ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(79)116
Vol.1979/0058

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(79)116final
Brussels.7thMarch1979
USEOFCOMMUNITY INSTRUMENTS ANDGREATER
CONVERGENCE OFECONOMIC PERFORMANCE
•(Communication oftheCommissiontotheEuropeanCouncil
Paris-12and13March1979)
C0M(79)116final

-1-
1.TheEuropeanCouncilhasinstructed theCommission tostudy
"...therelationbetweengreaterconvergence ofMemberStates'economic
performance andtheuseofCommunityinstruments,particularly ofthe
Fundsforreducingstructural disequilibria",inconnection withthe
impendinginstitution oftheEuropeanMonetarySystem(EMS).
2.Convergence ofeconomicperformance isaconditionforatrue
stabilitybetweenEuropeancurrencies .Inthefirstplacethedevelop­
mentofeconomicactivity,asbasedonshort-termpolicy,mustbesuch
thatchangesinparitieswithintheEuropeanMonetarySystembecomeincrea­
singlyinfrequent .ThismeansthattheMemberStates'inflationrates
mustbecompatible witheconomicstability,strongergrowthand,hence,
theviabilityoftheSystem.Inflationratesshouldconvergetowardsthe
lowestpossiblelevel.
Secondly,inthelongerterm,andwiththeprospectoffuller
economicandmonetaryintegration inview,convergence mustbebasedona
broadharmonization ofeconomic andsocialstructures andoftheconditions
forproduction andtrade.
3.Relationship betweenconvergence andpolicycoordination atCommu­
nitylevel.
Beforeconsidering thespecifically financialaspectsofthecon­
tributiontobemadebytheCommunitytogreaterconvergence,noteshould
betakenofitsmoregeneralaspects.
(a)Theadjustments necessarytoachieveexternalbalanceandcontrol
inflation dependprimarily ontheeconomic,monetaryandsocialpoliciesof
theMemberStates.Theireffectiveness can,however,beincreased :
bycloserCommunitycoordination (e.g.tomakeinternalmonetary
policiesmoreconsistant);
bydeveloping concertedaction,whichwillenabletheeffectsof
parallelactionstobemultiplied andhighergrowthandemployment levels
tobereached,whichisalsooneofthemajoraimsofthenewmonetary
system.

-2-
TheCommunityalreadypossessesarangeofmechanismsforthis
purpose,whichhavenot,however,alwaysproducedthedesiredeffects.
Theyshouldbestrengthened intheprocessofestablishing theEuropean
MonetarySystem.
(b)Harmonization ofstructuresistoaconsiderable extentdependent
onCommunity-level coordination ofthenationalactionsdetermining econo­
micdevelopment.Suchcoordination isaprecondition foreventuallymaking
theEuropeaneconomymorehomogeneous andcompetitive.Theplansformoder­
nizingsectorsonthedeclineandstimulatingindustrialandtertiaryacti­
vitieswithagrowthpotentialshouldalsobecloselycoordinated,their
socialaspectsalso.Developing commonpolicieshereand,totheextent
thattheCommunitycanmakeaspecificcontribution,increasingtechnical
andtechnological cooperation andstrengthening thesinglemarketareall
essentialconvergencefactors.
4.Relationship betweenconvergence anduseofCommunityfinancial
instruments .
Inthiscontext,theCommunityinstruments cancontributetoensu­
ringth£System'sstability.
(a)Someofthemdirectlyaffectconvergence.Thevariousmeansfor
financingthebalanceofpayments(medium-termfinancialassistance,Commu­
nityloans)all'enabletheburdenofadjustmenttobespreadoutovera
periodoftimeandthusenabletbecountryinquestiontoimproveits
growth.Thesemeansaretobegrantedontermswhichtakeintoaccount
theobjective,areturntoconvergence.
(b)In1979theCommunitybudgetwillamounttosome15thousandmil­
lionEUA,i.e.0.80%oftheCommunity'sGDP.Itisnotintendedforuse
asaninstrumentforregulatingtheshort-termeconomicsituation.The
sumsinvolvedaretoosmalltohaveanysignificanteffectontheeconomic
situationasawhole,atleastinthelaterMemberStates.
Three-quarters ofthebudgetisdevotedtofinancingagricultural
expenditure.Thisexpenditure dependsonthenatureandthelevelofagri­
culturalproductionineachMemberStateandonthesizeofmonetaryflue­

-3-
tuations.InapaperfortheEuropeanCounciltheCommissionhasanalyzed
thedifferentaspectsofagricultural policyingreaterdetail.
Asregardsnetgainsandcontributions,whicharedifficultto
assessprecisely,thebudgetdoesnotalwayscorrespondtotherelative
situationofthevariouseconomies.Inthisconnection,afinancial me­
chanismwassetup,bytheRegulationof17May1976,which,withincertain
limits,appliestoMemberStatesinaparticulareconomicsituationand
whoseeconomieshavetobearadisproportionate shareinfinancingthebud­
get.Usehasnotyetbeenmadeofthismechanism.
(c)Goingbeyondthemoregeneralaspectdescribedabove,mostofthe
Communityinstruments (structural Funds,borrowingandlendinginstruments),
weredevisednotasshort-termeconomicpolicyinstruments,buttoserve
specificschemestopromoteconvergence inspecificinstances.Thisisthe
contextinwhich^transfers,whetherasloansorgrants,aretobejudged.
Theyarenotintendedtomakeupfororganizational deficiencies orpoor
profitsfrominvestmentsortofinanceconsumption.TheCommunityFunds,
theEuropeanInvestment Bank,theECSC,EuratomandtheNewCommunityInstru­
ment(NCI),servetosupplementthefinancingofnecessaryinvestments in
Statesorregionswithinadequateliquidassetsandtofurthermodernization
ofstructures.Thesolutionoftheproblemsinvolvedrepresentsforthe
CommunityanetgainthuswarrantingtheuseofCommunityresourcesfor
convergence purposes.
5.Convergence anduseoftheFundstoreducestructuralimbalance.
(a)ThetablesattachedgiveanindicationofthesizeoftheCommunity
financialandbudgetaryresourcessetasideforreducingstructuralimbalance
in1977and1978.
From1979onwardstherewillbenewmechanismsinoperation,nota­
blythe200millionEUAayearfor5yearsforinterestsubsidiesgranted
undertheEuropeanMonetarySystem,theloansfromtheNewCommunityInstru­
mentandtheMediterranean sectionoftheCommonAgricultural Policy.
TheseandtheCommission'slatestproposalsbringassistance from
theFundsuptoafiguretwiceashighin1979asin1977.

-4-
(b)Thoughthesumsinvolvedarelarge,accounthasnotalwaysbeen
takenadequatelyinapportioning budgetassistanceforstructuralpurposes
oftherelativegravityoftheproblemsinquestion.
Expenditure bytheGuidanceSectionoftheEAGGFhasnotalways
beeninlinewiththedifferences inincomeandproductivity ortotherela­
tiveweightoftheactivefarmingcommunityinthevariousMemberStates.
Assistance fromtheSocialFundhasnotalwayscorresponded totherelative
severityofemploymentproblemsortoneedsforvocationaltraining,though
ithasbeenmoreusefullydirectedsince1978.Whilethoseproblemsshould
notbeexagerated,thesituationcallsforimprovement .Theproblemsarise
asaresultofsomeoftheoperatingprinciplesofsomeoftheFunds,the
lagsbetweenpresentation ofprojectsandtheirexecutionatnationallevel,
andthefactthattheFundsserveprimarilytore-financenationalprojects.
(c)Itfrequentlyhappens,also,becauseprojectsaresodispersed,that
thefundsaregrantedtocarryoutoperations whosesignificance isonly
marginalanddifficulttodetermine.Itisnotsomuchtheoverallsizeof
theinstrumentsthatisinquestionhereastheneedtoconcentrate them
moreon-acertainnumberoffundamentaloperations.Nonetheless,itshould
benotedthatthisassistanceforstructuralpurposes,includingloans,
constitutes asignificantpartofthestructuralinvestments incertain
fieldsandincertainregions.
(d)Communityloans(2,100millionEUAin1977,2,300millionEUAin
1978,muchmorein1979)aresteadilyrising.Theyarebeingsoundly
directed,inthatthemaineffortisbeingconcentrate onthosecountries
withthegreatestneedtoimportcapital.ThustheEuropeanInvestment
Bankhasaccomplisheditstasksatisfactorily inrespectofregionaldeve­
lopment:some70%ofitsloansareforregionalprojects.WhentheNew
CommunityInstrument comesintooperationandinterestsubsidiesareaccor­
dedoncertainloansforinfrastructure programmes,theeffectiveness of
Communityactioninthisfieldshouldbeincreasedconsiderably .
Conclusions .
(a)Returntoconvergenceisdependentontheeconomic,monetaryand
socialpoliciesadoptedbytheMemberStates.Thesepolicieswillbemore

-5-
effectiveifcommonpoliciesareworkedout.andarealcoordination established
attheCommunitylevel;themechanismsdesignedforthispurposemustbestreng­
thened,withthedetermination totakefulladvantageofthem.
(b)Theinstrumentsforfinancingbalanceofpaymentdeficitscanplaya
significant role.
(c)TheCommunityinstruments,notablytheFundsintentedtoreducestruc­
turalimbalance,whicharenotnegligeable inrelationtotheiraim,serveto
backupschemestopromoteconvergence inspecificcases.Theycannotbeauto­
maticorpurelyredistributive andarenot,eitherbytheirnatureortheir
sizeshort-termeconomicpolicyinstruments.
(d)Communityassistancedoesnotalwaystakesufficiently intoaccount
therelativeseverityofthestructuralproblemsinquestion.Toimprovethe
situation,theCommissionproposesthefollowing:
(i)whilekeepingwithintheirgeneralobjectives,theFundsshould
concentratetheirresourcesmoreonpriorityactions,selectedonthebasis
oftherelativegravityofthedifferentsituations;
Hi)thevariousCommunityinstruments shouldcombinetheiraction
inintegratedprogrammestoassistregionsthatareunderdeveloped orin
declineandwhosestructuralhandicapscannotbeovercomewithoutrecourse
tooutsidecapital;
(lii)priorityshouldbegiventotheCommunity'sfinancingofna­
tionalprogrammes,particularly asregardsinfrastructure ,thatarepartof
schemeswhichareindicatedasbeingofEuropeaninterest,whichwillensure
thattheprojectscomplementeachotherasfullyaspossible;
<iv)whilethefinancialresourcesavailableshouldbeutilizedas
effectively aspossible,aneffortshouldbemadegraduallytoexpandthe
existingFundsand,moregenerally,thefinancialmechanismsintentedto
remedystructuraldisparities,soastoenablethemtofulfillthisfunc­
tion.
(e)TheeffectsoftheCommunity'sfinancialinstruments onnational
economicpolicieswillincreaseastheinstruments develop.Inthisconnec-

-6-
tion,theCommissionhasthefollowingremarkstomake:
(i)inareportitbroughtoutrecentlyoncertainCommunity
reservestheCommissionstressedthatregressivemeasuresmustbeavoided
anditraisedthepossibility ofintroducing anelementofprogressivity ;
theeffectofsuchameasureonconvergence mightbequiteconsiderable ;
(ii)improvingandexpandingtheCommunityinstruments shouldgo
handinhandwithharmonizing thedifferentStates'macro-economic and
structuralplans,withtheobjectivesjointlydetermined,soastoensure
thatresourcesareputtothebestusefortheCommunityasawhole;
(ill)lastly,theresultsofCommunityactionmustbementioned
tomakesurethatCommunityintervention doesinfactconstitute a
"convergence bonus."-

BUDGET EXPENDITURE AND STRUCTURAL LOANS
INTHECOMMUNITY
I
TABLE 1
This table shows structural commitment appropriations and
payment appropriations entered intheCommunity Budget for
each oftheyears 1977 »1978 and1979 *
TABLE 2
This table gives the1977 and1978 breakdown bycountries of
Budget assistance actually decided onbytheCommunity ineach
year (assistance granted ,applications forassistance endorsed ,
assistance approved ,aiddecided on,&c.).
TABLES 3and
Table 3gives the1977 and1978 breakdown bycountries of
loans decided onbytheCommunity .
Table k.shows theoverall movement ofCommunity loans from
1977 to1979 (1979 figures estimated ).

Table 1
COMMITMENT APPROPRIATIONS AND PAYMENT APPROPRIATIONS
ENTERED INCOMMUNITY BUDGET ('000,000 EUA )
E P
TOTAL GENERAL 10.267,894 9.599,865
dont :FEOGA 0. 325,000 157,800
Secteur social 524,143 158,353
dont :FOND SOCIAL 504,100 140,640
FEDER 398,300 318,600
CECA 93,000 93,000
TOTAL FONDS 1.320 ,400 710,040
TOTAL GENERAL 12.702,934 12.362,654
dont :FEOGA 478,500 . 428,500
(avec action
commune pêche )
Secteur secial 592-653 559.107
dont :FONDS SOCIAL 569.500 538,800
FEDER 000958 525-000
CECA 143,000 143,000
TOTAL FONDS ■1.772 x000 1.635X300
TOTAL GENERAL 14.576,673 13.494,353
dont :FEOGA 0.
(avec action corn .pêche569,230
\431,220
Secteur social 804,062 556,877
dont :FONDS SOCIAL 777,500 532,500
FEDER (1) 945,000 499,000
CECA 143,000 143,000
Boni f1cations 200,000 200,000
TOTAL FONDS +BONI FI-
CATIONS2.634.730 1.805 ..720
Evolution 1979 /1977
(fonds +bonifications )+99% +A5h%
Source :doc .XIX/10-131C78 )etXIX/137/79 et
(1)Budget supplémentaire etrectificatif 1979 SI(79)140 .

Breakdownofstructural Budgetassistance ,in*000,000 EUA
FEOGA-orient .
(1)Fondssocial
jFonds
irég.!SucgetCECA
<4>TOTAL
197719781977197^1977.197319771978 j1977 I1978
RFd'Allea.'85,287,182,U>7,359,148,73 ,10,9721,25–1
I
237,27214,38
IPrance64,756,4124,686,270,282,63 !27,0022,68286,50.247,91
IItalie 50,548,074,5233,0119,3224,20 i1,212,23 1245,51 ι507,43
jPays-Bas 18,612,615,99,88,18,18 42,6030,58
IBelgique 17,25,911,411,110,56,154,265,0843,26128,23
JLuxembourg I0,6
i0,50,00,20,60,50.51-1,206,35
IRoyaume–Uni4,738,8145,5111,891,5p51,46|2,1034,37283,80I336,43I
IIrlande 17,519,030,044,219,334,95«466,8098,15
Danemark 13,712,915,114,27,25,53
I
I36,0032,68
CEE9312,60281,2499,0567,8385,8562,3845,5490,761242,941502,14i-3
S»
o"
M
»
rv>
(1)à(4)ïvoirpagejointe.

(1)Figures forassistance forindividual projects andpayments inrespect ofseparate measures
and joint operations .
(2)Endorsements ofapplications forassistance .
(3)Assistance approved tyCommission :disbursements asandwhen Member States commit their own
funds toprojects concerned .
(*)Amounts charged toBudget :notwhole ECSC Budget ,onlyheadings relating toaidinform of
interest subsidies forinvestments (Article 5^ECSC )andredevelopment (Article 56ECSC )and
toreadaptation aid (Article 56ECSC ).

LOANS GRANTED (gross )in'000.000 EUA
BEI (1) CECA(2) EURATOMEmpruntsTOTAL en%duPIBcommunaut .
1977 1978 1977 1978 1977 1978 1977 1978 1977 1973 1977 1978
RFALLEMAGNEI
28,4 I45,5 115.5 140 45,0(3 ) 188,9 185,5 0,04 0,04
FRANCE 296,5 359,3 174,5 127 50,0(3 ) 521,0 486,30,16 0,13
ITALIE 425,7 845,1 173,6 127 35,9 442,0 1041,31008,0 0,66 0,54
PAYS-BAS 0/5 45 0,5 43,0 0,04
BELGIQUE . 15,8 .ΚIm "15,3'•.-0,02 ι.
LUXEMBOURG62,20,67534,4 0,6|)171,6
r0,03>0,22
ROYAUME-UNI 489,5 430,7 260,3 273 749,8 703,7 0,35 0,29
IRLANDE 79,7 117,5 0,2 0 79,9 117,5 0,99 1,24
DANEMARK 32,7 106,3 0,5 13 33,2 119,3 0,09 0,27
*
CEE -9 1352,5 1966,6 741,5 798 95,0 70,3 442,0 2631,0 2834,9 0,19 0,19
(1)Prêts accordés
(2)Prêts payés
(3)Allocation estimée dutotal de95KUCE .
(4)Répartition estimée

Table k
COMMUNITY LOANS ('000,000 EUA )
1977 1978 1979 (cntircationc )
NIC 500
BEI 1.352,5 1.966 2.500 ouplus
CECA 741 797 950
EURATOM 170 130
2.093,5 2.933 4.080 ouplus