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Vol. 1984/0 255 
  
 
Disclaimer  
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  
der genannten Verordnung freigegeben.  
COMMISSION OF THE EUROPEAN COMMUNITIES
C O M (84) 700 f inal  
Brussels, 29 N o v e m b e r 1984
T H E  E C O N O M IC  A N D  S O C IA L  
S IT U A T IO N  IN  T H E  C O M M U N IT Y
(C om m unication f r o m  the C o m m is s io n  to the
European Council, 3  a n d  4  D e c e m b e r 1984)
C O M (84) 700 f inal

1. Introduction
T h e  Com m ission's m o s t recent assessm ent of the eco n o m ic situation  
a n d  the short-term out to o k  confirms a n d  in s o m e  respects accentuates  
the prognosis w hich it co m m u n icated  to the E u ro pean  Council in Ju n e:
the upturn in activity a n d  the efforts tow ards stabilization  
are continuing, but grow th is unlikely to accelerate appreciably  
in 1985;
recent developm ents in u n em p lo ym en t a n d  the im m ediate prospects  
are extremely unsatisfactory; in 198 5 the C o m m u n ity  wilL probably  
see a  further, though moderate, rise in the u n e m p lo ym e n t rate;
- the current upturn m u s t b e  consolidated, a n d  the eco n o m ies of  
all the M e m b e r States m u s t return progressively to a  perm anently  
higher grow th curve w h ich  will create m o re  jobs.
2. T h e eco n o m ic situation in 1984 a n d  19 8 5
2.1 In 1984 international trade h a s  b een  m arked  b y  a  vigorous upturn
in activity in the industrialized countries, especially in North Am erica.
This h as helped to ease the international financial situation b y  
taking pressure off the developing countries' current account deficits.
In 1985, the volum e grow th world trade is likely to b e  maintained  
at a  rate of over 5 %  (com pared with 9 %  in 1984). B u t this forecast  
depends o n :
- a  start being m a d e  towards restoring, sm oothly a n d  without disruptions,  
m o re balanced exchange rates a n d  interest rates;
- the trading system  remaining o p e n  internationally;
- growth in the industrialized countries continuing at a  rate of  
at least 3 % , w hich m a y  b e  optimistic in view  of the latest  
information o n  the United States e co n o m y.
2.2 In the C om m unity, the recovery in the grow th of output is likely  
to continue in 1985. This will s te m  mainly from  im proved or maintained  
growth in the United K in g d o m , the Federal Republic of G erm any, Italy  
a n d  perhaps D enm ark. Furthermore, a  grow th rate of 2.3%  in 1 9 8 5  
w ould b e  well below  the C om m unity's long-term perform ance (grow th
of 2.9%  a  year from  1 9 7 1  to 1980 for example), unlike predictions  
for the econom ies of the United States a n d  Japan. T w o  further c o m m e n ts  
are called for:

-  2 -
(i) the chief growth- promoting factors are, in order of importance,  
the sharp recovery in investment, export d e m a n d  a n d  private  
consum ption;.
<ii) the danger is that the upturn in activity will prematurely
c o m e  u p  against the problem  of physicaL limitations o n  output,  
given that the industrial capacity utilization rate is n o w  
over 80 % . S o  the take-off in investment m u s t b e c o m e  
permanently buoyant if a  n e w  s lo w d o w n  in the potential grow th  
rate of the C o m m u n ity  e c o n o m y  is to b e  avoided.
2.3 Inflation in the C o m m u n ity  is likely to continue to slow  d o w n  
and, despite the effects of the U S  dollar's climb in value, will  
probabLy turn out at around 5.1%  in 1984 a n d  4.2%  in 1985 (1971-80  
average: 9.5%),
A t the s a m e  time the performances of M e m b e r States participating  
in the E M S  continue to converge, with average inflation in the C o m m u n ity  
falling substantially from  1 1 %  in 1980 to 4.2%  in 1984 a n d  narrower  
inflation differentials betw een M e m b e r States.
2.4 T h e  external accounts situation a n d  to a  lesser extent that  
of public finance are also encouraging.
T h e  Com m unity's current account will b e  virtually in balance in
1984 a n d  in 1985 should yield a  surplus of the order of half a  percentage
point of G D P .
A s  regards public finance, the C o m m u n ity  general governm ent deficit  
will probably b e  d o w n  to 5.4%  of G D P  in 1984 a n d  4.8%  of G D P  in 1985.
B u t despite significant improvements, the disparities betw een  
M e m b e r States rem ain profound.
2.5 U n em p lo ym en t is s till worsening, though in 1985 it is likely  
to stabilize or even fall slightly in s o m e  M e m b e r States - the  
Federal Republic of G erm any, the United K in g d o m  a n d  D enm ark.
In 1984 a n d  1985, the unem ploym ent rate in the C o m m u n ity a s  a  w hole  
is expected to ru n  at betw een 1 1  a n d  11.5%  of the labour force,  
i.e. over 1 2  million unem ployed. T h e  unem ploym ent rate a m o n g  y o u n g  
people under 2 5  is alm ost 2 5 % .
F o r s o m e  years the Com m unity's e c o n o m y  h a s  s h o w n  itself incapable  
of producing a  net surplus of additional jobs: from  1982 to
1984, total em ploym ent will h ave fallen b y  800 000, co m p ared  with  
increases of 5.4 million in the United States a n d  1.5 million in Japan, w hich  
cannot b e  explained solely b y  those countries' grow th rates in 1983 a n d  1984.
3. E co n o m ic policy guidelines
T h e  C o m m issio n  h as just sent the Council (Econom ic a n d  Financial  
Affairs) a  detailed report o n  the econom ic situation in the C o m m u n ity  
in 1984-85. This report concludes that the Com m unity's imperative  
priority m u s t b e  to consolidate a n d  build u p o n  w h a t h a s  b een achieved  
under the stabilization policies of the Last few  years.

- 3  -
T h e  scale of u n e m p lo ym e n t a n d  the n e e d  to raise the potential grow th  
rate m e a n  that the incipient recovery n o w  under w a y  m u s t b e  maintained,  
since this is a n  essential condition for a n y  lasting upturn in investment  
a n d  the creation of sufficient n u m b e rs  of n e w  jobs. M easures m u s t  
b e  taken in three areas if this objective is to b e  achieved:
(i) M acro eco n o m ic policies: m onetary policies steering clear of  
a n y  acceleration in inflation m u s t b e  maintained. Public  
expenditure should b e  cut b ack a n d  efforts to reduce deficits  
should b e  pursued, primarily in the countries w h o s e  deficits  
are clearly still too high. H ow ever, it is just a s  important  
that a n y  n e w  r o o m  for m a n o eu vre should b e  u sed  to reduce taxes  
a n d  increase investment.
(ii) E m p lo ym en t: w a g e  costs should b e  m o re  diversified to reflect
differences in firms' profitability a n d  should in general b e  
stabilized or even  reduced; the obstacles to increasing com panies'  
readiness to take o n  labour should b e  rem oved, without h o w eve r  
jeopardizing the rights of present em ployees; w a y s  of increasing  
labour m arket flexibility, including ch an g es in working time,  
should b e  systematically sought; a n d  a n  active em p lo ym en t a n d  
training policy for young  people a n d  the long-term u n em p lo yed  is  
needed.
(iii) Supply-side m e asu res m u s t b e  vigorously pursued. T h e  competitiveness  
of productive structures m u s t b e  strengthened through a  rang e of  
m easu res including the further developm ent of the single C o m m u n ity  
market, joint advanced-technology developm ent a n d  adjustments in  
the rules a n d  regulations governing the activities of firms.
3.2 In addition to firm ag reem en t at C o m m u n ity  leveL o n  this set of  
eco n o m ic guidelines, the C o m m is s io n  considers that the E uropean M onetary  
S ystem  should b e  consolidated - for a  n u m b e r of fundam ental reasons.
Firstly, experience h a s  s h o w n  that a  robust E M S  is essential both to the  
C om m unity's existence a s  a n  integrated a n d  h o m o g e n e o u s  eco n o m ic entity  
a n d  to the securing of its potential for subsequent developm ent. A  strong  
a n d  cohesive C o m m u n ity  is a n  invaluable asset for restoring growth,  
regaining competitiveness a n d  im proving em ploym ent.
Secondly, a  stronger E u ro p ean  m onetary identity is essential if w e  are to  
reduce the vulnerability of the E u ro p ean  eco n o m ies to external constraints.
It is not alw ays realized h o w  seriously the C om m unity's external w eakn ess  
h am p ers policies for a  faster return to m o re  satisfactory growth.  
Consolidation of the E M S  w o u ld  give the C o m m u n ity  greater international  
influence, a n d  w o u ld  enable it to exert a  useful stabilizing effect a n d  
to regain a  degree of a u to n o m y  w h ich  it lacks today. How ever, s u c h  
external action will b e  credible only if the C o m m u n ity  ensures that its  
internal m onetary organization is solidly b ased  a n d  if it achieves  
greater convergence in perform ances. T h e  time h a s  c o m e  for it to d o  so.

- 4  *
Experience h a s  s h o w n  that the E M S  could b e  im proved in a  n u m b e r of ways, a n d  
the C o m m issio n  h a s  recently laid proposals before the Council of Ministers  
with this aim  in view.
T h e  proposals m a k e  u p  a  balanced package consisting of a  series of m easu res  
for im m ediate action a n d  a n  agreem ent to b e  reached in the near future o n  
other action. T h e  aim s are a s  follows:
- to take a  series of m easures to strengthen convergence;
- to re s u m e  the financial integration process b y  easing the restrictions o n  
capital m o v e m e n ts  a n d  b y  gradually extending M e m b e r States' obligations  
with regard to the liberalization of capital m o vem ents;
- to develop the role of the public E C U , in particular b y  improving the  
conditions for its u se betw een central banks, b y  increasing its  
remuneration a n d  b y  m aking it accessible to other central b anks in  
Europe;
- promoting the private use of the E C U  through wider quotation, the  
establishment of a  clearing system, the introduction of greater transparency  
o n  the m arket in E C U  securities a n d  the subsequent diversification of s u c h  
securities.
- In addition, the C o m m issio n  proposes that early solutions b e  found o n  
other key questions:
- participation of sterling in the exchange rate m echanism  a n d  reduction  
in the m argins for the lira,
- intramarginal interventions in E C U s ,
- abolition of the E C U 's  acceptability limit,
- rem oval of existing obstacles, particularly in the  
Federal Republic of G erm any, to the private u se of the E C U ,
- adjustments to the C o m m u n ity  instruments providing balance-of-payments  
support.
T h e  C o m m issio n  requests the European Council to lend its support to this  
initiative: following the progress achieved at the Fontainebleau meeting,
it w ould m a k e  a n  important contribution to restoring vitality to the  
C o m m u n ity  a n d  w ould help secure greater stability in international m onetary  
relationships.
T h e  m o s t timely occasion for reaching a n  agreem ent o n  significant  
strengthening of the E M S  is the C o u nciL  meeting of Ministers for  
E c o n o m ic  a n d  Financial Affairs to b e  held o n  1 0  D ecem ber. This is a n  
opportunity w hich m u s t not b e  m issed.

MAIN ECONOMIC INUICAJORS FOR 1HC EUROPEAN COMMUNITY, UNITED STATES AND JAPAN
I  TABl F 1 CROSS 
PM I  CLDOME StIC PROOUCT (  PERCENT.  CHANCE AT CONSIANT 
S ON I'MLCIUINC Yl AM,  1C, USA, JAPAN, 1971-1986)ITAHIF 2 :  DTFIATOR OF PR I  VAT F CONSUMPTION (PERCENT. CHANGE ON |  PRLCIUINC Yl AM, LC, USA, JAPAN, 1971-1985)
1 1971i....1 19
711 I9601981198;»190119841986 1 I 198019011982198319641965
I I9601 1  98U
IB 3232-1 .  1 1  1 .4151.0 i IB 717.0877.56.86.45.5
IDK 23-4-.73.62.5'  362.9 1 }  OK in29.81710.36.76.04.3
ID 2820.0-1.0 1.024,  2.5 1 ID 525.4575.12.92.32.2
|  GR 4716-.4 .0.3222.0 I 1  GR 13422.122321.119.018.518.0|r T611.  1i  .6 7141.7 | I  1 9413.112 71  .19.37.65.7|  1  m 41111. u1  . · ( >11 i 1  Mil 1391». r.20l1  7.19. 7B.6 7 .0
1' l119 . 1- 1-1.2 92 1 1  1  
| i14620.11921 f t .716. 110. 3 7. 1
| i )111-i.n- 1  .  1-1.4 201.4 1 6//.//7I I I .{ )8.46. /5.·)INI 34 9- .  7-1.6 .6201.8 I INI 7767625.52.93.22.3
|UK 19-2( ,- 1  .  J 2 .  13 .  3203.0 | |  UK 1331681  118.35. 15.15.6
lie 2911-.3 .5.9222.3 1 1  F 0 971  111018.86.25. 14.2
|  USA 29-23.0-2.4 3.3702.9 1 |  USA 6910269583.93.43.6
I  JAP |----4a494.
03.22.9554.4 1 I  JAP 8668482.41.42.93.3
I...........................................................................|TABLE 3 :  NUMBER OF UNEMPLOYED AS PIRCLNI AGE Or THF 
|  CIVILIAN LABOUR FORCE (EC, USA, JAPAN, 1971-1985)I.................................................................... ......
I 19
71
I 198019811982190319841985
1 I960
IQ 67y111.21313413.413.8
IDK 36678.99510410,2 9.0
ID 26334. /f t8048.68.6|CH ---15798.48.8
If 36647.8888410.U11.6
I  IRL 720310.212414816.316. 3
1  1 59800.0H)69/10.210.6
IL 37i.o13161.71.8
INI 33620.81  171 ' )616.916.9
IUK 41639.31071  1711.711.8
ire 40617.89• j10411.011.4
IUSA 62717.69/967.57.1
1  JAP 16212.2242f2.62.5II.....-.............................................................tI
ABLE 4 :  BALANCE ON CURRENT ACCOUNT (PER CENT OF GDP,
|  LC, USA, JAPAN, 1971-1985)I....................................................................
I
I
l19
71
1980198019811982198319841985
IQ .0-4.5-43-34-.9-4.5
|  OK -3.0-3.7-31-41-2.1-26-2.2
ID .  7-1.8- 106.7 61. 1
I  GR -2.8 .  3 3-39-4.5-47-4.9
IF -.4-1.4-14-30-1.5-12-.7
I  IRL -4.9-11.3-144-101-5.9-44-3.3
I  1  
l l .-.3-2.4-23-16.  1-4.0
22.522.628240239.039137.5
INI 1  .  1-1.5 22282.8384.4
|  UK -.81.825191.0 2.2
i  f  C  |  USA 
|  JAP-.2 
.  1  
.7-1.3.2
-1.0“61
5-53
7.  1
-1.2
2.0-2
30
5
0.4
-3.6
3.3
NATIONAL ACCOUNTS DEFINITION
|IABLE 5 :  CLNIKAL COVtHNMlNI LLNUINC OR BORROWING (-) 
j  AS PlftCENTACE 01 CDP (EC, 1971-1905)I...................................................................
I
I
I1971
I960190019811982198319841985
IB -4.9-9.9-12.6-11.1-12.2-1 1.5-10.5
|DK -1.0-3.3-7.1-9.3-7.6-5.5-3.7
ID -1.7-3. 1-3.9-3.4-2.7-1.7 -.8
|CR -4.6-5.4-10.6 -9. 7-9.2-10.0-10. 1
|f -.5 .  3-1.8-2.5-3.3-3.4-3.6
I  IRL -9. 1-11.8-16.8-14.2-12. 3-10.8-10.9
1  1 -8.7-8.4-11.7-12.7-11.8-13.6-12.2
IL 2.0-.8-2. 3-1.4 .0.  1.9
INI -1.6-4.0-5.2-6.9-6. 1-5.6-6.0
IUK -3.3-3.4-2. 7-2. . 1-3.4-3.0-2.4
lie -3.2-3.6-6.4-5.6-5.6-5.4-4.8|I AIM f 6 :  MONfY SUPPlY M2/M3 {Pf RCEN1AGE CHANGE AT END OF YEAR I  
i  ON IWlLVi MON 11IS LARI UR, LC, USA, JAPAN, 1971-1985)1I................................. -........................................... I
I
I
!19
71
1980198019011982196319841965
IB 10. 3 276.65971767.3
IDK 11.71099.6172471108.0
ID 10.0 625.07153474.7
ICR 23.824734.329020324224.1
ir 14.8 9711.4108112706.5
I  IRL 18.416917.41295613211.0
I  I 19.512016.017213212010.8
u.- - - - ---
1  NL 10.8 365.276 105706.0
IUK 14.518614.6 92103657.0
l ie
IUSA 
1  JAP13.0
9.5
16.910
8
75
9210.0 
10. 1  
11.09
97/2
910 11 
70
54807.2
F Nl USA· M2; D, CR, IRL: M3; B, OK: M2H; UK: STERLING M3 
(FISCAL YEAR); I: M2 (71-79), M3 (80-85); JAP: M2 AND CD.