A4-0168/95

Resolution on the Commission's Recommendation for the Broad Guidelines of the Economic Policies of the Member States and the Community (COM(95)0228 - C4-0210/95)

The European Parliament,

- having regard to the Commission's Framework for the Broad Economic Policy Guidelines, pursuant to Article 103(2) of the EC Treaty,

- having regard also to Articles 102a and 103(1), which require Member States to co-ordinate their economic policies and to conduct them with a view to advancing the objectives set out in Article 2 of the EC Treaty,

- having regard to the Commission recommendation (COM(95)0228 - C4-0210/95),

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinion of the Committee on Social Affairs and Employment (A4-0168/95),

1. Believes that the principal task of the economic policy of Member States and the Community is to translate the on-going economic recovery into significantly enhanced employment creation and non-inflationary sustainable growth;

2. Emphasizes that the current and projected level of unemployment continues to be a cause of deep anxiety (11.2% in 1994; 10.7% in 1995, 10.1% in 1996), and therefore regrets that the section of the Guidelines dealing with employment - in contrast to those dealing with inflation and deficits - sets no targets and offers no policy guidelines;

3. Expresses its concern that on the Commission's forecasts, EU growth 1994-96 will take up less than half the overcapacity generated in just one year (1993) of the recent recession; and that in 1995-96 three million new jobs will be created, reducing unemployment by only 1.6 million, compared to the 5.8 million jobs lost in 1992-94;

4. Concludes, even in the context of the relatively optimistic growth forecasts of the Commission as compared with the OECD and the IMF, that a risk exists that projected growth may be insufficient to eliminate the unemployment generated by the last recession, with a consequent danger that Community unemployment rates could be ratcheted upward by an inadequate recovery, thus leaving no room for complacency with regard to growth performance;

5. Regards as a sign of imbalance that no mention is made of the risk of inadequate recovery, calls therefore for an enhancement of the Guidelines to ask Member States to prevent a resurgence of inflation but to ensure that demand grows at a sufficient rate to permit growth above trend rates for several years which, by definition, is needed to recover from recession;

6. Considers that the policies set out in the Guidelines are insufficient to achieve sustainable growth, and to tackle massive unemployment, and believes that the contribution of both monetary policy and structural policies needs to be spelt out much more clearly;

7. Is concerned that structural unemployment is still projected to be as high as 9% of the labour force in 1997;

8. Urges therefore that the employment content of economic growth be dramatically enhanced through the implementation of the recommendations in the White Paper on Growth, Competitiveness and Employment, in particular, through:

- increasing the incentive to employ by reducing the tax wedge/non-wage labour costs in the context of overall macroeconomic stability,

- a gradual shift in the tax-burden from taxes based on labour to taxes based on the use of scarce natural resources and pollution of the environment,

- examining urgently with the social partners new patterns of working time to improve employment without reducing the competitiveness of firms,

- strengthening training systems to improve labour market flexibility and individual opportunity,

- recognizing the major role of SMUs in job creation and economic development, and supporting and encouraging SMUs at Community level,

- reinforcing the competitiveness of undertakings in the EU and increasing investment on a sustained basis, so as to achieve economic growth and higher employment, via the constant encouragement of quality and innovation and the enhancement of research and technological development;

9. Given that up to half of structural unemployment consists of the long-term unemployed, calls for the intensification of training programmes aimed, in particular, at disadvantaged groups, in order to improve their employability and to promote social cohesion and combat the risk of social exclusion;

10. Supports the Commission proposal in the context of Article 103 of the Treaty to establish a procedure for the surveillance of employment trends and policies but calls for interinstitutional discussions on how the proposal may be strengthened and the procedures made more democratically accountable;

11. Notes with satisfaction that of all areas of convergence in the Community most progress has taken place with regard to inflation (down from a peak of 5.6% in 1991 to 3.2% in 1994) but expresses concern at the uncertainty of the outlook especially in Member States with currency depreciation, and urges that further progress be made;

12. Welcomes the overall downward trend of general government deficits but regrets that projections over a three-year period (1994-1996) of strong economic growth indicate that only half of the expected 1.6 point reduction in Community net borrowing, in GDP terms, will be accounted for by discretionary deficit reduction. In this context, warns against 'adjustment neglect' which may weaken commitment to tackling underlying structural deficits as cyclical improvements impact positively on government borrowing;

13. Regrets the trend in general government gross debt (to GDP) which is projected to move further away from the target of 60% (66.2% in 1993 to 70.4% in 1996), suggesting the need in several Member States for substantially more ambitious fiscal plans;

14. Welcomes the Guidelines' emphasis on fiscal consolidation, but believes they show insufficient awareness of the relatively closed nature of the European economy and the consequent need for the European authorities to ensure that their policies do not lead to an undue decrease in internal demand;

15. Considers therefore that a rapid and substantial reduction in deficits, as called for by the guidelines, will create the conditions for a reduction of interest rates, thus promoting investment and sustained economic growth;

16. Points out that, if countries are, at whatever pace, consolidating their fiscal position, it follows that the burden of ensuring that demand growth is adequate falls on the monetary authorities, who should be urged to be aware of their responsibilities;

17. Is concerned at the detrimental effect on all Member States of exchange rate instability and potential beggar-thy-neighbour exchange rate policies; draws attention to the risks to the proper functioning of the internal market through competitive distortions and the additional burdens imposed on depreciating-currency states in achieving stability-oriented medium-term objectives;

18. Believes that for the adjustment process to be successful, a medium-term strategy needs to be established by the Commission taking the following into account:

(i) that the achievement of the convergence criteria and an appropriate fiscal-monetary policy mix, being matters of common concern, requires the development of new policy instruments and institutional structures to ensure better coordination and to minimize detrimental effects,

(ii) the need to consider a Community initiative with regard to the international monetary systems given the instability caused through dollar depreciation and the role which that currency plays in international settlements and transactions,

(iii) the medium-term reform of social protection systems in the context of demographic trends and fiscal constraints,

(iv) priority should be given to the completion of the internal market through fully transposing existing directives into Member State law in particular in the areas of insurance, company law, intellectual and industrial property, public procurement, new technology and services, financial services, and freedom of movement, and furthermore that the internal market must be completed in the sectors of energy, telecommunications and transport,

(v) the need to develop vocational training and to invest in ongoing training, promoting closer links between institutes of learning and technological development and the business sector;

(vi) the recommendations of the Essen European Council regarding the information society, legislative and administrative simplification and Community competitiveness must be translated into Community legislation,

(vii) transition to the new development model by applying the recommendations mentioned in chapter 10 of the White paper on Growth, Competitiveness and Employment, aiming at the integration of environmental policy and economic policy, in order to achieve ecologically sustainable development;

19. Instructs its President to forward this resolution to the Council, the Commission and the parliaments of the Member States.