17. 11.75 Official  Journal  of the  European  Communities No C 263/1 
II 
(Preparatory  Acts) 
ECONOMIC  AND  SOCIAL  COMMITTEE 
Opinion  on the  degree  of convergence  of Member  States'  economic  policies  and  the 
extent  to which  Member  States'  economic  policies  comply  with  Community  objectives 
A. LEGAL  BASIS  FOR  THE  OPINION 
In accordance  with  Article  20 (3), of its Rules  of Procedure,  the Bureau  of the Committee 
decided,  on 18 March  1975  to draw  up an additional  Opinion  on the abovementioned 
subject. 
B. OPINION  OF  THE  ECONOMIC  AND  SOCIAL  COMMITTEE 
The Economic  and  Social  Committee  drew  up its Opinion  at its 130th  plenary  session, 
held in Brussels  on 28 and  29 May  1975. 
The Opinion  is published  below. 
THE  ECONOMIC  AND  SOCIAL  COMMITTEE, 
Having  regard  to the submission  by the Commission 
to the Council  on 18 March  1975  (in pursuance  of 
Article  2 of the Council  Decision  of 18 February  1974) 
concerning  the  adjustments  of the  economic  policy 
guidelines  for 1975; 
Having  regard  to the submission  by the Commission 
to the  Council  at the  same  time,  and  on the  same 
basis,  of a summary  of the  economic  policies 
pursued  in 1974; 
Having  regard  to the  Commission's  report  to the 
Council  at the same  time,  and  on the same  basis,  on 
the implementation  of the  Council  Decision  of 18 
February  1974  concerning  the attainment  of a high 
degree  of convergence  of the  economic  policies  of 
the Member  States  of the European  Community,  and 
the conformity  of the  policies  pursued  with  the 
objectives  set; 
Having  regard  to Article  20 (3)  of its Rules  of 
Procedure; Having  regard  to the  decision  of its Bureau  of 18 
March  1975  instructing  the  Section  for  Economic 
and Financial  Questions  to draw  up an additional 
Opinion  on  the  above  submissions  of  the 
Commission  to the Council; 
Having  regard  to the  Committee's  Opinion  of 26 
February  1975  on the present  economic  situation  in 
the Community  and  the  cyclical  policy  to be 
pursued; 
Having  regard  to the  Opinion  of the  Section  for 
Economic  and Financial  Questions; 
Having  regard  to the  oral  report  presented  by Mr 
O'Ceallaigh,  Rapporteur; 
Having  regard  to the discussions  at its 130th  plenary 
session  of 28 and  29 May  1975,  sitting  of 29 May, 
HAS  ADOPTED  THE  FOLLOWING  OPINION 
by 58 votes  in favour,  13 against  and  8 abstentions: 
No C 263/2 Official  Journal  of the  European  Communities 17.11.  75 
1. General 
1.1. In  its  recent  Opinion  on  the  economic 
situation  of the  Community  and  the  short-term 
policy  to be pursued,  the  Economic  and  Social 
Committee  expressed  its alarm  at the grave  situation 
in relation  to unemployment,  inflation,  the decline  in 
economic  growth,  the general  state  of disequilibrium 
within  the  Community  of Member  States  and  the 
increasing  divergence  of their  economies. 
1.2. The  Committee  feels  it unnecessary  to repeat 
its assertions  outlined  in that  Opinion.  The  latest 
data from  Community  sources  underline  the  fears 
then expressed  by the  Committee  and  re-emphasize 
the necessity  for joint  consultation  and  joint  action 
by the Member  States. 
1.3. In  the  light  of developments  in 1974,  and 
realizing  that  possibilities  of  successful 
implementation  of joint  action  in 1975  are dependent 
on the unambiguous  support  of the government  and 
the social  partners,  the Committee  is taking  this  early 
opportunity  of expressing  an Opinion  on the extent 
to which  there  was  convergence  of economic  policies 
in 1974  and  on the proposed  guidelines  for 1975. 
1.4. No  monetary  and  economic  scheme,  however 
sophisticated,  can  succeed  in the absence  of the will 
to implement  it. The  major  question,  whether  asked 
directly  or by implication,  must  be whether,  in view 
of the  almost  total  absence  of  Community 
harmonization  in economic  and  monetary  policies  in 
1974,  there  is any  reason  to  suppose  that 
convergence  will  be applied  any  more  rigorously  in 
1975.  And,  if  significant  progress  towards 
convergence  is not  achieved,  are  there  grounds  for 
calling  into  question  the  concept  on which  it was 
initially  launched  and  asking  that  new  thinking  be 
developed  which  will  more  successfully  promote  the 
political,  monetary,  economic  and  social  solidarity  of 
the Community  in the future? 
1.5. In  the last  analysis,  every  Community  action 
must  be judged  against  the basic  objectives  laid  down 
in the Treaty  of Rome:  'to promote  throughout  the 
Community  a harmonious  development  of economic 
activities,  a continuous  and  balanced  expansion,  an 
increased  stability,  an  accelerated  raising  of the 
standard  of living  and  closer  relations  between  its 
Member  States'.  The  Committee  would  not  have 
envisaged  it as necessary  to draw  attention  to these 
objectives  of  Community  solidarity.  It again 
expresses  its unequivocal  support  of these  objectives 
and the policies  which  they  imply. 2. Economic  policy  guidelines  for 1975 
2.1. The  Committee  recognizes  that  the  fall  in 
activity  in the last  few  months  of 1974  is now  seen 
to have  been  more  severe  than  expected.  Therefore, 
prospects  for  improvement  in  growth  and 
employment  for 1975  start  from  lower  levels  and  are 
consequently  likely  to be even  worse,  on a year-to-
year basis,  than  forecast  by  the  Commission. 
However,  changes  in price  levels  and  in balances-of-
payments  seem  less  unfavourable  than  anticipated. 
There  are  indications  that  some  recovery  in the 
economic  situation  may  be expected  before  the end 
of the year,  but its timing  and  scale  is as yet unclear. 
It must  be  emphasized  that  whereas  these 
generalizations  apply  to the Community  as a whole, 
serious  disequilibria  still  exist  in particular  Member 
States,  and  there  are large  disparities  as between  one 
country  and  another.  This  can  only  serve  to 
emphasize  the  validity  of the  Opinion  of the 
Economic  and  Social  Committee  of 26 February 
1975  on  the  present  economic  situation.  The 
Committee  notes  with  satisfaction,  therefore,  that  the 
general  Economic  Policy  Guidelines  coincide  with 
many  of the policies  proposed  in that  Opinion.  The 
Committee  sees  the  following  of the  Commission's 
proposed  adjustments  to Economic  Policy  Guidelines 
as the most  important. 
2.2. Firstly,  the  unemployment  crisis  must  be 
resolved  by specific  and  concerted  policies.  In this 
connection  the Economic  and  Social  Committee  has, 
in a recent  Opinion,  specified  the policies  calculated 
to safeguard  employment  in the Community. 
The Committee  notes  with  satisfaction  the 
importance  which  the Commission  assigns  to policies 
on vocational  training,  re-training,  improvement  of 
working  conditions  with  the  aim  of achieving 
mobility  of the  labour  force  which  will  protect  the 
interests  of workers.  In additien,  changes  should  be 
made  in  social  security  so  that  incomes  are 
effectively  protected  and  to ensure  that  restructuring 
of the economies  is not hampered. 
2.3. Secondly,  the  objective  of full  employment 
will be furthered  if progress  is achieved  in the fight 
against  inflation  and  in the  restructuring  of the 
economies.  In this  context  it is vital  that  all the 
Member  States  pursue  an  appropriate,  selective 
policy  of aid to investment. 
2.4. Thirdly,  the  process  of eliminating  the main 
balance-of-payments  disequilibria  must  be gradual. 
An orderly  financing  of deficits  must  be arranged 
17. 11. 75 Official  Journal  of the  European  Communities No C 263/3 
while  waiting  for  adjustments  in real  flows  to be 
realized.  The  Community  instruments  of financial 
solidarity  have  an important  role  to play  in this 
context,  jointly  with  international  instruments  and 
the capital  markets.  The  Committee  realizes  that 
recourse  to external  borrowing  and  Community 
financial  assistance  has  definite  limits.  It sees  the 
necessity  to  implement  different  demand 
management  policies  in surplus  and  deficit  countries, 
and strongly  argues  against  protectionist  measures 
which  would  provoke  >a crisis  in world  trade. 
2.5. Fourthly,  harmonized  demand  management 
policies,  aimed  at stimulating  demand  in the surplus 
countries  and  moderating  internal  demand  in the 
deficit  countries,  should  be a top priority. 
The Committee  realizes  that  budgetary  policy  is 
already  adjusted  towards  this  objective  in the surplus 
countries  — but  it will  be mid-year  before  its 
effectiveness  can properly  be appraised.  In the deficit 
countries,  while  the  need  to fight  unemployment 
warrants  a less  restrictive  budgetary  policy,  it is 
nonetheless  important  to ensure  that  the  equally 
important  fight  to correct  the external  balances  and 
to moderate  inflation  is not undermined. 
2.6. Fifthly,  monetary  policy  should  be reasonably 
expansionary  in the  surplus  States,  subject  to the 
avoidance  of excessive  liquidity.  In the  deficit 
countries  a degree  of selective  flexibility  is required 
in order  to protect  employment,  but  with  cautious 
monitoring  of its  effects.  In all  countries,  the 
application  of monetary  policy  must  be  closely 
associated  with  trends  in incomes  and  in public 
sector  finance. 
3. Convergence  of Member  States'  economic  policies 
3.1. The  above  guidelines  must  be seen  against  a 
background  of disparities  in the economic  situation 
of the  Member  States.  These  disparities  can  be 
explained  by a number  of factors,  inter  alia,  initial 
differences  in structural  positions,  varying  degrees  of 
dependence  on oil imports,  the behaviour  of the two 
sides  of industry,  as well  as the relative  effectiveness 
of the adaptive  mechanisms  proposed  in the Council 
Decision  of 18 February  1974. 
3.2. The  Committee  notes,  with  considerable 
disquiet,  the  lack  of harmonization  in decision-making  and  the  lack  of implemention  of the 
Community  economic  policy  guidelines,  as outlined 
by the Commission  in the following  areas: 
— in all Member  States  the economic  policies  failed 
by a long  way  to achieve  the  degree  of 
effectiveness  necessary  to reach  a high  degree  of 
convergence; 
— each  country  apparently  underestimated  the 
strength  and  speed  of the  economic  forces 
operating  on it, and  consequently  delayed  their 
decisions  and  actions; 
— contrary  to requirements,  growth  of consumption 
in the Community  as a whole  in 1974  was  faster 
than  growth  of investment.  Most  countries  pay 
insufficient  attention  to redeploying  resources 
rapidly; 
— necessary  restrictive  budgetary  policies  were 
rejected  in some  countries; 
— there  was  little  significant  progress  in 
harmonization  of monetary  instruments  in 1974; 
— no progress  whatsoever  was  made  towards  the 
re-establishment  of a Community  exchange  rate 
system  during  the  period  in question.  The 
Committee  welcomes,  however,  the recent  return 
of the  French  Franc  to the  joint  EEC  'Snake', 
and sees  in this  development  an example  of the 
results  which  adherence  to convergence  policies 
can bring  about. 
3.3. On  the other  hand,  the Committee  notes  with 
satisfaction  the progress  made  in joint  action  on: 
— implementation  of the  Council  Decision  (of 22 
March  1971)  in arranging  medium-term  facilities 
for Italy; 
— adoption  of the Regulation  on Community  loans; 
— measures  to facilitate  recycling  of capital. 
3.4. The  Committee  recognizes  that  1974  was  a 
running-in  period  for the policy  of consultation  and 
convergence  —  although  the  Commission 
transmitted  the  relevant  communication  to  the 
Council  in March  1974,  the adjustment  to the policy 
guidelines  for  1974  was  not  taken  by the  Council 
until  4 July  1974.  Under  these  circumstances,  lack  of 
harmonization  in implementation  of economic  policy 
is hardly  surprising.  The  Committee  is of the 
No C 263/4 Official  Journal  of the  European  Communities 17.11.  75 
opinion  that  if there  is to be a high  degree  of 
convergence  of policies,  Member  States  must  not 
only comply  with  agreed  procedures,  but  also  show 
the unambiguous  political  resolve  and  perseverance 
which  have  been  conspicuous  by their  absence. 4.4. Thirdly,  the system  must  bring  about  as close 
a cooperation  as possible  between  the Member  States 
and between  the  Community  and  the  rest  of the 
world.  Without  such  cooperation,  all the  parties 
concerned  could  be adversely  affected  by excessive 
competition. 
4. The  problem  of convergence 
4.1. The  Committee  believes  that  the Community 
may have  to be more  modest  in the objectives  set for 
convergence.  The  Committee  feels  that,  at the present 
stage  of development  of the  Community,  there  are 
three  basic  requirements  for a realistic  convergence 
of national  economies. 
4.2. Firstly,  the system  must  encourage  the further 
liberalization  and  expansion  of trade. 
4.3. Secondly  the system  must  take  account  of the 
realities  of  the  political,  economic  and  social 
situation  within  Member  States.  Member  States  must 
be enabled  to pursue  policies  directed  to reasonable 
objectives. 
At the national  level,  governments  can  be voted  out 
of, as well  as into  office.  If Community  policies  fail 
to recognize  this,  then  tensions  arising  from  a serious 
conflict  between  national  and  Community  objectives 
will place  the  realization  of Community  policies  in 
jeopardy. 4.5. The  Member  States  of the  Community  at 
present  have  different  levels  of economic  strength, 
and different  rates  of inflation.  These  differences 
reflect  what  has  been  called  the 'national  propensity 
to inflate'  which  depends,  inter  alia,  on historical 
and social  factors,  on  the  system  of industrial 
relations,  and  the  structure  of industry  and  its 
regional  development.  Convergence  of anti-inflation 
policies  is, on this  view,  a matter  not  only  of short-
term  economic  policy,  but  of structural,  manpower 
and regional  policies,  which  require  a long  time 
before  their  full  effects  are evident. 
4.6. The  Committee  concludes  its obervations  on 
the fundamental  problems  of  convergence  of 
economic  policies  by stating  that,  because  of the 
structural  and  other  differences  between  Member 
States,  one  should  keep  one's  mind  open  to any 
measure  whose  implementation  could  bring  about 
convergence.  Collaboration  in the  formulation  of 
compatible  economic  targets  is more  necessary  than 
ever.  The  Committee  believes  that  this  must  be a 
realistic  progression.  It must  be borne  in mind  that 
harmonization  of domestic  economic  policies  has not 
taken  place  because  governments  have  not  so far 
been  ready  to share  the  responsibility  for  the 
decisions  that  such  harmonization  implies. 
For instance,  it is logical  that  each  country  should 
have  a certain  margin  of  control  over  the 
relationship  between  national  and  international 
prices,  just  as it is normal  that  each  country  should 
be able  to count  on Community  solidarity.  Without 
losing  sight  of the  reality  and  the  legitimacy  of 
national  objectives  and  the fact  that  the institutional 
structures  and  practices  of the  Member  States  vary 
considerably,  an effort  should  be made  to adapt 
national  policies  to Community  objectives.  In this 
connection,  the  Committee  draws  attention  to the 
crucial  significance  of Articles  103  and  105  of the 
Treaty,  which  call  upon  the  Member  States  to 
'regard  their  conjunctural  policies  as a matter  of 
common  concern'  and  to  'coordinate  their 
economic  policies'  in the pursuit  of common  goals. 
In this  way  a certain  flexibility  may  be accepted  in 
respect  of the  adjustment  of exchange  rates,  the 
convertibility  of  currencies  and  movements  of 
capital. 5. Conclusions 
5.1. The  Committee  supports  the views  expressed 
on convergence  of economic  policies,  and  supports 
the decision  of the Council  concerning  the guidelines 
for 1975,  in particular: 
— that  priority  be  given  to  combating 
unemployment  and  controlling  inflation; 
— that  policies  must  aim  at slowing  down  rises  in 
costs  and  prices,  and  at modifying  structures; 
— that  the  process  of  eliminating  balance-of-
payments  disequilibria  be gradual  and  be aided 
by a Community  solidarity  which  is genuine  and 
unambiguous; 
17.11.  75 Official  Journal  of the  European  Communities No C 263/5 
— in promoting  investment,  governments  must  bear 
in mind  the need  to respond  to new  demand; 
— that  incomes  be  protected  as  part  of  the 
restructuring  policy. 
5.2. The  Committee  concludes  by asserting  that 
the process  of joint  formulation  of compatible 
economic  policies  is necessary  for the survival  of the 
Community.  It urges  the  Commission  and  the 
Council  to take  brave  and  positive  steps  to turn  the 
hope  for  economic  and  social  solidarity  in the 
Community  into  a reality. 5.3. This  hope  will  be all the more  translated  into 
tangible  realities  for the peoples  of Europe  if it takes 
account  of  national  characteristics  and  if the 
governments  of the  Member  States  situate  their 
economic  policies  within  the  context  of objectives 
worked  out democratically  at Community  level. 
Done  at Brussels,  29 May  1975. 
The Chairman 
of the  Economic  and  Social  Committee 
Henri  CANONGE 
Opinion  on the restructuring  of the  economies 
A. LEGAL  BASIS  FOR  THE  OPINION 
On 27 November  1974,  the  Commission  referred  the  abovementioned  subject  to the 
Economic  and  Social  Committee  under  Article  198  of the  Treaty  establishing  the 
European  Economic  -Community. 
B. OPINION  OF  THE  ECONOMIC  AND  SOCIAL  COMMITTEE 
The Economic  and  Social  Committee  drew  up its Opinion  at its 130th  plenary  session, 
held in Brussels  on 28 and  29 May  1975. 
The Opinion  is published  below. 
THE  ECONOMIC  AND  SOCIAL  COMMITTEE, 
Having  regard  to the letter  dated  27 November  1974, 
in which  Commission  Vice-President  Haferkamp 
invited  the  Committee  to 'embark  upon  and  pursue 
a discussion  on the need  for structural  improvements 
in the  economies  of the  Member  States,  and  on the 
pattern  such  adjustments  should  follow'; 
Having  regard  to  the  Treaty  establishing  the 
European  Economic  Community,  and  in particular 
Article  198  thereof; 
Having  regard  to the decision  taken  by the Bureau  of 
the Economic  and  Social  Committee  on 18 December 
1974,  instructing  the  Section  for  Economic  and 
Financial  Questions  to prepare  an Opinion  on the 
restructuring  of the economies; 
Having  regard  to the  report  drawn  up  by  the 
Economic  Policy  Committee  of the  Commission  on 
'The  Community's  economic  situation  and  medium-
term  outlook'; Having  regard  to the  earlier  submissions  of the 
Economic  and  Social  Committee  on  the  general 
economic  policy  of the Community,  in particular  the 
— Opinion  of 28 January  1971  on the  draft  third 
medium-term  economic  policy  programme; 
— Opinion  of  18  October  1974  on  the 
Commission's  annual  report  on  the  economic 
situation  in the Community, 
— information  report  of the  Section  for  Economic 
and Financial  Questions  of 29 January  1975  on 
inflation; 
— Opinion  of 26  February  1975  on the  present 
economic  situation  in the  Community  and  the 
cyclical  policy  to be pursued; 
— Opinion  of 29  May  1975  on  the  degree  of 
convergence  of  Member  States'  economic