Tothis end itisdesirable that the Council proceed toa
declaration onmonetary and commercial policy .This declaration ,while
referring tothedeterioration which must unavoidably occur inthe current
balances ofpayments ofmember countries in1974 »would state the firm intention
ofthose countries torefrain from any competitive depreciation oftheir
currencies and from any restriction ontrade .
6. Given that the policies ofmember States will accord
differing priorities among economic objectives atatime astroubled astho
present ,and that there will bedelay inthe necessary re-establishment of
stability inthis situation ,the rates ofexchange ofEuropean currencies
cannot but evolve divergently tosome extent .Itisparticularly necessary
toavoid aggravating these divergences bypressures tending tolead
governments toout-bid each other inthe introduction ofprotectionist measures ,
inparticular bycompetitive devaluations .
7. This means that member countries ,whatever their exchange
rate regimes ,should consult each other effectively ontheir exchange rate
policies and onany action having adirect bearing onthose policies .This
idea should find expression incontinuing exchange ofview :"onthe evolution
ofexchange rates ,oninterest rate policies ,onrecourse tothe international
financial market and ,ifnecessary ,onthe use ofreserves .
Itwould further benecessary toreinforce this action in
the following three ways :
-intra -community credit facilities ,organised onthe lines ofthe Commission 's
proposal for increasing the quotas available for short-term monetary support ,
should immediately bemade available :

-3-
-the competent Community institutions should "beinvited "bythe Council
todevise ,without delay ,rules and procedures forthe orderly mobilisation ,
byway ofEuropean action ,ofresources which can "beused onthe interna­
tional capital markets ;
-the Council should ask the Monetary Committee andthe Committee ofCentral
Bank Governors toformulate without delay their opinion onthe eventual
modification ofthe rules concerning the price atwhich transfers ofgold
may beeffected between monetary authorities ,both within the Community
and inthe international sphere#
8. The measures suggested above cover alimited area inwhich
immediate action isessential .They will have tobesupplemented byother
measures onwhich the Commission will present proposals atthe appropriate
time«