23. 8. 76 Official  Journal  of the European  Communities No C 197/39 
Opinion  on the  current  economic  situation  in the  Community  and  the  anti-cyclical 
policy  to be pursued 
The opinion  of the  Committee  is not  based  on  any  text  published  in the  Official 
Journal  of the European  Communities. 
A. LEGAL  BASIS  FOR  THE  OPINION 
On 27 April  1976  the  Bureau  of the  Committee  decided,  in accordance  with  Article  20 
third  paragraph  of its Rules  of Procedure,  to draw  up an additional  opinion  on the 
abovementioned  subject. 
B. OPINION  OF  THE  ECONOMIC  AND  SOCIAL  COMMITTEE 
The Economic  and  Social  Committee  prepared  its opinion  on the  above  matter  at its 
139th  plenary  session,  held  in Brussels  on 25 and  26 May  1976. 
The full  text  of the opinion  is as follows: 
THE  ECONOMIC  AND  SOCIAL  COMMITTEE, 
Elaving  regard  to Article  20 third  paragraph  of its 
Rules  of Procedure, 
Having  regard  to the  decision  taken  by its Bureau  on 
27 April  1976  instructing  the  Section  for  Economic 
and Financial  Questions  to draw  up  an additional 
opinion  on the aforementioned  subject, 
Having  regard  to the  resolution  which  the  Council 
and the  representatives  of the  governments  of the 
Member  States  adopted  on  22  March  1971  in 
connection  with  the  achievement  by  stages  of 
economic  and  monetary  union  in the Community, 
Having  regard  to  the  Council  Decision  of  18 
February  1974  on the  attainment  of a high  degree  of 
convergence  of the  economic  policies  of the  Member 
States  of the European  Economic  Community, 
Having  regard  to the  opinions  which  the  Committee 
delivered  on  30  October  1975  on:  (a)  the  1975 
Annual  Report  on  the  economic  situation  of the 
Community,  and  (b)  the  proposal  for  a Council 
Decision  on  a change  in the  time  table  for  the 
preparation  of the  Annual  Report  on the  economic 
situation  in the Community  (1), 
Having  regard  to the  oral  report  made  by  the 
Rapporteur,  Mr  Margot, 
Having  regard  to the  opinion  issued  by the  Section 
for Economic  and  Financial  Questions  at its meeting 
on 28 April  1976, 
(!) OJ No C 15, 22. 1. 1976. Having  regard  to the  discussions  at its 139th  plenary 
session,  held  on 25 and  26 May  1976  (meeting  of 25 
May  1976), 
HAS  ADOPTED  THE  FOLLOWING  OPINION 
by 77 votes  in favour,  4 against  and  10 abstentions: 
1. Introduction 
1.1. In  its  opinion  of 30  October  1975  on  the 
proposal  for  a Council  Decision  on a change  in the 
time  table  for  the  preparation  of the  Annual  Report 
on the  economic  situation  of the  Community,  the 
Committee  argued  that  the  time  table  'should  be 
such  that  the  Council  discussions  at which  economic 
policy  guidelines  are  set for the Member  States,  takes 
place  before  the  national  Governments'  budget 
proposals  are  approved  in broad  outline  by  the 
respective  parliaments  since  it is on  these  budget 
proposals  that  economic  and  social  policy  is largely 
based'. 
1.2. Similarly,  the  Committee  wished  to apprise 
the Council  of  its  views  on  the  socio-economic 
policies  to  be  pursued,  before  the  Council 
discussions  take  place  on this  subject.  This  would 
enable  the  Council  to take  account  of the  views  of 
the socio-economic  interest  groups  when  setting  its 
guidelines. 
1.3. In  the  present  circumstances,  the  Committee 
did not  think  it appropriate  to express  concrete 
criticism  of  the  policies  of  the  individual 
governments,  and  to pass  judgment  on the  separate 
policies  to be pursued  in each  Member  State.  This 
No C 197/40 Official  Journal  of the  European  Communities 23. 8. 76 
does  not  preclude  the  Committee  from  expressing 
concern  over  the  failure  to achieve  convergence  of 
the economic  and  monetary  policies  pursued  in the 
various  Member  States. 
1.4. In  drafting  the  opinion,  account  has  been 
taken  of various  Commission  documents  and  of the 
speech  which  the  Commission  Vice-President,  Mr 
Haferkamp,  made  before  the  European  Parliament 
on 12  February  1976.  Nevertheless,  the  opinion 
makes  no  direct  assessment  of any  Commission 
document  whatsoever.  The  Committee  in its opinion, 
wished  above  all  to  focus  attention  on  the 
fundamental  issues  which  should  be  taken  into 
account  when  economic  and  social  policy  measures 
are being  prepared  and  when  budgets  are  being 
drafted. 
2. Particular  features  of  the  current  economic 
situation  and  recent  trends 
2.1. The  economic  recovery 
2.1.1.  The  Committee  notes  with  satisfaction  that, 
although  the main  causes  and  effects  of the recession 
have  not  yet  been  fully  overcome,  the  long-heralded 
economic  recovery  has  got  underway  with  varying 
intensity  in the various  Member  States. 
In most  Member  States,  and  in  particular  in 
Germany,  France,  the  Benelux  countries  and 
Denmark,  cyclical  trends  are  more  favourable  than 
the 1975  Annual  Report  had  forecast. 
A GNP  growth  rate  of 3-0 to 3-5 °/o had  been  forecast 
for 1976.  In the  wake,  inter  alia,  of the  vigorous 
economic  upturn  in  Germany,  this  figure  will 
probably  be achieved  and  may  even  be exceeded. 
This  upturn,  which  is reflected  in restocking  and  a 
recovery  in domestic  and  external  demand,  is a 
welcome  change  from  the  gloomy  1975  situation 
whose  features  included  generalized  negative  growth. 
Nevertheless,  the  Community  is still  faced  with  a 
number  of fundamental  structural  problems  and  less-
favourable  trends  which  are  partly  responsible  for  a 
high  level  of uncertainty  as to whether  the  recovery 
will be sustained. 
2. L.2. Whether  or not  the  economic  recovery  in 
the Community  will  be sustained  will  depend  not 
only  on  the  specific  problems  of,  and  the  policy 
pursued  in the various  Member  States,  but  also,  to a 
significant  extent,  on external  factors. The trend  in world  trade  is difficult  to forecast, 
particularly  in view  of the  policy  to be pursued 
bearing  the  balance-of-payments  deficits  in mind.  It 
should  be noted  that  the  recovery  in the  USA  is 
being  sustained  and  a 7 %> growth  rate  (instead  of 
6 %>) is now  being  forecast.  Forecasts  in Japan  were 
less optimistic  six  months  ago  but  a 4 % GNP 
growth  rate  is expected  now. 
Monetary  unrest,  for which  the  uneven  development 
of consumer  prices  and  production  costs  is partly 
responsible,  continues,  however,  to  give  rise  to 
uncertainty.  There  is  also  a trend  towards 
protectionism  in various  countries.  Other  factors 
which  will  influence  the  economic  development  of 
the Community  include:  (i) the trend  in raw  material 
prices,  (ii)  efforts  to achieve  a new  international 
division  of labour,  and  (iii)  mobility  of multinational 
undertakings. 
2.1.3.  Further  factors  of  uncertainty  include 
inflation  trends  in the Member  States,  and  whether  it 
will be possible  to reduce  the  disparity  in inflation 
rates  which,  in 1975,  ranged  from  5 °/o to 23 °/o. 
Such  differences  in price  trends  encourage  divergence 
in exchange  rates. 
2.1.4.  It  is also  still  unclear  whether  increased 
industrial  output,  which  is primarily  geared  to 
restocking,  will  lead  to  a significant  revival  in 
private  investment. 
The propensity  to invest  is still  fairly  limited,  which 
indicates  that  investors  are  not  very  hopeful  of 
obtaining  a good  return. 
2.1.5.  The  major  cause  of uncertainty,  however,  is 
the probable  trend  in unemployment.  The  large 
number  of people  out  of work  remain  a source  of 
concern. 
2.2. The  employment  problem 
2.2.1.  At  its plenary  session  on 26 February  1976, 
the Committee  delivered  an  opinion  on 
unemployment  in the  Community.  In that  opinion, 
the Committee  expressed  particular  concern  about 
the seriousness  of the  problem.  The  opinion  stated 
that,  at that  point  in time,  there  were  more  than 
.5 million  unemployed  in the  Community. 
2.2.2.  It  is a fact  that  the economic  upturn  has  not 
yet been  reflected  in all the countries  in a decrease  in 
the number  of wholly  unemployed  persons.  This  is 
in part  due  to the fact  that  a considerable  proportion 
of industrial  production  capacity  had  not  been  fully 
exploited.  The  recovery  was  thus  used,  in the  first 
instance,  to increase  the utilization  factor. 
23. 8. 76 Official  Journal  of the European  Communities No C 197/41 
2.2.3.  The  structural  problems  of unemployment 
are also  liable  to be aggravated  by several  factors 
including:  (i)  competition  from  countries  where 
overall  labour  costs  are  lower  than  in  the 
Community,  and  (ii) a trend  towards  rationalization. 
2.2.4.  Unemployment  figures  do not  always  give  a 
clear  or accurate  picture  of economic  trends.  Firstly, 
they have  been  reduced  by  slowing  down  or 
restricting  the  employment  of  non-Community 
migrant  workers.  Secondly,  unemployment  figures 
are influenced  by such  factors  as:  (i) demographic 
trends,  (ii) the  raising  of the  school-leaving  age,  (iii) 
the development  of the  job  situation,  and  (iv)  the 
increase  in the  number  of women  coming  onto  the 
labour  market.  In most  Member  States,  there  has 
been  a significant  increase  in undeclared  work,  in 
particular  in the  crafts,  maintenance  and  services 
sectors. 
2.2.5.  The  high  level  of unemployment  among 
young  people,  even  graduates,  is particularly  serious. 
The short-  and  medium-term  consequences  of this 
state  of affairs  cannot  be overemphasized. 
2.3. The  problem  of convergence 
2.3.1.  The  considerable  disparity  between  the 
economic  situations  of the  various  Member  States 
and regions  presents  a major  obstacle  to  the 
balanced  economic  development  of the Community. 
There  is hardly  any  sign  of an effective  Community 
policy  capable  of removing  or significantly  reducing 
the differences  between  the  various  Member  States 
and/or  the various  Community  regions. 
2.3.2.  In  1975,  a clear  degree  of convergence  was 
achieved  as  regards  balances  of  payments. 
Germany's  surplus  on current  account  was  reduced 
by two-thirds  as a result  of a sustained  high  level  of 
imports  despite  a fall-off  in economic  activity.  On 
the other  hand,  by sharply  reducing  imports,  all the 
deficit  Member  States,  in particular  Italy  and  France 
managed  to reduce  their  balance-of-payment  deficits 
on current  account.  The  future  is,  however, 
uncertain  and  a deterioration  in the  Community's 
balance  of payments  cannot  be ruled  out this  year. 
2.3.3.  Although,  in 1975,  inflation  was  kept  below 
the 1974  level,  there  is still  a considerable  difference 
in the  rates  in  the  various  Member  States. 
Nevertheless,  it seems  that  it will  be possible  to 
reduce  this  disparity  in the short  term. 2.3.4.  The  disparity  between  the  Member  States  is 
also reflected  in the  financial  and  monetary  fields. 
The pressure  on  parities  (stimulated  by  currency 
speculation)  led  in recent  months  to  a further 
effective  devaluation  of the  lira  and  the  pound 
sterling.  France  was  yet  again  forced  to pull  out  of 
the 'snake'  which  it had  re-entered  in July  1975 
after  an 18-month  absence. 
For a short  time  it seemed  that  the  'snake'  would 
not survive  speculative  pressures,  but  the  measures 
taken  by  national  governments  and  monetary 
authorities  (which  were  often  fairly  radical, 
especially  in Belgium)  helped  to turn  the  tide  and  the 
'snake'  continued  with  its  pre-July  1975 
membership. 
2.3.5.  The  serious  monetary  problems  besetting 
Italy  and  Ireland  in particular  led  the  Council  to 
grant  these  countries  Community  loans  totalling 
1 000  million  and  300  million  dollars  respectively. 
3. The  policy  to be pursued 
In the  light  of the  current  situation  and  recent 
developments,  the  Committee  would  wish,  first  and 
foremost,  to define  the major  criteria  which  must  be 
met by  short-term  policy  and,  therefore  when 
budgets  are being  drawn  up. 
The Committee  would  then  submit  a number  of 
proposals  on various  aspects  and  components  of this 
policy  and  would  conclude  by  stressing  the 
importance  and  purpose  of such  a policy  and  voicing 
its views  on  the  prerequisites  for  an  effective 
approach. 
3.1. Criteria  for short-term  policy 
3.1.1.  The  Committee  would  emphasize  that  anti-
cyclical  policy  must  be compatible  with  the approach 
and objectives  of structural  policy.  There  must  be no 
conflict  between  the  short-  and  the  medium-term 
objectives  and  measures. 
The means,  inter  alia,  that  the  anti-cyclical  measures 
taken  by the  individual  national  governments  should 
not also  be  such  as to increase  the  disparities 
between  the  economic  situations  obtaining  in the 
various  Member  States.  They  should,  on  the 
contrary,  aim  at reducing  such  disparities  gradually 
by improving  the  economic  situation  of the  less 
well-off  countries. 
3.1.2.  The  Committee  would  stress  the  need  to 
focus  anti-cyclical  policy  on  combatting 
unemployment. 
No C 197/42 Official  Journal  of the European  Communities 23. 8. 76 
The restoration  of generalized  economic  growth  is 
undoubtedly  a prerequisite  for  progress  towards  the 
goal of full  employment. 
In view  of  the  acute  problem  of  structural 
unemployment,  programmes  for  stimulating  the 
economy  must  be  aimed  primarily  at promoting 
measures  designed  to create  employment. 
Social  measures  to combat  the  consequences  of 
unemployment  must  also  be  directed  towards  a 
better  spread  of employment,  with  due  regard  to: (a) 
the specific  needs  of certain  regions  and  sectors,  (b) 
the serious  problem  of unemployment  among  young 
people,  and  (c) qualitative  improvement  of jobs. 
3.1.3.  If  the  economic  recovery  is to be sustained, 
the Committee  also  considers  that  inflation  must  be 
controlled  and  brought  down  to  an  acceptable 
level,  especially,  in those  countries  where  it is still 
particularly  high.  This  is all the more  necessary  since 
inflation  has  a direct  impact  on  the  employment 
trend  and  the ability  of firms  to compete. Public  investments  must  make  allowance  for  the 
need  to improve  the  quality  of life  by providing 
more  funds  for  public  facilities,  such  as  health 
services,  education  and  transport. 
A special  effort  will  also  have  to be  made  to 
stimulate  the  creation  of small-  and  medium-sized 
undertakings  and  investments  by such  undertakings, 
since  such  undertakings  could  lead  to a considerable 
improvement  in the  employment  situation  in the 
short  term. 
3.2.2.  The  safeguarding  and  spreading 
of employment 
In the  various  Member  States,  special  attention  will 
have  to be paid  to effective  measures  to combat 
unemployment. 
3.2. Proposals  concerning  the  policy  to be pursued 
3.2.1.  Investment  policy 
The necessary  revival  of the  propensity  to invest  will 
depend  primarily  on restoration  of confidence  and 
on the  existence  of clear-cut  economic  development 
programmes  that  have  been  agreed  on at Community 
level. 
New  projects  will  only  get  under  way  if there  are 
prospects  of a proper  return  on capital  and  sufficient 
demand  for the goods  and  services  to be produced. 
Since  the  need  for  profitability  encourages  firms  to 
invest  first  and  foremost  in rationalization  — the 
importance  of this  for economic  expansion  must  not, 
in fact,  be underrated  — government  programmes 
for stimulating  the  economy  should,  in view  of 
present  employment  problems,  largely  encourage 
job-creating  investments  and  labour-intensive 
industries,  especially  in economically  weak  regions 
and sectors. 
Such  a  policy  of  encouraging  job-creating 
investments  must  cover  both  private  and  public 
investments.  This  means  that  governments  must 
ensure  that  firms  which  receive  aid  for  creating 
employment  do in fact  create  jobs. Statistics  must  be  compiled  to provide  a better 
picture  of the  components  of the  unemployment 
phenomenon.  At  present  statistics  are  not  always 
comparable. 
On the  basis  of these  data,  a specific  policy  must  be 
worked  out  and  geared  to the  various  critical  aspects 
o! the problem,  viz.,  unemployability,  unemployment 
among  young  people,  unemployment  among  women, 
the recruitment  of workers  from  non-Member  States 
and unemployment  among  these  immigrants, 
undeclared  work,  the  holding  of several  jobs  at the 
same  time  and  clandestine  employment. 
So that  the  available  work  can  be  spread  out 
effectively  measures  must  be adopted  to promote 
occupational  mobility,  for  example  especially 
tailored  training  and  retraining. 
In the  light  of:  (a) the  demographic  trend,  and  (b) 
the medium-term  impact  of  such  measures  on 
national  budgets,  short-term  efforts  should  be 
concentrated  on reducing  unemployment  among  the 
young  be offering  them  crash  training  courses  geared 
to neglected  occupations,  or temporary  employment 
on non-profit  Community  projects.  Similarly, 
overtime  and  the  holding  of more  than  one  job 
should  be discouraged,  and  thought  could  be given 
to shortening  the  normal  working  week,  or even 
encouraging  part-time  working. 
23. 8. 76 Official  Journal  of the  European  Communities No C 197/43 
3.2.3.  Social  policy 
As well  as restoring  an  economy  geared  to full 
employment,  action  must  be  taken  to help  those 
sectors  of society  that  have  been  hardest  hit  by the 
economic  crisis  (families,  the elderly,  etc.). 
But the  economic  recovery  will  be sustained  only  if 
foreign  markets  are  expanded  and  there  is a buoyant 
domestic  market. 
This  means  that  purchasing  power  must  be 
guaranteed  and  the  incomes  of the  most  vulnerable 
groups  in society  must  be increased. 
A selective  boost  of domestic  consumption  along 
these  lines  is a pre-requisite  for  creating  the  climate 
of confidence  which  is necessary  if investments  are  to 
be expanded. 
3.2.4.  Control  of  inflation 
With  a view  to  achieving  a greater  degree  of 
convergence  between  the  economies  of the  various 
Member  States,  emphasis  must  be placed  on fighting 
inflation,  particularly  in those  countries  with  high 
inflation  rates. 
This  presupposes:  (a)  suitable  restraint  of income 
growth,  particularly  in the  higher  income  brackets 
and in priviliged  sectors,  (b)  curbs  on  other  cost 
factors,  and  (c)  the  working  out  of instruments 
which  will  enable  effective  action  to be taken  against 
excessive  price  rises. 
Action  on a Commission  proposal  the  Council  will 
have  to make  the  appropriate  recommendations  and 
take  the  requisite  decisions  to make  all Community 
policies  more  compatible  with  anti-inflation  policy. 
3.2.5.  Monetary  policy 
The Committee  would  express  its concern  about  the 
impact  which  currency  speculation  had  had  on efforts 
to reinforce  and  expand  the  Community  exchange 
system. 
The Committee  would  stress  the  need  for  permanent 
consultation  between  the  Member  States  to ensure 
appropriate  coordination  of their  monetary  policies. 
The growth  of the  money  supply  must  also  be 
controlled,  but  not  at the  expense  of employment 
and recovery.  This  has  been  excessive  in various 
Member  States  and  is a significant  cause  of inflation. Central  Bank  policies,  must  be  more  closely 
coordinated  to this  end.  Recent  events  have  shown 
that even  though  France  was  forced  to leave  the 
'snake1  again,  resolute,  coordinated  action  can  stem 
speculation  and  avert  the  danger  of collapse  of the 
Community  exchange  system. 
3.2.6'.  Budget  policy 
The necessary  steps  to tackle  the  recession  and 
combat  unemployment  — combined  with  the  direct 
impact  of the  recession  itself  — have  inevitably  led 
to an increase  in budget  deficits  in all the  Member 
States.  Nevertheless,  the  important  thing  now  is to 
keep  the  expansion  of public  expenditure  under 
control  as much  as possible. 
This  is all the  more  urgent  in those  Member  States 
which  have  recorded  considerable  budget  deficits  this 
year  and  are  faced  with  a large  public  debt.  A clamp 
down  on  tax  evasion  coupled  with  measures  to 
improve  productivity  in the  public  service  can  help 
to reduce  these  deficits. 
The Committee  thinks  that  the  Community  should 
provide  extensive  aid,  on reasonable  terms,  to those 
countries  which  are  beset  with  exceptional 
difficulties. 
3.2.7.  Community  action 
The Community  itself  can  play  a major  part  in 
creating  conditions  favourable  to investment,  price 
stability,  and  job  creation.  A  commitment  by 
Member  States  to achieve  in the  next  12  months 
economic  and  employment  growth  rates  higher  than 
those  expected  at present  would  have  the  effect  of 
restoring  confidence  to those  taking  decisions  about 
investments. 
The Council  of Ministers,  in accordance  with  the 
terms  of Article  145  of the  Treaty,  should  agree  on 
targets  to  be  achieved  at national  level,  taking 
account  of  the  particular  balances  of payments, 
inflation  rates,  and  industrial  and  regional  strengths 
and weaknesses  of Member  States. 
Done  at Brussels,  25 May  1976. 
The Chairman 
of the Economic  and  Social  Committee 
Henri  CANONGE