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COM (84) 154 
 
 
 
Vol. 1984/0 057 
  
 
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Conformém ent au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents 
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
règlem ent. 
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the opening to the public of the historical archives of the European Econom ic 
Communit y and the European Atom ic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
27.9.2003, p. 1), t his file is open to the public. Where necessary, classified documents in this 
file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februa r 1983 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003  
(ABI. L 243 v om 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit  
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5  
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COMMISSION OF THE EUROPEAN COMMUNITIES
COM(84) 154 final 
Brussels, 14 March 1984
THE ECONOMIC AND SOCIAL SITUATION IN THE 
COMMUNITY
(Communication from the Commission to the European Council
of 19-20 March 1984)
COM(84) 154 final

THE ECONOMIC AND SOCIAL SITUATION IN THE
COMMUNITY
(Communication from the Commission to the European Council 
of 19-20 March 1984)
CONTENTS
I. Economic developments in 1983 and outlook for 1984
II. The conditions for continued recovery in 1984
III. Strengthening convergence within the Community
IV. Conclusions

INTRODUCTION
This communication to the European Council embodies the main points 
set out in the document on the economic situation addressed to the Council 
(economic and financial affairs) and discussed by it at its meeting on 
12 March 1984.
It summarizes the assessments and economic policy guidelines which 
the Commission regards as being of key importance in pursuing the objective 
of restoring sustained growth and improving the employment situation.
I.  Economic developments in 1983 and outlook for 1984
A. Economic performance in 1983 was better than anticipated; the
Community economy moved on to a recovery path in the first half of 
1983, thus ending a recession which had begun in 1979: real growth 
will have amounted to 0.8 % in 1983 as against 0.6 % in 1982 and 
-0.4 7 .  in 1981. The recovery process has been marked by:
- the favourable effects on consumption, and then on stockbuilding, 
of the stabilization policies which have,especially in the 
Federal Republic of Germany and the United Kingdom, been pursued;
- an appreciable acceleration in the growth of international trade, 
induced mainly by the recovery in America;
- a continued drive, whose results began to materialize in 1982, to 
bring down inflation. The inflation rate in the Community was 
6.2 X in 1983 as against 8 .8 X in 1982 and over 10 X in 1981, 
while the Community's average annual inflation rate during the 
last decade was above 9 X;

-  2 -
further progress towards restoring external equilibrium: the 
Community's current account deficit was equivalent to -0.1 / of 
GDP in 1983 as against -0.5 / in 1982 and -1.3 % in 1980;
- a worrying unemployment trend: it eased somewhat during the second 
half of 1983, with the increase in unemployment slowing; but the 
unemployment rate continued its rise,to average more than 10.5 % 
of the labour force in 1983, compared with 9.5 % in 1982 and
7.8 % in 1981.
B. The recovery should in the normal course of events continue and
accelerate in 1984; management opinions on the trend of activity have 
improved distinctly since the end of 1983 in the Federal Republic of 
Germany and the United Kingdom, and investment in manufacturing could 
increase in the Community as a whole by an average of more than 4.5 % 
in volume terms, having fallen by 3 % in 1983.
Overall, the outlook for the Community economy as a whole in 1984 
is as follows:
- the recovery should acclerate, with the real growth rate reaching 
2 % for the Community as a whole and 3 % in the Federal Republic 
of Germany, 2.5 % in Denmark and 2.5 % in the United Kingdom, so 
that these countries would exceed their average annual growth 
rates for the last decade;
- this recovery is expected to be accompanied by a further slowdown 
in inflation, which could be 5.2 % for the community as a whole, 
i.e. half the rate in 1980-81;

- 3 -
investment and exports should take over from consumption and 
stockbuilding as the key factors fuelling the recovery in 1984.
Total investment could grw by 2 % in volume terms, following a 
steady decline during the past three years. World trade should 
continue to expand strongly, mainly under the impact of the 
growth of the American economy, but also because of growth in 
the other industrialized countries and in the developing countries. 
World imports could increase in volume terms by 5 % in 1984 as 
against 1.7 % in 1983. International trade would thus gradually 
become the driving force once again in the growth process, not 
only in the Community, but also in the world economy as a whole;
the Community should be back in current account equilibrium and, 
during 1984, achieve a slight surplus of the order of 0.3 % of GDP;
lastly, the policies to stabilize and reform the public finances 
which have been pursued throughout the Community for the past two 
years should begin to produce results: the general government 
borrowing requirement could be brought down to 5.2 % of GDP 
compared with 5.7 % in 1983 and 5.4 % in 1981-82.
However, although the recovery which got under way in 1983 has 
continued and is expected to gain significantly in strength in 1984, there 
has not yet been any growth in employment, even though the easing of the rise 
in unemployment first noted in 1983 has been followed by relative stabilization. 
At the end of January 1984, unemployment amounted to 12.9 million persons 
(in unadjusted terms) in the Community, i.e. 600 000 more than at the end 
of January 1983, and the unemployment rate is likely to reach an average of 
11 % for 1984, compared with 10. 6 % in 1983. However, there is expected to 
be a fall in the average unemployment rate for 1984 in the Federal Republic 
of Germany and the United Kingdom.

- 4 -
II. The conditions for continued recovery in 1984
The profile sketched out above for 1984 and the outlook for 1985 will 
largely depend on the international environment:
continued expansion of trade, stabilization of a number of economic 
fundamentalsrnotably interest rates and exchange rates, and greater 
predictability of policies are essential if there is to be strong 
and sustained recovery. These conditions in turn depend on a 
large number of factors, with the path of the US economy probably 
the crucial influence.
To date, the combination in the United States of an expansionary budgetary 
policy and a restrictive monetary policy has made it possible to stimulate 
economic activity to a greater degree than was predicted and to bring 
inflation down to very low levels: a policy mix of this sort has produced, 
and is still producing, undeniable knock-on effects throughout the world 
economy. .
However, it has also exerted very strong pressures on interest rates 
and has contributed to an overvaluation of the dollar and considerable 
uncertainty about its future performance (as very recent developments again 
illustrate). One result has been a substantial deficit in the 
US trade balance, which amounted to US $9 500 million for the month 
of January 1984 alone, compared with US $6 300 million a year 
earlier. The danger is that the policies being pursued will 
eventually jeopardize the US economy's capacity for growth or will 
arouse new protectionist pressures.

- 5 -
For the Community, the level and uncertainty of the dollar exchange-rate and 
excessively high real interest rates are undermining the beneficial effects 
to be expected from bringing greater discipline into public finance and 
may delay the upturn in investment. These factors are also of importance 
for the rest of the world economy and above all for the developing countries - 
whose economic and financial position is still shaky - at a time when most 
of them have embarked on a difficult adjustment process.
The economic and monetary policies of the industrialized countries must 
therefore be more closely coordinated, with the prime objective of removing 
some of these impediments to continuing economic recovery. The forthcoming 
gatherings at international level (IMF Interim Committee in April, OECD 
ministerial meeting in May and the London summit of industrialized countries 
in June) should be used by the Community to push for coordination along 
those lines.
Ill.  Strengthening convergence within the Community
The economic performance of the Member States followed an increasingly  
convergent path in 1983 and further headway is expected on this front in  
1984. The slowdown in the rate of price increases has been accompanied by  
a narrower spread between Member States' performances; Greece apart, the  
widest inflation differential narrowed from 14.5 percentage points in 1981  
to 11.5 points in 1983 and will probably be trimmed to under 8 points in  
1984. At the same time, most Member States have been recording since 1983  
a reduction in their external imbalances. Lastly, in response to budgetary  
policies, sometimes pursued under difficult conditions because of the level  
of interest rates, public deficits are now beginning to shrink, although  
still too slowly in some Member States.

-  6 -
At the same time as this growing convergence of economic
performance in 1983, there has occurred a desynchronization of economic 
cycles which may prove beneficial if it is used to buttress economic 
stabilization policies in the countries where the adjustment process 
has not yet been completed. Only on this condition will we be able to 
begin a radical adaptation of our economies or. to lay the foundations for 
a lasting recovery in economic activity.
The closer convergence of Member States' economies owes much to 
the effects of the EMS. Over and above its tangible effect in 
helping to secure monetary stability, the EMS has made a major 
contribution, through the regular discussions on economic and 
monetary matters, to the emergence of a consensus on the causes 
of the problems we face and on the general thrust of economic 
policy that is needed. At Community level, agreement has 
gradually emerged on:
- the need to reduce structural budget deficits through efforts 
to limit the expansion of public expenditure, to maintain the 
level of public investment and to reduce the share of taxes and 
social security contributions in GDP;
- the importance of assigning a durable and credible anti-inflationary 
role to monetary policies;
- the need to pursue policies aimed at channelling more savings 
into investment;
- the importance of ensuring that wage 
productivity gains, tnat they permit 
firms' financing capacities and thattrends do not outrun
a lasting restoration of
they contribute to disinflation;
- the need to secure a sustained improvement in the competitiveness, 
adaptability and innovative capacity of the European economies;
- the advisability, as a back-up to economic policy, of introducing 
specific employment measures, while making allowance for the competitive 
constraint facing firms and making sure that the measures are reversible

- 7 -
IV. Cone lusions
For the first time since 1979, the Community economy is on the road to  
recovery: the recovery process, which got under way in 1983, should
be reinforced during 1984 by the combined effects of stabilization  
policies and the revival of world trade. Concomitant features should  
be a further slowdown in inflation, an upturn in investment and increased  
convergence of economic performance.
Despite this favourable outlook, the upturn in 1984 is not yet expected  
to bring about any appreciable improvement in unemployment in the  
Community as a whole, even though the rate is now rising more slowly.
All in all, unemployment remains the most worrying economic and social  
problem in the Community, and its lasting reduction remains a key  
priority.
Moreover, the continuation of the recovery in the Community in 1984 will  
continue to depend on several aspects of the international environment  
which remain uncertain, especially the level of interest rates and the  
development of exchange rates. A significant improvement in the coordination  
of economic policies at international level should be among the Community's  
priority objectives, in particular at the forthcoming international-  
meetings on economic matters.
Provided that these uncertainties are removed, there is the prospect of  
a gradual improvement in the economic situation in the Community: it
must be turned to good account in the pursuit of adjustment efforts and  
action to eliminate the weaknesses in the Community's productive structure,  
and in order to achieve faster improvement in the competitiveness of the  
European economies, so necessary for any lasting solution to the  
unemployment problem.

OAIN LCONUfllC INDICATORS FOR THt EUROPEAN COMMUNITY1 ,  UNITED STATES AND JAPAN
I  TAbLE I CROSS DOMESTIC PRODUCT (PERCENT, chance at constant 
PRICES ON PRECEDING YEAR. EC. USA. JAPAN. 1970-1904)I
|  TABLE 2
IDEFLATOR OF PRIVATE CONSUMPTION (PERCENT. CHANCE ON  
PRECEDING YEAR. EC. USA. JAPAN, >970-1964)
1----
19
761----
I 19
76_19791980l  9B1198219831984 1 -197919861981(98219631984
1 1979 1 1979
,----
. 11-l.i 1.0 .  01  3 1 1 * A. 73.7A.7o\S7.  47.  7A.4
2AJ74-. 73.A .  02 A IDK 9.816.4(6.21  1.91  03A.  73.4
1  o 94119T-1 .0 103.6 ID 3.14.23.4i.633303.3
ILK 48371A-.7 .0 31  .  A ICR 1  1  .317.322.224.42111  9819.2
3. 1>13 1  .  / 3.  AU *8. A10 .A13.312.91  •B937.2
1  IRL 4334371  .61.2 32.3 |  IRL 12.813.418.A26. 11  71089.0
I  | 3* >4939 -.3-13“ i  * iI I 13.115.026.319.6 A84310.5
|  L 3140l7-1 .6 -.9- »4-1.0 I L A. 33.87.77.76e847.7
I N I . 3649-1 .6-1 .  A 101.7 INL 7.54.3A.9A.457273  .  l
|  UKno1A0-2.0 2.4322.5 IUK 12.313.21  A .  411.0 83343.3
,----
|  
EC J13J13-.4 .6 82.0 1  KC 9.18.911.210. 1 8.8Ao5.2
IUSA n9o4-32.3_2_2 343.6 IUSA A. 19.616.3 8.95.83.95.1
(  JAF A931443.22.9334. A 1  JAP 7.73.37.04.32.91  .41  . 4
ITAOLE 3 NUMBER OF UNEMPLOYED AS PERCENTAGE OF THC  
j CIVILIAN LABOUR FORCE (LC. USA. JAPAN. >970-1904)I
I  TABLE 4
IbALANCE ON CURRENT ACCOUNT (PER CENT  
EC. USA. JAPAN. 1970-I  984)
1970
197919/V1  9U019811  982 IVBJ19841
1
11976
19791979I9601961198219831  984
—
1 * • >0 66 V4I  l 311  451  49 lb .  4-2.7-4.7-4-3 A -l .3 -.5
L » K 3J A1 70 y29y1  0 5108 ID K -2.9-4.7-3.7-3. \-41-2. 1 -1.9
b 5343447 A8 d478 ID .9-.8-1 .9-1.6 A .  71  .0
_ - - - "j8 768A IC R -2.8-2.9 - .  9 -.2-39-3.8-4.3
1 33L0 647B07 89 97IF -.3 .6 -1 .4-1 4 -2 9 -1 .7 -.0
71 74 H u: • 2J 1  4 7 1  A A 1  IRL -4.2 -11.3 -9.9-13 1-8 4 -2.8 -1 .  3
1 5A 75 80 au 91 1 0 7 1  1 9 1  I_  - 3l  .  7-2.4 -23 -1A -.2 - .  i
? ( ik > 12 16 19 IL 22.5 28.3 22. A31 5392 37.7 3A. 1
J0•,7 63 V4 2.7 1  ‘ i 4 6f t  t IN L 1  .3 -1.1-1 .5 2273.3 3.9
UK 40 5u 64 Vt 10 1714 IU K -.9 .61  .  A 2A26 .  7 .  A
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llAbLf 5 GENERAL LUVCkNMlNI lLnOINC  UR bORKOulNC ( - )  
l  AS PLRCE nIALE U) CDP (LC. 1 9 7 0 -1 9 6 4 )
>9 7019/9 i960 >981 1962 1983 1984
>9/9
- 4 -7 t -y 1 - 1  2 6 - 1  1 6 - 1  1 . 6 - I 0 9
1  D K 0_ * 30 -3 A -7 1 -9 0 .2 -A 9
1  u - 1 5- 28 -3 1-3 V - J t -3.0 -1 8
If.R - 44 -  4li 34 - 1  0 A - 83 - V. 2 -9 8
i  1 -A-7 3 -1 li. iA - 3. 4 -3 5
1  i RL -u 1  1 9 * l 2 U - 1  ! > li - 1  An- 1  3 . 4 -1 2 3
1  i -8 6 -9 5 ••8 4 - 1  1 7 - 1  1 9 -1 1 .9 -1 1 9
-t3 7 -U - 23 * 1 4 - 2.  3 • •6
J  NL - 1 J -43 -4 0 -5* > -7 * ■ > -A.A -6a
1  U K -3 2-3 --3 4 -2 7- -0 -3 5_ o3
i 1  C- 29-3 A-3 5 -5 4 - 34 -5 7 -5* >
IITAbLC 6 money supply m2/h3 (percentage  Change at eno of year 
t  on twelve months earlier,  ec.  usa.  japan. >970-t964>
i .......................................................................................................................................................
1 1976
1 - 1979 1986 1981 1  982 1  983 1984
1 1979
lb 1  0.9 A0 2.7 A  .  A 3V 55 A  7
1  O K 1  1.6 (0 8 8. 1 9.4 1  18 25. 4 7.5
ID 1 0.  1A6 A.2 3.6 7l 5.3 3.3
ICR 23.3 1 8 4 24.7 34.3 3 1 3 20.0 2 1  .  3
IF 1 3.4 1  4  . 4 9.7 11.4 1  088 .8 A  .6
1  IRL 1 0 2 19.6 1  A.  9 17.4 1  297 .3 11.4
1 1 1 9A 26. 3 12.0 1  A.  6 1  7 2 1  4. 4 14.2
IL - - -----
INL 1  1A 7.A 3. A 3.2 7A 10. 3 10.0
IUK 13A12.718.A14.A 921  1  .36.9I rc1391  1  .916.516.6107 9.a6 .  A
1  USA 956.29.010.6 9_ 2--
1  JAP 1  A99.17.28.776*-
F,NL.USA HI.D. CR.IRL 71318. DK«2h,U KSTERLING M3
(FISCAL YEAR) .  1M2(A8-79) M3 (86 -64 )JAPn2ANDCD.
NOTE ITALY H2-CR0WTH IN >963 AND 1984 WAS  
13.0 •  /• AND 12.6 •  /• RESPECTIVELY