No C 218/18 Official Journal of the European Communities 29. 8. 85 
Policies for economic efficiency must be matched by concern 
for the well-being of those less able to protect themselves in 
this age of radical transition. The commitment of the Community to this integral approach, first reflected in the 
Treaties, needs to be reaffirmed even more in times of crisis 
or sluggish growth. 
Done at Brussels, 4 July 1985. 
The Chairman 
of the Economic and Social Committee 
Gerd MUHR 
APPENDIX 
to the opinion of the Economic and Social Committee 
Rejected amendment 
The following amendment, to the section opinion, tabled in accordance with the Rules of Procedure, was rejected 
by the Committee during plenary session discussions: 
Point 2.1: 
At the end of this paragraph, add the following: 
'They further recommend closer examination of current fiscal and insurance provisions in Member countries 
which act as a disincentive to employers to provide, and potential employees to enter into, new employment. The 
Committee endorses these aims both because the creation of new areas of job opportunity increases employment 
and personal incomes, and at the same time augments the funds availale in social action programmes calling for 
assistance to the more vulnerable members of society.' 
Consequently, the first line of the second paragraph of point 2.2, page 4, should be modified to read as 
follows: 
'It is therefore not inconsistent to register concern at some of the tendencies . . .'. 
Reasons 
Self-explanatory. 
Result of the vote 
For: 28, Against: 48, Abstentions: 13. 
Opinion on the economic situation in mid-1985 
(85/C 218/10) 
Procedure / 
On 20 November 1984 the Economic and Social Committee, acting under the fourth paragraph of 
Article 20 of its Rules of Procedure, decided to draw up an opinion on the Economic situation in the 
Community in mid-1985. 
29. 8. 85 Official Journal of the European Communities No C 218/19 
The Section for Economic and Financial Questions, which was responsible for preparing the 
Committee's work on the subject, adopted its opinion on 18 June 1985, in the light of the report by Mr 
Goris. 
At its 228th plenary session (meeting of 4 July 1985) the Economic and Social Committee adopted the 
following opinion by 76 votes to six, with 23 abstentions. 
Introduction 
When the opinion on the economic situation at the end 
of 1984 was being debated it was decided that the 
Commission's 1984/85 annual report should be the subject 
of further study. The Committee reserved the right to prepare 
a more detailed opinion on certain points. The Commission's 
proposed economic strategy was subsequently adopted by 
the ECO/FIN Council in December 1984, while the 
European Council has endorsed the guidelines in the 
Commission's report and called for their rapid 
implementation. 
The Committee has reconsidered the Commission's 1984/85 
annual economic report and the views expressed by members 
on this subject are contained in the report of the Section for 
Economic and Financial Questions on the economic 
situation in mid-1985. This report is appended to the 
opinion. Community, since world trade is expected to grow less 
rapidly than in 1984. Hence exports will also expand less 
rapidly in 1985. 
1.3. Investment 
Investment in manufacturing industry continues to expand; 
the increase in volume terms should be 9% this year, as 
compared with 7% in 1984. It should be noted that a large 
proportion of industrial investment is aimed at labour saving 
and rationalization rather than at the expansion of 
capacity. 
Investment is stagnating in other sectors, and actually falling 
in the construction sector; this could lead to job losses in 
these sectors in the next few months. 
1.4. Inflation 
I. The economic situation in mid-1985 
1.1. The main features of the economic situation 
According to the indices currently available, the economic 
recovery in the Community is continuing but remains on a 
very modest scale. The economic policy initiatives taken by 
the Member States and the Community should in the normal 
course of events reinforce or at least maintain this trend. The 
initiatives in question will certainly improve the functioning 
of the markets for goods, services and capital. It is proving 
very difficult to improve the employment market, a task 
hardly facilitated by the practically continuous rise in the 
number of jobless in the Community. In 1984 the inflation rate was reduced to an average of 6,3 % 
for the 10 Member States, with considerable variations from 
one country to another, ranging from 2,6 % in Germany to 
18,1 % in Greece. Further progress has been made in 1985 
and all forecasts put the average inflation rate for the current 
year at 5,4 %, which means a reduction of about one point 
compared with last year. 
Productivity gains and a significant decline in the upward 
pressure on costs within the Community are the main factors 
contributing to this reduction. 
On the other hand, the appreciation of the dollar, which has 
pushed up import prices, has worked in the opposite 
direction. 
1.2. Economic growth 
The following factual analysis of the economic situation 
(points 1.2 to 1.7) is based on Commission documents and 
the data they contain. 
Gross domestic product (GDP) at constant prices will rise 
this year by 2,3%, which is slightly above last year. 
Industrial output, which showed a strong recovery at the end 
of last year with an average rise in the Community of over 
4,5 %, will continue to increase in 1985. But one should not 
count on a fresh acceleration in real GDP growth in the 1.5. Balance of payments 
Since June 1984 Community exports have gained ground and 
there is every indication that this trend will continue in 1985. 
The Community's trade surplus should accordingly increase 
to around $ 15 000 million or 0,6% of GDP. The 
Community's invisible transactions, however, are expected 
to fall off slightly in 1985 and the deficit could rise to around 
$ 8 000 million. 
Thus the balance on current account will show a surplus of 
the order of $ 10 000 million, or 0,4 % of GDP. Once again 
No C 218/20 Official Journal of the European Communities 29. 8. 85 
there are considerable variations from one country to 
another. 
1.6. Employment and unemployment 
In 1982 and 1983 the Community recorded net losses of 
employment in a number of sectors. Last year total 
employment stabilized and in the current year there could be 
a modest increase of 0,3 % in employment. 
This slight expansion of employment should in the normal 
course of events materialize in the services sector, resulting in 
an increase in the number of self-employed persons. The 
others sectors, particularly manufacturing, will suffer job 
losses. 
Stabilization or a slight improvement in total employment 
will not prevent unemployment from getting worse, since the 
growth of the labour force will not be absorbed. The 
unemployment rate, calculated as a percentage of the civilian 
workforce, was 12% at the beginning of 1985, and the 
number of registered jobless in the Community (excluding 
Greece) has reached the record figure of 13,6 million 
(January 1985). 
It is true that the very severe weather in January 1985 has 
been a major contributing factor in this increase, but it is not 
the sole cause. The unemployment rate in 1985 is expected to 
be higher than the 1984 figure and could reach an average of 
11,2% of the labour force. 
However, it should be noted that signs of a decrease in 
unemployment are detectable in some Member States. 
1.7. Monetary problems 
The fluctuations in the dollar, which set in at the end of 
November 1984, were still in progress at the beginning of this 
year. 
Despite this situation the European Monetary System has 
remained stable with the relative positions of the currencies 
in the EMS changing only slightly in the first months of 
1985. 
The growth in the money supply in the Community is at 
present equivalent to the growth in nominal GDP, which 
should be around 8 %. 
II. The Committee's assessment 
2.1. The modest economic recovery expected in 1985 
must be reinforced by the adoption of economic policy 
measures by the European Community and the individual 
Member States. The functioning of the markets in goods, services and capital should benefit from such measures. 
Improving the labour market situation is a much more 
complicated matter, however. A substantial improvement 
will be difficult to achieve in the short term, given the steadily 
rising number of job-seekers in the Community. 
It should nevertheless be pointed out that forecasts of the 
international economic situation are subject to a number of 
uncertainties. The Community must none the less strive to 
pursue policies which will give Europe a less dependent 
position in the world economy, thus increasing its room for 
manoeuvre. 
2.2. Economic growth 
Economic growth in 1985, forecast at 2,3 % of GDP, is still 
insufficient to bring about a return to economic equilibrium. 
In order to combat unemployment a higher growth rate is 
necessary. The Committee notes that the objective of higher 
growth is unlikely to be achieved this year. The rise in 
industrial output is certainly encouraging, but it is largely 
dependent on exports. For the time being domestic demand 
remains slack. In order to achieve a higher growth rate 
vigorous measures are needed to improve the supply-side 
situation in all the markets. These should go hand in hand 
with a policy designed to support demand. 
2.3. Investment 
Although the rise in industrial investment is encouraging, the 
Committee regrets that investment in other sectors, 
particularly the construction sector, is lagging behind. 
In this context it is worth highlighting once again projects 
for the improvement and development of European 
infrastructure. 
The Community's infrastructure needs are considerable and 
Europe must not let slip the opportunities offered by space 
exploration. In this connection mention can be made of 
transport, telecommunications, information technology, 
etc. Projects in the fields of environmental protection, the 
quality of life and health care are also considered very 
important. 
The housing situation in several Member States leaves 
considerable room for improvement as regards both the 
construction of new homes and the renovation and 
improvement of existing housing. 
The speedy implementation of these projects could lead to a 
major increase in investment and create a large number of 
jobs. 
The Committee is of the view that the Community's 
borrowing capacity is sufficient to finance infrastructure 
projects. 
29. 8. 85 Official Journal of the European Communities No C 218/21 
2.4. Inflation 2.7. The monetary situation 
The Committee attaches the greatest importance to a policy 
for the further reduction of various inflationary pressures, in 
so far as they are still operative. The Community's monetary 
stability would also be enhanced by a downward 
convergence of the inflation rates of the various Member 
States. 
2.5. Balance of payments 
The Committee notes with satisfaction the Community's 
steadily improving balance of payments. Policy should, 
however, do more to channel capital flows (which are at 
present predominantly directed towards non-Community 
countries (especially the USA), into investment within the 
Community. The primary aim of such a policy for 
encouraging investment in the Community must be to 
improve the business climate, making it more attractive to 
invest in Europe. Although the monetary policy pursued has so far had 
beneficial effects, particularly with regard to the relative level 
of interest rates, the monetary situation continues to pose 
problems in the Community and the world. The Committee 
considers that further progress must be made towards 
monetary integration in the Community, although this can 
only be successfully achieved in tandem with greater 
European economic integration. In this connection, 
attention is drawn to the information report on the European 
Monetary System recently adopted by the Committee. This 
report advocates continued reinforcement of the EMS and 
urges that the opportunities offered by this system be better 
utilized. 
Efforts should be made to improve the credibility of the EMS 
both within and outside the Community through a series of 
initiatives designed to bring about: 
— a narrowing of the present margin of fluctuation of the 
lira to 2,25%; 
— full participation of the pound sterling in the System; 
2.6. Employment and unemployment the recognition by the German authorities of the ECU as 
a currency under the present monetary arrangements and 
exchange rate system; 
The Committee considers the present unemployment rate to 
be unacceptable. Measures adopted by the Community and 
the individual Member States have unfortunately only 
yielded relatively unsatisfactory results. The resolution on 
long-term unemployment adopted by the Council, which put 
forward proposals for a common programme of action by 
governments, both sides of industry and the Community, 
must be implemented rapidly. The Committee also draws 
attention to the proposals to combat youth unemployment 
already advanced in the report. In this connection, as in the 
case of investment promotion, it is of the greatest importance 
that the climate for business activity in the EEC should be 
improved to make companies more dynamic and better able 
to create jobs. 
The Committee is aware of the problems posed by trends 
in labour costs, the employment market and work 
organization. These problems should form the subject of 
consultation between,. the two sides of industry and 
government. The development of the European economy 
and particularly the expansion of employment in the 
Community - the object in view - will to a large extent be 
determined by the outcome of these discussions. Finally, the 
Committee considers that at European level the Commission 
must continue to take initiatives with a European dimension 
aimed at solving the unemployment problem. 
Vocational training must be adapted in such a way as to 
promote employment and at the same time initiate the work 
force in the new technologies. A special effort supported by 
the European Social Fund should be made to promote the 
training of young people and the long-term unemployed. the freeing of movements of capital and associated 
services. 
Action is also needed to bring greater stability to the EMS 
through more intensive coordination and monitoring of 
macroeconomic policies and adjustment measures, and 
through closer cooperation between central banks. 
Finally, the EMS and ECU need a clearly defined identity 
both regard to the operation of the system and the official and 
private use of the ECU. 
A stronger EMS is also extremely important for the 
stabilization of the international monetary order, 
particularly with regard to the exchange rate relationships 
between the dollar, the yen and the European currencies. An 
international monetary conference ought to be organized to 
promote this stabilization. 
2.8. Economic and political integration 
Closer European monetary and economic integration must 
go hand in hand with greater European political unity. 
Progress on monetary and economic integration can only be 
achieved through the further development of the internal 
market and the revision, simplification and harmonization of 
laws which act as obstacles to the free movement of goods 
and services. The reinforcement of regional policy is also very 
important for strengthening the common market. 
No C 218/22 Official Journal of the European Communities 29. 8. 85 
Distortions of competition need to be eliminated in particular 
through measures designed to secure the harmonization of 
taxes, the dismantling of subsidies and the removal of 
intra-Community protectionist barriers. Competition could 
also be improved if companies from all Member States came 
into de facto consideration for public sector contracts. 
2.9. Protectionism 
The Committee views with concern the growth of 
protectionist tendencies in world markets as a reaction to the 
unfavourable economic climate, exchange-rate related 
distortions in the international price structure and shifts in 
international competitiveness. Given that the spread of 
protectionism would lead to a reduction in the volume of 
trade and consequently by a deterioration in the international 
division of labour with damaging consequences for the world 
economic situation, the Committee calls for rejection, 
wherever possible, of further export subsidies or import 
restrictions. New protectionist measures should not be taken 
as a matter of principle. The Committee supports the 
initiation of a new GATT round with the aim of dismantling 
the manifold forms of protectionism on a multilateral basis. 
These negotiations should be closely linked to the 
negotiations at the international monetary conference 
proposed by the Committee in point 2.7. We would also refer 
to the ESC's previous reports and opinions^). 
2.10. Small and medium-sized enterprises 
The present difficult economic situation and the inadequate 
growth of demand have plunged a large number of 
companies into financial difficulties. The effects have been 
Done at Brussels 4 Juli 1985. 
•(») OJ No C 230, 10. 9. 1981, p. 14. felt by small and medium-sized enterprises, which are largely 
dependent on the domestic market and have a relatively small 
capital base, little scope for raising finance and few options 
available when business difficulties arise. This deteriorating 
situation could have a damaging effect on competition, 
innovation and employment. The Committee, therefore, 
feels that measures should be taken to enable SMEs to adapt 
better in the long term to changes in the socio-economic 
situation. In addition to measures to improve the financial 
situation of SMEs, their market prospects and the know-how 
of their management and workforce, a study should be 
carried out to determine to what extent simplification of the 
laws and regulations could lead to a better climate for the 
development of these firms. 
3. Conclusion 
Taking into consideration the uncertainty factors referred to 
above, the Committee feels that measures are required at 
national and European Community level to achieve a more 
rapid recovery of the European economy and employment. 
The Committee considers the measures to alleviate 
unemployment adopted thus far to be inadequate or 
insufficiently effective. 
In the present economic crisis dialogue between the two sides 
of industry on the one hand and the national governments 
and EEC Councils of Ministers on the other is essential if 
appropriate solutions are to be found. 
The Economic and Social Committee will support any 
initiative of this kind. It goes without saying that the ESC 
is prepared to contribute through all the means at its 
disposal. 
The Chairman 
of the Economic and Social Committee 
Gerd MUHR 
29. 8. 85 Official Journal of the European Communities No C 218/23 
APPENDIX 
to the opinion of the Economic and Social Committee 
Change made to the text during discussions 
The following paragraph in the text submitted for adoption by the Committee was deleted: 
Point 1.7, third paragraph 
'The rise in interest rates in the UK and in the Lombard rate in Germany have reversed the downward trend that had 
set in in the Community. In the USA, on the other hand, there has been a sharp drop in short-term interest rates, 
which means that the rates in the Community are at present higher than those in the USA.' 
Opinion on the memorandum on income taxation and equal treatment for men and women 
(85/C 218/11) 
On 3 January 1985 the Commission decided to consult the Economic and Social Committee on the 
memorandum on income taxation and equal treatment for men and women. 
The Section for Social Questions, which was responsible for preparing the Committee's work on the 
subject, adopted its opinion on 13 June 1985 in the light of the oral report by Mrs Heuser. 
At its 228th plenary session (meeting of 4 July 1985) the Economic and Social Committee adopted the 
following opinion by 61 votes for, none against and with 15 abstenstions: 
1. The Economic and Social Committee welcomes the 
fact that the Commission has taken action to examine, in 
respect of wage and salary incomes, the direct and indirect 
effects of the income tax systems on equality of opportunity 
for men and women. 
2. Ideas concerning the roles of men and women in society 
have undergone a radical change in recent decades. Whereas 
previously the husband was regarded as head of the 
household with responsibility for supporting the family 
financially, it is now more and more the case that men and 
women share financial and other responsibilities in the 
family. This means that men and women must have equal 
opportunities above all as regards employment. It must 
therefore be ensured that they have equal access to 
employment, receive the same wages for the same work and 
have the same tax and social insurance liabilities. Commission comes to the conclusion that there is direct 
and/or indirect discrimination, albeit of very different kinds, 
in the income tax systems of all the Member States. It also 
emerges that the tax laws often embody a 'moral' evaluation 
of family or marital status which can vary greatly from one 
country to another. In the Federal Republic of Germany, for 
instance, married couples are better off than single persons as 
a result of the splitting system applied there, whereas in 
Belgium married couples are still at a disadvantage if both 
partners are gainfully employed, because they are taxed 
jointly and so pay more tax, since they come into a higher 
band in the progressive scale. 
4. In the Committee's view, tax laws should on no 
account incorporate an evaluation of the status of being 
married or not married. Tax systems should be completely 
neutral in this respect. Taxation should be based to a greater 
extent on the personal ability to pay. 
3. The Commission has already issued Directives dealing 
with the first two subjects at Community level. In the present 
memorandum the Commission turns to the question of the 
equal treatment of men and women as regards income tax. 
On the basis of a detailed comparative analysis the 5. The Committee agrees with the Commission that 
discrimination against the second income earner, generally 
the wife, can be precluded only by separate taxation of 
spouses' incomes. The Committee regrets that this correct