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COM (77)315
V ol.1977/0105

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COMMISSION OFTHE EUROPEAN COMMUNITIES
COM(77)315 final .
Brussels ,7July 1977
COMMISSION COMMUNICATION TO THE COUNCIL
ONECONOMIC POLICY TOBE FOLLOWED IN1977
AND ONTHE PREPARATION OPPUBLIC BUDGETS FOR 1978
K(77 )315 final *

CONTENTS
I. THE ECONOMIC SITUATION AND THE OUTLOOK FORTHECOMMUNITY
1.General economie situation and recent developments
2.Outlook for theCommunity in1977
3.The world scene and outlook
4.Theoutlook for 1978 andtheobjectives ofthe
fourth medium-term economic policy programme
II. GUIDELINES FOR ECONOMIC POLICY INTHE COMMUNITY
1.General guidelines
2.Monetary policy guidelines
3.Budgetary andfinancial policy guidelines
4.Guidelines country bycountry
Denmark
Federal Republic ofGermany
France
Ireland
Italy
Netherlands
Belgium
Luxembourg
United Kingdom
PROPOSAL FORACOUNCIL DECISION ONTHEPREPARATION OF
PUBLIC BUDGETS FOR 1978
STATISTICAL APPENDIX

-1-
I.THE -ECONOMIC SITUATION ANDTHEOUTLOOK FORTHECOMMUNITY
1.General economic situation and recent developments
1. Therecovery iscontinuing intheCommunity atamoderate pace ,"but
the level ofunemployment andrates ofinflation arestill asouroe ofconcern *
Balance ofpayments disequilibria aredecreasing gradually inmost Member States ,
"butwide disparities persist from onecountry toanother .
2. Theupswing since 1975 has "been anything butsmooth ;periods ofslack
growth have alternated with periods ofrapid expansion .Inthefirst stage
oftheupswing ,thefactors ofexpansion –underpinned byarange ofshort-term
measures aims atstrengthening therecovery –were particularly vigorous until
thefirst quarter of1976 ,Then followed along period ofcalm during thesummer ,
and theoutput oftheeconomy asawhole accelerated once again only in"thefourth
quarter .In1976 ,theannual average growth rate ofgross domestic product in
Volume terms wasover 4»5$ in"theCommunity .Thekeyfactors intherecovery have
been arecovery ofstookbuilding ,steady progress inexports andaboom insales of
consumer durables –particularly cars –Sifter aperiod where demand wasdeferred .
Atthesame time ,innearly alltheMember States ,thesituation onthelabour
market hasshown little change orhaseven wors&ned .In1976 ,theCommunity ran
upaheavy current account deficit ,ofabout %8billion .
3. Thegrowth rate hadbeen speeding uptothefinal quarter of1976 ,
butintheearly months of1977 itslowed somewhat .Theconjunctural indicators
show that therates ofgrowth ofdemand andoutput arerelatively low (see
Table l)^^. inthefirst quarter of1977 »gross domestio product involume ,
calculated onanannual basis ,increased byonly 3^–4$onthepreceding
quarter ,asagainst 5*5% during thefourth quarter of1976 .Demand andoutput
hasprobably continued togrow atamoderate pace during thesecond quarter .
(l)This year conjunctural data areparticularly difficult tointerpret owing
tomodifications inthestatistical methodology intheFederal Republic
ofGermany andItaly .

4. Since thebeginning oftheyear industry has "been ingeneral still
running well "below capacity ,theutilization rate "being ,onaverage ,79$.
(Amaximum rateofabout 86%wasobserved in1973andaminimum rateof72%%
in1975 ).Economic activity hasnotprogressed fast enough toprovide employment
forthestill large number ofyoung people coming ontothelabour market for
thefirst time .Since last summer ,theseasonally-adjusted number ofwholly
unemployed intheCommunity hasremained virtually unchanged }inMaysome 5.4million
people ,orapproximately 5,1% oftheworking population were outofwork (see
Table 2).Inmost countries theproportion ofunemployed less than 25years old
isasmuch as40$ormore .Thenumber ofvacanoies hastended todecrease in
almost all the Member States .
5. Attheendof1976 ,andduring thefirst quarter of1977# special factors
–previous sizeable currency depreciations ,rises intheprices ofrawmaterials
andincreases inindirect taxrates and theprices ofpublic goods –prevented
further progress foratime ,inmost ofthemember countries ,intheeffort to
reduce inflation rates .Since winter thetrend inunderlying inflation rates
hasimproved slightly .Nonetheless inMay ,onayea3> -oi>-year basis therate of
increase inconsumer prices hasagain accelerated to18J$ inItaly ,to17%inthe
United Kingdom andto14%inIreland .Onthesame basis rates ofinflation are
running atless than 4%intheFederal Republic ofGermany ,f%intheBenelux
countries and9*5% inDenmark andFrance (seeTable3 ).During thefirst five
months of1977 »theincrease fortheCommunity asawhole ,onanannual basis ,
was13$.Prices therefore continued torise fast ,atleast toconsumers ,although
thepressure ofwage costs remained moderate inmany countries .
6. Inmost ofthemember countries ,growth ,until theautumn of1976 ,was
mainly export –ledparticularly because ofthestrength ofintraF-Community trade .
Thereafter ,demand from abroad weakened substantially ,although exports tothird
countries remained relatively strong .Asimports went onexpanding foratime
(petroleum products purchases from OPEC countries ahead ofexpected currency
changes ),theCommunity 'sdeficit ontrade andthebalance ofpayments steadily
worsened .During thefourth quarter of1976,thetrade defioit wasmore than

twice thefigure for thefirst quarter .Nonetheless trade deficits have been
gradually contracting since the "beginning ofthepresent year (seeTable 4)dueto
toslacker import growth arising from theslowdown inproduction andrelatively
high stock levels *
V

4
2,Outlook fortheCommunity in197f
7.Growth potential maybe"expected to"gainsomestrength
inmostofthemember countries during thesecond half 0f1977 .The
growth ofworld trade outside theCommunity -islikely toaccelerate
alittle .Theexpected lower inflation rates should allow a
morerapid growth ofdisposable income .Private consumption could well then
start making amore substantial contribution togrowth .Private investment
should continue toexpand ,although atamoderate pace ,aslongassales and
profit prospects improve ,andconfidence inthefuture oftheeconomy is
built up.Theoutlook forresidential construction andpublic sector investment
isstill uncertain .
8.Ascompared with 1976 ,theannual average increase intheCommunity 's
gross domestic product involume terminI977should beonlyabout 3%(seeTables 5
and7).Thisfalls short ofthe3.5%predicted inMarch^and the4%objective fixed
for1977bytheCouncil intheAnnual Report ontheeoonomio situation inthe
Community and "theeconomio polioy programme ^.In1977,gross domestic product in
volume willprobably notincrease bymore than 4to4.5$ (instead of5%
forecast inMarch )intheFederal Republic ofGermany^orbymorethan 3to
3.5$ (instead of4.5$)inPrance .InItaly agrowth ratehigher thanthatforecast
atthebeginning oftheyear nowseems likely .However ,inmost oftheother
Member States ,annual average growth rates should befairly close tothe
figures putforward inMarch 1977 (seeTable 5)*Theincrease intotal output
which isatpresent considered likely will probably fall short ,inalmost all
theMember States ,ofwhat isneeded foranyimprovement inthedegree of
capacity utilisation andinthelabour market situation ,even bearing inmind
thespecific measures that have been taken .
./.
(l)Council Decision (77/340/EEC)of25April 1977concerning theadjustment
oftheeconomic policy guidelines for1977 .OJ119,12May1977 .
(2)Council Decisión (76/916/EEC),22November 1976 ,OJL358,29December 1976 .
(3)Decision oftheCouncil andrepresentatives oftheGovernments ofthe
Member States meeting within theCouncil (77/294/eEC)of14March 1977 ;
°JL101,25April 1977 .
(4)Theestimated realGDPgrowth ratewillbelower intheFederal Republic
ofGermany partly because thebaseyear forcalculating prices hasbeen
changed (from I962 to1970).

9. Foreseeable inflation rates arestill cause forconcern .Although
according totheguidelines intheAnnual Report they were tohave "been
reduced tosome 7or8%intheCommunity asawhole in1977 »they will
probably infaot bearound 9l$ assuming some slowing down during the
second half oftheyeari This islargely duetotheeffects ofcurrency
depreciations ,andtherises inrawmaterial prices .Butexceptional
increases insome taxes andpublic service charges incertain countries
where thebudgetary deficit required corrective action have also palyed a
role .The effects ofthese various factors arelikely todiminish inthe
coming months .However ,thegeneral deceleration ofwage cost increases
since 1975 will probably endin1977# Overall thedivergences inprice and
cost trends within theCommunity will remain substantial (seeTable 8).
10. With regard tothebalance ofpayments ,some progress will bemade
in1977 *Thetendency forthedeficits toshrink which has just gotunder
wayandwhich will probably continue justifies thehope that theCommunity 's
current account mayeven balance outin1977 *This prediction isbased in
particular onthemajor improvement inthebalance ofpayments situation
intheUnited Kingdom ,Italy andFrance .Itshould ,however ,beborne inmind
that this result isonly partly duetoanimprovement incompetitivity ,and
that itcanbeattributed inparticular toaslowing down ofeconomio activity
andBritish sales ofNorth Seaoil# IntheUnited Kingdom ,theimprovement
intheexternal accounts for1977 isalready much greater than itwasafew
months ago*

-6-
3.Theworld scene and outlook
11. In1976 ,real GDPinnon-member industrialized countries increased
more sharply than intheCommunity taken asawhole (5»5$ asagainst 4»5$ )
(seeTable 7).Thegrowth rate ofthese countries together should reach
about 4.5# in1977 and5#in1978 .
Thevolume ofworld trade ,which wasdecelerating uptothebeginning
of1977 maywell expand more rapidly once again during thecourse ofthe
year and play animportant part insustaining economic activity in
member countries .However ,theannual rate ofincrease ofworld trade
(involume terms )in1977 will beappreciably slower than last year because
anumber ofexceptional factors ,such asrestocking andanticipatory purchases
ofpetroleum products ,will have worked themselves out .In1977 »thetotal
volume ofimports byindustrialized countries (excluding Community imports )
should increase bysome compared with 12.5$ in1976 ;thetotal volume
ofworld imports (including those ofOPEC countries )bydeveloping and
State-trading countries should increase by7~kfocompared with 9/°in1976
(seeTable 7)*Thefirst forecasts ofprospects for1978 suggest rates
ofgrowth similar tothose in1977 tproviding that theworld economic upturn
ismaintained andthat tendencies towards protectionism areresisted .
12. Since autumn 1976 ,world market prices have climbed considerably .Only
recently hasthere been aslackening ofthesharp upward movement which
involved inparticular foodstuffs andanimal feed andnon-ferros metals ,
andwhich wascaused bypoorharvests andother scarcities' ^.InMay,the
dollar-based HWWA index wasmore than 14%uponthelevel reached atthe
same period last year andmore than IQffouponDecember 1976 .Itisexpected
that theprices offoodstuffs andrawmaterials will increase again ,
inthesecond half of1977 andin1978 ,though less rapidly .
./•
(l)Forthefirst time ineight months ,theoverall index oftheHamburger
Weltwirtschafts Archiv fell by1.6^inMaycompared with thepreceding month .

Itshould also "benoted that thethreat ofarenewed upsurge in
inflation hasrecently reappeared inanumber ofmajor non-member countries ^
This recent phenomenon exacerbates thedifficulties ofareturn toprice
stability and thereduction ofthebalance ofpayments deficits ofthe
Community .
13. Balance ofpayments disequilibria attheworld level will continue
tohinder thegrowth ofinternational trade .In1977 ftheOPEC countries 1
surplus oncurrent account islikely toincrease slightly toexceed
US$40000million . Asthenon-oil-producing developing countries
will probably avoid anincrease intheir overall deficit asaresult ofthe
rise inrawmaterials prices ,therest oftheworld 'sdeficit will increase .
Themeasures taken bytheCommunity may enable ittoerase itsdeficit in
1977 .While Japan 'ssurplus islikely togrow ,thedeficits inthesmaller
industrialized countries and th.e United States will worsen .The oil deficit
oftheUnited States could reach half the overall trade surplus oftheOPEC
countries .
./•
(l)Between January andMaythis year consumer prices intheUnited States
have risen atnearby 10$inannual terms ,while theincrease ofwholesale
ices hasbeen even greater .

-8-
4.Theoutlook for1978 andtheobjectives ofthefourth -medium -term
economic policy programme
14. Despite theuncertainty prejudicing theconditions surrounding
economic activity ,arough exposition ofpossible developments inthe nember
countries in1978 is.desirable .Theoutline isbased ,ofcourse ,ondevelopments
implied byunchanged economic policies ,taking into account theassumptions
which can atpresent bemade concerning external economic transactions
andthethrust ofcurrent economic trends .Such aforecast ,probabilistic
innature /should notbeconfused with feasible anddesirable
developments which could beachieved assuming changes inbehaviour orthe
introduction ofneweconomic policy measures .
15. Onthebasis ofthe above assumptions ,the rate ofgrowth ofreal
GDP intheCommunity maybeput atabout 3.5Xfor1978 .Compared with
1977 ,overall demand andoutput mayexpand slightly more rapidly ,
particularly inthose member countries which have hadtoundertake
•restrictive economic policies .These stabilizing policies pursued
in1977 ,provided they result inasufficient measure ofsuccess ,wi11,however ,
"bring about aloosening ofexternal constraints ;thus ,growth prospects will
beenhanced ,particularly intheUnited Kingdom ,Italy ,Denmark andFrance .
Ontheother hand ,theprospects forgrowth inthesurplus countries
(theFederal Republic ofGermany andtheNetherlands )are atpresent rather
poor .All-in all,none oftherates ofgrowth anticipated forthevarious
Member States -will besufficient to cause anyappreciable improvement in
thelabour market situation *
Theprospects are somewhat less unfavourable forareduction inthe
level oftheaverage inflation rate in1978 (toabout 8/6intheCommunity as
awhole )andforasubstantial narrowing oftherange ofinflation rates as
between theMember States .This presupposes ,however ,that theincrease in
primary commodity prices ,therise inwage costs and -theadjustment ofexchange
rates toaccount fordiffering rates ofinflation donotexceed certain limits *
Furthermore ,itisprobable that thebalance ofpayments position ofthe
Community asawhole will beinsurplus *Asaresult ofthepersistence of,
moderate growth there is,however ,reason tofear that "the 1improved external
position will notcome about very quickly fortheCommunity considered intotal ,
andthat excessive disparities between balance ofpayments situations inthe
various Member States will reamin *
•••/•••

16. Thelack oftheanticipated progress ingrowth andemployment
remains extremely worrying .
Taking into account theprobable rate ofgrowth ofGDPfor
1977 andtheassumed rate for1978 ,theaverage annual rate ofgrowth for
theperiod 1976-1978 will be "between 3#5%and4$ "theCommunity asa
whole .GDPwould have toincrease annually "by "between &foand in1979
and1980 ,iftheannual growth ofbetween 4»5%and5%sought inthefourth
medium-term economic polioy programme were to "beachieved .Itwill "be
practically impossible between nowand1980 ,torecover theground which
hasbeen lost ,because inorder to-dosoitwould beneces&ary toovercome
immediately theinflationary pressures inall theMember States .
17. The weakness ofinvestment isanimportant cause ofthe
slowness oftheeconomic recovery .Theshare ofinvestment inGDP,which
had ,continuously increased throughout theCommunity during the 1950' s,
began todecline towards theendofthe1960 's.Thereversal ofthe
trend became evident asfrom thebeginning ofthe current decade and it
hasbeen amplified bythecyclical effects ofthe1975 recession .Thus ,
theinvestment share hasfallen from 232onaverage fortheyears 1970-1973
to20.5 %in1977 .Theprincipal change hasbeen inbusiness investment ,
butresidential construction toohasbeen affected bythis development ,
while public investment hasalso been tending toweaken incertain countries .
The change which hasoccurred inthetrend ofprivate sector
investment isexplicable interms ofthe combined action ofnumerous
factors .Since theend x>fthe1960 's,inflation rates inthemain
.industrialised countries have both accelarated anddiverged ;
meanwhile ,thedeepest andmost prolonged post second -world -warrecession
began . While this conjunction ofinflation andstagnation was
developing ,theprice structure waschanging atavery rapid rate ;labour
costs everywhere continued toincrease ,theshare ofprofits inGDP
declined ^oilandprimary commodity prices shot upwards andtheprogressive

collapse ofthefixed exchange rate system gave rise tochanges inrelative
prices andinoejHainties between different countries .Inthis situation ,
entrepreneurs were nolonger asstired ofmarket outlets norofmaintaining
adequate profit margins •Insum ,confidence infuture profitability declined ,
thus bringing about alower propensity toinvest .
The falling-behind ofinvestment calls ,inthe context of
hesitant economic conditions ,forswift corrective action .Gross fixed
capital formation hasanessential r5le inthestrengthening ofthe
economic recovery both intheprovision ofproductive capacity and inthe
creation ofthe additional jobs which arerequired inthemedium term .
Inmost member countries ,theaverage annual growth rate ofinvestment
should exceed substantially ,inthemedium term ,that ofGDP inreal terms .

11-
II.GUIDELINES FOR ECONOMIC POLICY INTHE COMMUNITY
1.General guidelines
18. Anexamination ofthe current situation and ofthe outlook for
economio activity indicate that thegrowth andemployment objectives
adopted inthecontext oftheeconomio policy guidelines established in
March 1977 and inthefourth medium-term economic policy programme are
hardly capable ofachievement ,fortheCommunity asawhole .Theeconomic
policies conducted bythemember countries having anexternal surplus and
those ofdeficit member countries have notyetproduced all oftheir expected
results .Theprocess ofadjustment which hasbegun andthe structural
changes bywhich itisinevitably accompanied areoccurring slowly and
their magnitude hasnotyet ,moreover ,been fully appreciated .Nevertheless ,
impatience isnomore appropriate than resignation orpessimism when it
relates tothemajor distortions which have emerged ,over anumber ofyears ,
intheworld eoonomy under theinfluenoe ,notably ,ofaccelerated inflation
andtheoilcrisis .-These structural difficulties canonly beovercome
gradually byputting into aotion thepolicies foreseen inthe fourth
medium term economic policy programme oftheCommunity .
19* Itwould then beamistake toabandon efforts tocontrol
demand andtocoordinate itatCommunity level onthegrounds that ,upto
thepresent ,theobjectives sought have notalways been fully attained .
Thedisparity ofeconomic situations within theCommunity implies ,inorder
tomaintain anadequate rate ofgrowth inthose Member States where the
primary policy objective istoremove inflation andtheexternal deficit ,
that expansion should continue ,andprobably accelerate ,inthose countries
where thebalance ofpayments iscurrently satisfactory .But ,ontheother
hand ,expansion inthelatter countries ispartly dependent upon thesuccess
ofanti-inflationary polioies intheformer countries ,since thepersistence
ofsizeable divergences intherate ofprice inoreases islikely tocreate
newuncertainties especially about themedium-term development ofexport
markets and therefore toinfluenoe the decisions ofinvestors .Itismore
than ever required that adifferentiated regulation ofdomestic demand ,
•••/•••

-12-
asbetween thesurplus countries andthedeficit countries ,should he
sustained ,asprovided for ,indeed ,intheguidelines ofNovember 1976 and
March 1977 foreconomic policy intheCommunity in1977 •
20. Itisproper that allthemember countries should trytore­
establish orimprove conditions conducive toareturn tosustained and
non-inflationary growth ,encouraging ,inparticular ,thepropensity to
invest ofthe private sector andassuring ahigh level ofpublic investment .
Toachieve ahealthy andlasting recovery ininvestment ,thereduction in
therate ofincrease ofwage costs ,both direct andindirect ,ofthe last
fewmonths needs tocontinue ,but ingeneral itmust beassociated with
policies toreduce inequalities .Atthe same time ,speoific action ,both
atnational andCommunity level ,should besuch astofavour therecovery
inivestment inthe oontext ofaCommunity structural policy .With this
objective inmind ,theCommunity iscontributing by:
–strengthening ofexisting Community instruments which hasamultiplier
effect .Thus for example thecapital oftheE.I.B. hasbeen increased
andabetter use ofthefunctions oftheSocial Fund ,abroadening and
diversification oftheactivities oftheRegional Fund andamobilisation
offinancial instruments acquired intheenergy sector canallbeanticipated .
–thecreation ofanewCommunity borrowing mechanism ,designed tofinance
investment ofastructural character inline with priority Community
objectives intheenergy sector ,inindustries undergoing structural
change andintheinfrastructure ^^.
21. Publio intervention isnot sufficient t>overcome the
difficulties ofadaptation which will arise incoming years andtorestore
confidence inthe mediunh-term outlook .JLminimum economic and social
concensus onobjectives tobeachieved andtheinstruments ismore than
ever necessary *Animosities canonly narrow the scope forgrowth and
frustrate individual measures .Thethird meeting between
•••/•••
1'Cf.theCommunication from theCommission totheEuropean Council
"Investment andBorrowing intheCommunity ",document COM(77)300final .

-12a-
thesocial partners ,thegovernments oftheMember States and the
Commission held on27June 1977 confirmed the scale ofthe tasks to
hecarried outandofthedifficulties tohesolved (1)»Themeasures
which have already been taken inall themember countries inconnection
with employment andprofessional training ,particularly that ofyoung
people andwomen (2),ought tobestrengthened tothegreatest extent
possible * t
(1)Cf."Growth ,Stability andEmployment tstock-taking andprospects ",
C0M(77)25O final ,23May1977 .
(2)"Report totheEuropean Council onCommunity Action intheField of
theLabour Market ",COM(77)301 final ,15June ,1977 .

-13-
2.Monetary policy guidelines
22. Monetary policy hasamajor contribution tomake inconsolidating
orstrengthening thesuccess achieved inthefight against inflation .The
pursuit ofasteady monetary policy andthepublication ofquantified norms
fortherelevant monetary aggregates ineach member country will help toreduce
inflationary expectations ,tostrengthen theconfidence ofmanagement andprivate
consumers andfavour thedevelopment ofamore stable pattern ofexchange rates
"between thecurrencies ofMember States .TheCommission hasalready outlined ,
inits Annual Report ontheeconomic situation intheCommunity (l),quantitative
guidelines formonetary policy intheMember States for1977 *"buttea-get figures
were indicated for some Member States only .According tothefourth medium-term
economic policy programme fortheCommunity (2),guidelines forinternal monetary
policy should "beestablished ataCommunity level each year .TheCommission will
formulate quantitative monetary policy guidelines again initsforthcoming Annual
Report ontheeconomic situation intheCommunity .Thequantitative guidelines
will have totake account offairly divergent economic situations andofthe
differing monetary instruments ofmembei^-States .
23. Data available for1977 (covering ,formost countries ,only thefirst
quarter )appear toindicate aslow deceleration ofmonetary growth ,butspecial
vigilance onthepart ofthemonetary authorities isstill required incertain
Member States .This isespecially true ofItaly ,where monetary expansion has
been toovigorous and thequarterly norm fixed bytheCommunity inconnection
with theCommunity loan for that country wasexceeded inthefirst quarter of
1977 "byLit.1,300,000 million (thenorm wasLit.6,600 ,000million ).Itwould
also appear necessary tomaintain themeasures taken tolimit theexpansion
ofbank credit inDenmark ,France andtheNetherlands .Ontheother hand ,in
theUnited Kingdom ,where monetary growth hasfluctuated widely inthepast ,a
steadier andmore sustained expansion ofthemoney supply seems feasible and
desirable .IntheFederal Republic ofGermany ,thetrend ofcentral bank money
waslargely consistent with theguidelines during thefirst four months of1977 *
•••/•••
(l)Council decision of22November ,1976,approving theAnnual Report onthe
economic situation intheCommunity andsetting out theeconomic policy
guidelines for1977 *
(2)Decision 77/294/EEC-O.J.LlOl/lof15Aprii 1977 ,p.6.

-14
3*Budgetary andFinanoial policy guidft^nag
24.Moreusethaninthepastshould now "bemadeofbudgetary policy as
aninstrument ofgrowth policy .Somestrengthening ofmeasures taken to
stimulate investment isnecessary inorder tomakeuplostground asfaras
meeting medium-term targets isconcerned andtoaccelerate thereturn tofull
employment .SomeMember States havealready adopted thisapproach .
25.Asfarasprivate investment isconcerned ,decisions might "bemade toj
-extend theconditions forvaluing ,fortaxpurposes ,company liabilities
andassets ;
-increase subsidies forresearch anddevelopment ;
-payselective subsidies favouring investment designed tocreate newenergy
sources ortosaveenergy (l),toimprove theenvironment andtorefurbish
regional infrastructures .
Toavoid creating distortions between theMember States ,
r
allinvestment –incentive programmes should bethesubject ofcoordination at
Community level .
26.Anincrease indirect investment bypublic authorities ,whether central
orlocal ,isalsorecommended formostcountries ,within thelimits ofnon­
inflationary financing possibilities andtaking account oftheexisting
structure ofinterest rates .Suchinvestment willhaveadifferent importance
andimpact asbetween onecountry andanother ,according totheir different
infrastructural needs andthedegree ofspare capacity existing inthe
construction industry .Thespecific programmes tobedrawn upshould takethis
into account .
w Communication fromtheCommission totheCouncil onthe
tniJT emen!°Len®rgysavin«sthrough themodernisation ofexistingbuildings intheCommunity .Document CGM(77)l86 final ,of27May,1977.

15 •*
Atallevents ,inmost oftheMember States ,planning should now
"begin toraise thevolume ofgeneral government investment above that ofthe
last five years without ,however ,raising theproportion ofpublic expenditure
inGDP .Consumption andtransfer expenditures
should then "berestrained . Theannouncement oftheimplementation
ofnewprogrammes could well strenthen confidence without producing undesirable
"mechanical "effects if,asisthecase incertain countries ,unused production
capacities arefairly substantial .Integrating such efforts into thefive year
public investment programmes ,covered bytheCouncil Directive 74/l2l/EEC
(l),should increase thechances ofachieving more stable long term growth .
27. Action taken torevive investment using themeans described above
implies aprolongation ofefforts toreduce budget deficits inthesurplus
countries .Nevertheless ,stimulatory action should notbring about ,inthe
longer term ,anylasting deterioration inthenetborrowing requirement .
Where theweakness pfinvestment reflects general under-utilization ofproductive
capacity and entails therisk ofpersistent reduction orobsolesence of
capacity ,adeterioration inthebudget surplus ordeficit would beacceptable .
Thefavourable effects this should have oneconomic growth should
intime engender additional taxrevenue which initsturn should tend to
reverse theeffect onthebudget deficit .
Those member countries where thebalance ofpayments may still be
precarious in1978 orwhorequire acurrent surplus inorder torepay external
debt should modulate very carefully themeasures taken tostimulate investment ,
which should not ,inanyevent ,bring about agrowth inbudget deficits or
ofthemonetary aggregates inexcess ofthelimits agreed within theCommunity
context orwith theInternational Monetary Fund .
Inthose oountries inwhioh thebudget deficit isbeing financed toa
substantial degree bymonetary means in1977 ,action togetinvestment moving
again should becarefully monitored toprevent thecreation ofnewliquidity
fl*om strengthening inflationary expectations .
(l)Directive of18February 1974 ,concerned with stability ,growth andfull
employment intheCommunity ,

-16-
4.Guidelines country bycountry
InDenmark ,theeconomy hasentered into aphase ofvery slow growth
since theautumn of1976 brought about byarestrictive policy made
necessary byadeterioration inthecurrent balance ofpayments .Private
consumption hasscarcely risen atall and total investment (construction
andmachinery )hasexperienced aquite marked decline .Industrial exports
arethemain element supporting activity which remains ,however ,insuffi­
cient toprevent anincrease inunemployment .These trends should persist
uptotheendof1977 andshould permit ,asaresult ofafall inimports ,
areduction inthe current deficit .
Theoutlook for 1978 isfor acertain pick upintheeconomy dueto
amodest recovery ofinvestment andprivate consumption .Accordingly
imports could bemore dynamic anddespite anappreciable performance of
exports ,the current balance should only improve slightly .Unemployment
islikely toincrease further .Due tothemoderation ofimport prices
andwage costs the inflation rate will becutconsiderably .
Given the importance oftheexternal deficit andthegrowing burden
ofexternal debt which reduces the room formanoeuvre ofthe authorities ,
economic policy should asapriority begeared towards creating lasting
conditions for areturn toexternal equilibrium without which theemploy­
ment situation canonly grow worse .
The incomes policy adopted inSpring 1977 could contribute tothe
realisation ofthis objective insofar asthesalary guidelines ,which
imply amodest growth inreal terms in1978 ,arestriotly adhered to#
Itshould beaccompanied bybudgetary measures which ,ranged around
apolicy toreduce thenetborrowing requirement ofthepublic sector ,
could nevertheless permit certain investment incentives .This develop­
ment would beeven more desirable since the maintenance ofthe high
interest rates ,necessary tofinance theexternal deficit ,could have
anegative impact onthepropensity toinvest .Ifthesalary norms
were tobeexceeded ,therestrictive orientation ofbudgetary policy
would have tobereinforced ;it^would beinparticular appropriate
tohave recourse toanincrease inindirect taxation insuch away
astomaintain private consumption ,andconsequently imports ,ata
level compatible with thebalance ofpayments ,which must beregarded
astheprincipal objective .
••/••

IlltheFederal Republic ofGermany ,theupswing ,which has been more
restrained than inprevious expansionary phases ,remains weak ,Taking into
account therelative lack ofdynamism ofeconomic activity ,inthearea of
private-sector investment inparticular ,growth will "beinsufficient to
improve substantially thelabour market situation .
Owing totheslow rate ofgrowth ,efforts tocutthepublic deficits
should bespread over alarger period than previously foreseen .There may
infact "beaneed forthepublio "budgets toexert anexpansionary influence
ontheeconomy .Theamended draft ofthetaxlawtabled "bytheGovernment
andatpresent being examined byParliament isalong these lines .Under the
draft ,while thestandard rate ofVATistogoupfrom 11to12^5andthereduced
rate–applying principally tofoodstuffs andservices –from 5*5to6$,
child benefits are tobeincreased , certain basic
allowances under income andwage taxraised and some reliefs granted in
respect ofcompany taxation andwealth tax.This package islikely toprovide
aninitial stimulus ofsome DM1000million in1978 »Iftheimpact ofthese
measures ,together with those adopted earlier (theannual shares ofthe
multiannual public investment programme ,themeasures aiding public housing
andthespecific programme tomaintain employment )isinadequate torestore
domestic demand ,newstimuli should beapplied ,particularly with aview to
along-term strengthening oftheprospensity toinvest .
Inspite ofthemore expansionary nature oftheoverall budget ,continued
efforts should bemade tocurb thegrowth ofcurrent expenditure ,thereby
making room forcapital expenditure .
Onthemonetary side ,theBundesbank should continue itspresent policy
ofexpanding themoney supply inline with potential growth and
afurther slackening intherate ofprice inoreases .
Monetary policy should continue tobeapplied flexibly soastoavoid temporary
strains onthemoney and capital markets .

-18-
InFrance ,where therate ofgrowth ofwage costs hasmoderated since
the "beginning oftheyear ,growth which ismainly export-led ,will remain
moderate intheperiod uptothe endof1977 »Theexternal deficit will
shrink further and theterms oftrade will goonimproving# Theupward
movement ofprices will tend toslacken gradually from thesecond half of
1977 *In1978 ,aprogressive revival indomestic demand should lead tosome
quickening intherate ofgrowth .Even so,thelabours-market situation will
experience only aslow improvement .
Theeconomic policy laid down for1977 isaimed atsecuring adecisive
slowdown intheinflation rate soastomake substantial progress towards
restoring equilibrium inthemain macro-economic relationships .Thecentral
state budget ,which intheform nowadopted shows adeficit ofFF11800
million ,could close with adefioit close tothat
of 1976 .However ,thegreater part ofthis deficit will befinanced by
norv-monetary means .Inaddition ,theauthorities have forthefirst time
fixed alimit formoney supply growth for1977 while maintaining thecontrol
over theincrease inthegreater part ofbank lending .Compliance with these
guidelines throughout thecurrent year will make avaluable contribution to
thegeneral fight against price andcost inflation .
Theefforts torestore equilibrium should becontinued in1978 and ,in
particular , themore restrained growth ofcosts seen in1977 should
continue.Economic policy ,both monetary andbudgetary ,should aidinthis
direction .Ascare should betaken toavoid anysharp acceleration inthe
growth ofdemand asthis would belikely togenerate anexcessive increase
inimports ,thegrowth incentral state expenditure should therefore not
beallowed toexceed theincrease inoutput invalue terms though spending should
betimed totake account ofthe short-term economic situation .Thus investment
inbuilding andconstruction ,which hasalowimport content butanappreciable
effect onemployment ,might bestepped uptohelp sustain employment .Butinany
event areturn tobudget equilibrium ,which should remain thelonger-term
objective ,should notnecessarily besought in1978 .
•••/•••

-19-
InIreIani,developments inthe second half of1977 should oe
reflected inacardinally higher growth rate duetoasore sustained
perforicance ofexports ,private consusption aidinvestment ,resulting in
asmall decrease inuneanrlcTcent ,which ,willstill ,however ,regain at
anhistorically high level attheendoftheyear.Consumer prices will
eoderate andthe "balance ofpayaents deficit will continue towiden tutat
aslowe ^. ^Jj8these treads should continue , uneaployEent should
fall again aoderately andtherate ofincrease inprices slow down
further .
The 1977 "budget islikely tohave asore sticulat ory
effect than initially expected .Thenet borrowing requirement asapercentage
ofgross domestic product should nevertheless "beofthe saae order of
aagnitude aslast year (11-^e).
Budgetary policy should ensure that this level is
not,inany event ,exceeded
in1978 .Taking account ofthenecessity ,onthe one hand ofnot increasing
tax pressure onwage incases ,duetoincase policy considerations ,and on
the other ofgfJring asuppleaentary budgetary effort infavour ofinvestment
and ezploysent ,coapensatcrry savings should "befound "byanextension of
thetax "base oncertain incomes ,notably agricultural ,and cuts incertain
nan-priority current expenditure .Inaddition ,the cost offood subsidies
also constitutes aburden tothe Exchequer andtheir phasing out could be
envisaged when the consuaer price index shows its expected deceleration
inthe second half ofthis year .
Asfar asincomes policy isconcerned acontinuation ofanode rate
pay agreement far 1973 isimperative asitwill iaprove theprospects for
the development ofeaployaent and reduce therisk tothe balance of
payaents oftoorapid anexpansion inprivate consumption .
Toobtain atthe saae tiae asoderate expansion ofsonetary
aggregates and asatisfactory perforsance ofbank lending tothe private
sector ,the authorities should endeavour tofinance assoch aspossible
ofthepublic deficit bynon–const ary seans encourage the development
ofthe "non-oonetary liabilities "ofthe systea .

-20-
InItaly ,economic activity ,particularly "because ofthestabilization
measures adopted intheautumn of1976 ,weakened inthefirst months of
theyear ,while still showing anincrease relative tothefourth quarter .
Thecontinued high rate ofinflation slackened ,though only little .At
thesame time ,thedeficit 6ntheoverall "balance ofpayments for the
first four months oftheyear wasslightly smaller than ayear earlier .
Thelira exchange rate remained fairly stable thanks toasubstantial
increase inthe commercial bank 'sshort –term external indebtedness .
Theauthorities should ensure that economic growth ,which might reach
yf0in1977 ,isobtained under conditions which arecompatible with the
objectives for1977 and1978 agreed among theterms forthegrant ofthe
Community Loan .
Inthepublic finance field ,thepublic sector deficit will shrink
significantly in1977 ,mainly asaresult ofanincrease -already
implemented -incertain tax rates andthe introduction ofanew system
ofadvance taxonnon-wage incomes .However ,additional measures will
probably prove necessary tocomply with the limit ofLit 16450000 mil­
lion laid down bytheCouncil inMay .Further efforts will also have
tobemade tokeep tothe limit ofLit 14450000million for1978 .
This isbecause revenue growth must beexpected todecelerate sharply
nowthat taxarrangements are reverting tonormal and incomes in
money terms expanding alot less rapidly .Consequently ,thegrowth
inpublic expenditure ,andmore particularly that incurrent expen­
diture ,should bekept within strict Limits ,leaving noroom forany
increase inreal terms .There will also beaneed tosecure additional
revenue ,among other things through afresh adjustment ofpublic service
charges andincreased local taxation .The reform ofthesystem of
financing social security benefits which thegovernment hasunder­
taken tocarry out by31January 1978 should bring abetter distri­
bution inthe tax burden ondifferent sorts ofeconomic transactions .
Itshould also provide anopportunity forstepping upthefight
against taxavoidance .

Themonetary authorities seem tobehaving great difficulties
incontrolling domestic credit expansion .During the first quarter
of1977 ,this wasagain much larger than theobjective set,even
though therelease ofthedeposits onforeign currency purchases
meant anappreciable increase infirms' financial resources .TheCommunity
andinternational undertakings given onthis score for1977 and1978
must bestrictly complied with bythemonetary authorities ,failing
which thestabilization programme would beliable tolose most of
itseffectiveness .Ifnecessary ,the ceiling controls onbank lending
will have totightened andextended once more .Interest rates should
bekept relatively high fwhile simultaneously endeavouring toimprove
their structure .
Lastly ,fresh efforts will have tobemade tocontain the rise
inlabour costs perunit ofoutput .Success inthis field will help
toslow down inflation ,toimprove thecompetitive position oftheItalian
economy andtosupport the level ofemployment *

Inthe Netherlands ,following sluggish growth and anincrease
inunemployment inthefirst half-year ,theeconomy should pick up
somewhat inthesecond half of1977 and in1978 ,although this is
unlikely toproduce arise inemployment .Thesurplus onthebalance
ofpayments oncurrent account maywell continue atthe same level
ifnot increase .
The authorities must therefore seek amiddle course between
short-term considerations ,which favour acontinued policy of
stimulating investment ,andlongei^-term considerations ,which point to
theneed tocurb the rise inprices and costs and restrain the
growth inpublic expenditure andthe tax burden .
With theoutlook foremployment andactivity in1978 not parti­
cularly favourable ,itwould beinappropriate togive budgetary
policy arestrictive bias .However ,given themedium-term objectives ,
thegeneral government borrowing requirement asaproportion of
gross domestic product should remain close tothelevel reached in1977 •
Since unemployment cannot bebrought down unless there isa
relatively large external surplus ,economic policy must continue
toprovide room forsubstantial exports oflong-term capital ,which -
given thepresent outlook -should hardly beanimpediment tomeeting
thegeneral government financing requirements .Inanycase ,there is
aspecial need tocheck thegrowth ofdomestic liquidity soasto
avoid any increase intheratio "between that andnational income

-23-
InBeIgium ,inthe first half of1977 ,unemployment rose appreciably
again theupward movement ofconsumer prices slowed down andforeign trade
remained insatisfactory "balanoe «Inthemonths ahead andin1978 ,
economic growth will probably still betoomoderate ■'overall ,toproduce
anysignificant improvement onthelabour market .Ontheother hand ,
progress made inslowing down therates ofinflation remains precarious .
Economic policy should therefore continue tocombat "both unemployment
andinflation ,within thelimits set "bythedifficult public finance
situation .
Theconstraints imposed "bythepronounced public finance disequilibrium
adisequilibrium which isuntenable inthemedium term -would leave
noroom forimplementing aneconomic policy designed tostimulate
activity andemployment through overall budgetary measures .TheGovern­
ment should therefore pursue aselective andtemporary policy of
combating unemployment ;itshould stimulate business investment ,notably
byceasing tochange VAToninvestments andmaking full useofthe
scope offered bytheexisting laws oneconomic expansion .Care should
betaken toavoid anadditional increase inpublic investment ,given
thenarrow margin ofspare capacity inthepublic works sector .There should
heagradual shift inthepublic investment programmes towards activities
which focus more onthequality oflife andinvolve lower permanent
operating costs ;this shift would also contribute tothe required
moderation inthegrowth ofcurrent expenditure ,which isessential if
arapid increase inthetaxburden istobeavoided .The central
government budget for1978 should therefore beaimed ataredeploy­
ment ofthepresent budgetary resources with aview toholding to
borrowing requirement asapercentage ofGOPtothe level reached
in1977 .
Inview oftheresources available onthe capital market ,the
greatest possible proportion ofthebudget deficit should befinanced
through long-term loans onthenational market .Monetary policy should
restrict therate ofgrowth ofprivate sector credit totheexpected rate
ofgrowth inthegross domestic product inmoney terms soastoreduce the
danger ofexcess liquidity causing inflationary tendencies togetoutof
hand .
••■/•••

-24-
InLuxembourg,theeconomicsituationisstillsluggishandtheout­
lookforthesecondhalfof1977andfor1978holdsoutonlylittle
hopeofarevivalinactivity.Evensothepublicfinancesituation
ismorefavourable thanexpected.
WorkontheCentralgovernment budgetfor1978shouldbebased
ontheassumptionthattherewillstillbesomeunemployment and
thattemporary measurestosupportcertainindustries mayhavetobe
extended.Suchapolicystancewouldmakeitpossibletomaintain
Centralgovernment netlendingatalevelofoverFlux2000million
andholdgeneralgovernment netborrowing,expressed asaproportion
ofGDP,tothesamelevelasin1977<1%>-

-25-
Thepresent outj.eok for the"rite -? eccnocy issensitive tothe
wide rar.re of"possible outturns icrearnings after stage XIexpires atthe
endofJuly 1?77 •Until thedetails oxthecert wage agreement areknowr ^
itcust befeared that average earnings co-old well accelerate "beyond the
Government 'starget ofac^it 10percent fortheTwelve months froa August 1?77 .
Or.this basis ,ateaporary acceleration indecani isforeseen .
However ,bylate 1976 economic growth will have weakened andinflation siay
accelerate .
Theforecast isforar_increase incross domestic product (GT?)ofabout
3percent between l^TT and1578 .AsEuch as1percent ofthis growth in
GIF will beaccounted forbyincreased production ofI7orth Sea oil .The ra.e
ofinflation isexpected tofall markedly inthe outlook period ;inthefinal
q^aner of1-73 ,however ,theincrease over ayear earlier caystill benore
than 10per cent ifthe Goverrssent *starget with respect toearnings is
exceeded .The cocbined effect ofthis slowdown inprices and acceleration
inearnings could beastrong revival ofprivate consumption .Total gross
fixed asset formation will also show anincrease between 1977 and1?73 ,albeit
a":alower rate than forprivate consumption .Strong growth inprivate sector
fixed asset formation (especially inmanufacturing industry )will bepartly
offset cyafurther substantial decline inpublic sector investment .There
islikely tobelittle change inpublic authorities' current consumption .
Cntheexternal side ,there should beacontinued andrapid expansion innet
experts ,because cfthecontribution of5crth Sea oil ,pointing toacurrent
account surplus ofever =»1billion in1J73 .
Thepresent developoent3 ofthebudgetary aggregates suggest that the
public sector borrowing requirement (ro3?.)for157S/79should remain within
thefigure indicated intheLetter ofIntent totheZK?without increasing
thetaxpressure significantly .However ,domestic credit expansion (ICS)is
likely tobeclose tothepemit"ied ceiling .
Theproblems facing theU.K. Government ,when considering budgetary
policy forl?~5/7?,arethat :
–after reaching alowpoint inthesecond hsfof1?7~ ,therale ofinfj.a~ion
Bay begin torise once store ;
–therate ofeconomic grotrih zaynotbesufficient toavoid afallm
capacity tr»ili3ati<s and .afurther rise inunemployment ;
–thebalance ofdemand between cons-jEiption andinvestment caydeteriorate ;

-26-
-pressures could well arise tousetheroom formanoeuvre provided bythe
projected "balance ofpayments surplus tostimulate private consumption .
Despite thestrong possibility that economic expansion mayslow down ,no
fiscal ormonetary relaxation canbecountenanced given thethreat posed to
theU.K. economy bythepossibility ofafurther surge ininflation .However ,
should theauthorities still seeroom formanoeuvre without exceeding the
target given totheIMF 1(aPSBR ofb8.6 "billion ,theequivalent of5gper
cent ofGDP),action should bedirected towards alasting increase ininvest­
ment andemployment ,without ignoring thegoal ofreducing theinflation rate *

PROPOSAL FORACOUNCILDECISION
ofJuly1977
onthepreparation ofpublicbudgetsfor1978
THECOUNCILOFTHEEUROPEAN COMMUNITIES,
HavingregardtotheTreatyestablishing theEuropeanEconomicCommunity,
HavingregardtoCouncilDecision74/120/EECof18February1974onthe
attainmentofahighdegreeofconvergence oftheeconomicpoliciesofthe
MemberStatesoftheEuropeanEconomicCommunity (1),andinparticular
Articles 1and3thereof,
HavingregardtotheproposalfromtheCommission,
WhereastheCouncilagreeswiththeanalysisoftheeconomicsituation con­
tainedintheCommission communication ofJuly1977concerning,in
particular,thepreparation ofpublicbudgetsfor1978,
HASADOPTEDTHISDECISION:
Article 1
MemberStatesshallpursueeconomicpolicieswhichconformtotheguidelines
onthepreparation ofpublicbudgetsfor1978setoutintheAnnex(2).
Article2
ThisDecisionisaddressedtotheMemberStates.
DoneatBrussels,July1977
FortheCouncil
V
ThePresident
(1)OJNoL63,5.3.1974,p.16.
(2)ChapterIIoftheCommunication totheCouncil.

STATISTICAL APPENDIX
1-INLUSTRIAL PRODUCTION
2-UNEMPLOYMENT
3-CONSUMER PRICES
4-BALANCE OPTRAD3
5-ECONOMIC POLICY OBJECTIVES AND PROBABIS
RESULTS FOR 1977
6-WORLD OUTPUT AND TRADE
7-MAIN MACRO-ECONOMIC AGGREGATES
8-WAGE COSTS AND PRICES

TABLE 1
INDUSTRIAL PRODUCTION
(#change onpreceding period ) .geaa^iy^wed figures
f I i
1974 1975 1976I 1975 19761977 Apr."
•76 I
1973III IV r 11 in ■ IV i JfUl, Feb. !
IKaru ,Apr. Apr.
•77
IDenmark η -5,8 10,9 2,2 4,9 3,7 2,3 0,4 -0,2 1,2 -1,7 -1,9 6,3 : t
IP.R.Germany 7,9 -1,1 -7,2 7,9 0,3 4,3 2,8 2,4 0,4 1,6 .2,1 5,9 -1.7-0,8 3,5 7,1
IFrance 7,3 3,3 -5,1 <j,6-1,0 3,7 4,8 1,5 0.6 0,6 3,6 3,5 -0,8 3,1
IIreland 10,3 3,0 "6,1 10,1 !-0,o '-O.e4,o 3rO 3,4 1,5«
«r •ι · t t r
IItaly 10.0 4,3 -9,8 12,2 -0,3 3,7 4,9 4,8 0,3 6,7 M -0,9 10,0 '-3,3
INetherlands 6,1 3,4 -5,0 7,9 -2,0 8,4 1,9 1,0 1,3 1,1 40,1i"*-2,4 -0,2 2,3 Α1
IBelgium «,3 4,0 -10,4 8,7 -1,0 1,5 4,9 5,3 0,1 1,7 OA 4,8 I-1,2 -0,
ILuxembourg 12,0 3,8 -22,9 6,6 -10,0 9,9 3,7 8,2 -3,5 0,4 2,3 7,2 -5,4 6,0 I
IUnited Kingdom -3A -4*8 ,1*7 -0.6 0,S 2,6 0,2 0,0 1,8 2,7 1,3
« «-0fi-r,5
A A-u,z
A A3,0
ri I
Community 7,7 0,6 -7,3 7,7-0,5 3,9 3,4 2,2 0,5 –Uf.H
|Investment goods6,6 2,5-3,9 '1,9 i-1,0
t1,4 0,9 1,6 -0,5 1,7 2,9 4,9 -0,00,2 |
' )Ilf
Fβ,τ
IConsumer goods 7,3 -0,6 -4,8 7,8 2,1 2,1 2,5 3,0'0,7 3,2 1,4 3,1-1,5 -0,0 1,2 6,3
Intermediate goods 9,0 0,5 -10,8 10,3 -1,7 5,3 5,2 2,2 1,3 2,0 .2,5 -1,7-1,2 -0,8 -0,3li^l
-'=WiC
Source iSÔEC

•TABLE 2
"osEMPLomyr
Ohemplo.yment rates^sinca 1973
2973 im 1?75 1976 1975 1976 1977 ;
Annual average III 3V I II XXX IV I Apri .May
IDenmark 1,0 2,1 5,2 4,9 5,4 5,3 5,1 1,8 4,9 4,8 5,6 5,9 .5,8
JF.R. Germany 1,0 2,2 4,2 4,0 4,5 4,4 4,5 4,0 4,0 3,8 3,8 3,8 3,8
IFrance 1.8 2,2 3,8 4,2 3,9 4,4 4,3 4,2 4,1 4,3 4,3 4,5 4,.6
IIreland5,9 6,2 8,7 9,8 9,1 9,4 9,6 9,8 10,0 9,8 9,6 9,6 9,5
Italy i 5,3 5,1 5,7 I6,0 5,9 6,J0 5,9 6,0 6,1 6,1 6,3 6,5 6,5
!Hetherlands2,4 2,7 4,1 4,î I4,3
l i4,4 |4,4
r4,3 4,5 4,3 4,0 4,0 [4,1
r
IBelgium 2,9 3,1 5,2 6,7 5,8 6,3 6,3 6.6 7,0 7,1 7,1 7,2 7,4
!Luxembourg M 0,0 0,2 0,3 0,1 0,4 0,3 0,3 0,4 0,4 0,5 o,5 |0,5
IUnited .Kingdom 2,5 2,3 3,8 5,3 4,1 4,8 4,9 5,2 5,7 5,5 5,4 5,4 5*3
jCommunity 2,5 2,9 I4,4 5,0 4,7 4,9 5,0 4,9 5,1 4,9 5,0 5,1 5,1
(l)Humber ofregistered unemployed as%ofcivilian labour force .Asdefinitions arenotuniform ,unemployment rates arenot
comparable from country tocountiy# . .... .
Source tSOEC and Commission staff *

TABLE 3
CONSUMER PRICES
IJÈ change onpreceding period ,
.May «76
May «77
1973 19741975 j19761975 1976 1977 • •|
III IV I II III 17 1I Apr, May
Denmark 9,3I
9,5 9,0 1,8 -0,7 3,1 4,0 1,5 3,9
ι2,3|i.o
I I: !
i
F«H «Germany 7,0 7,0 5,9 4,6 0,8 0,9 1,7 1,5 0,1 0,5 1,9 0,5 0,4 3,8 ;
France 7,3 ,13,6 11,7 9,6 2,2 2,2 2,4 2,3 2,3 2,6 1,6 1,3 0,9 9,8 ;
Ireland (l) ,11,3 17,0 20,9 17,9 U0,8 2,7 7,3 5,3 1,5 4,2 3,8 3,8 13,9 ;
Italy 10,8 19,2 17,0 lo,7 1,9 * 2,9 4,2 6,3 2,8 6,4 [4,7
r1,1 1,2 18,3
Netherlands 8,1 9,8 II
9,9 I8,9 1,9 2,3 1,7 3,4 0,7 2,5 0,7 1,7 0,5 7,5'
Belgium 6,1 12,7 12,8 9,2 2,3 2,9 2,1 2,0 1,9 1,7 2,0 0,5 1,0 7,3
Luxembourg 6,1I
9,5 jι...!ιυ,ο ιI. !
!*° I2,1 3,0 2,5 2,31,0it-X !ri.o iI2,3'0,6 0,4 |7,2
,United ,Kingdom 9,2 15,0 24,2 |16,5 4,4 3,5 3,5 3,7 2,3 4,6 5,0 2,6 0,8 17,0
Community 8,2 13,0 13,4 11,0 2,2 2,2 2,7 3,1 1,6 3,0 2,9 1,3 (0,9) (11,5)J
(l)Quarterly indices .
Source tSOEC

Tapie 4
} BALANÇA OF TRAD5 ' •
I ..,
-– Seasonally adjusted ,pmillion
i • Iί ;i
19761975 1976 1977
1973 1974 1975
I II III IV I II III
%IV IMaroh April
atcruarterly-""i ratos .■"*
IDenmark -1584'-2306
i-1348 -3188 -230 -192 -371 -555 -663 -726 -819 -981 -835 -1002 -567
F.R. Germany 12976 20260 15448 12994 4758 4257 3302 3131 3075 3131 3314 3473 3451 4250 3099
IGermany -142*-7141 -1894 -8291 -609 91 -174 -1202 -1460 -1480 -2400 -2951 -2518 -2635 -2215
|:Ireland -684-1211 -609-857 1
II
!-234
i-154 -88 -132 -274 -163 -207 -214 -332 -336 -243
Italy • wv •j*îI
IWU j-3161I
i-6216I
j-787-593 -50 »LUV -1370 -1747 -1179 -1920 -1510 -1462 -1352
| Netherlands- 431 -745!-11701
j-404-89-190 - 61 122 -598 -241 -453 jl672 >'-558
United Kingdom! rfv»w
-8555-1631
-15985-894
-9642-717
-9370231
-2824-321
-2301-449
-2623 -1895k-krte
-1617-243
-2395-209
-2635-52
-2723-345
-2331-127
-221 1--1697
Community (l) -4592I .
-20549 -4504 -19476 -827 451!
-1344 i
I-2784 -3321 -4784 -5071 !
j-6299 -5904 -.4459
(i)Community :Extra-Community trade.
Source :S0EC andCommission staff.,

TABLS 5
ECONOMIC POLICY OBJECTIVES AND PROBABLE RESULTS FOR 1977
* (#change onpreceding year ) ~*"i
Countxy
Denmark
P,R,Germaznr
Franoe
Ireland
ItaJ.y
Netherlands
Belgium
Luxembourg
United KingdomGross domestic product involume
Objectives 1977 (l)
(Annual Report Nov«
1976 )
3
S
41/2
"3
±0
41/2
41/2
41/2Objectives 1977(2 )
(Adjustment 'Karch
1977 )
>2
5
3
3
3
4
3
3
1,5Probable result
(Estimates May
1977 )
■V
11/2
41/2
31/2
41/4
(2-2 1/2)
41/2
1<x>t1/2
4
3
33/4
3
4
31/2
2Consumer prices
Objectives 1977 (l)
(Annual Report ÏTov.
1976 )
S
41/2
7-8
13
<:
7
8-9
8
11Probable resuit
(Estimates May
1977 )
a-
83/4
14 1/2.
19(3)
61/2
149
15
19(3)
7
71/2
73/4
15
EEC 3,5 31/4 7-8 9,4 9,6
(1)Ecor.omio policy guidelines for1977 included inAnnual Report (November 1976). ;
(2)Adjustment ofeconomic policy guidelines for1977 (March 1977)* . ' . .T»+e ofabout 16(3)Result ofariseatanannual rateofabout 21#between January andApril andaprogressiva reduction
(x)Atl^pSc^r 1"' H-Forecasts bynational experts . C-Forecasts byCommission staff.

.table 6
WORLD OUTFUT AND TRADE (l)
(%change onpreceding year )
\Gross dome aticpr•oduct involume (2)•- -
- ■if Imports ofgoodsinvolume
1969-73 .
average {ur™
(3)1975 1976 1977
I
I1969-73
average
(3)-t
1974 1975 1976 197Î
■UHiaSD STATES
CANADA
JAPM
OTHER DEVELOPED COUNTRIES
(excluding EEC)
TOTAL DEVELOPED COUNTRIES
(excluding EEC)
COMMUNTIY
TOTAL DEVELOPED COUNTRIES
(including EEC)
OPEC COUNTRIES
DEVELOPING COUNTRIES
CENTRALLY PLANNED ECONOMIES3,3
5,3
9,6
6,0-2,?
3,2
-1,3
3,7-ife
0,6
2,4
0,3
I6,1
4,6
«»3
2^5
3*
5*
66,9
10,0
14,9 "
I Aa.-3,4
10,0
-0,7
11 •-11,1
-5,4
-13,5
-8*ϊ,5
7,5
11,5
66
8|
.'3?
4,6 -0,4!
I-0,5- 5* I Al 9,2 3i -10121 j 8
4,8 1,7 |"2,0 |4,6 i3,0 jj10,3 -1*-5 !14t\
|4,7 j
I0,3 !-1,0 5,?
:4 jî5,8'•1 '-η »■ i α
i
!
pî)|î,4
6,438
13
1043
-4
616
3
4'
16
6
►
'4 '
IWORLD (excluding EEC)
!Μ 9 - 3* 9 ri
I"WORLD (including EEC)– iJ5 -4 10* , 6J
| <(1)SeeAnnex fordefinition ofareas .
| )2{Gross national product forUnited States ,Canada andJapan.
'(3)Geometric mean ofannual changes from I968 to1973,
| '^ource3 -1National statistics a:idCommission ataff.

»
TABLE 7
MAIN MACRO-ECXJNCMIC AGGREGATES
CountryGross domestic product (volume ) |
'tochanges • IUnemployed as$oflabour force I
1970-
19741975 1976 1977 Ι1970-
121A L1975 1976 [ 197' .
Denraark
F.R»Germany
Prance
Ireland
Italy
Netherlands
Belgium
Luxembourg
United Kingdom2,8
3,Ka )
5,1
3.4
4.1
4,7
5.2
4,1
2.5-1,1
-?,6
+0,1
+0,4
-3,5
-1,1
-2,0
-8,4
-1,74,8
5,7
5,2
3,2
5.6
3.7
3,0
3
1.81.5
3,8
3
3,7
3
4,2
3,2
2
0,81,3
1,1
2,7
5,9
3,3(5,2 )
2,1
2,3
j0
I2,85,2
4.1
4.2
7,9
3,3(5,5 )
4.3
4,5
0,2
3,75,1
4,1
4,6
9,4
3,7(5,9 )
4.6
6.1
0,4
5.2€,C
3,£
9,3
3,9(6£ )
4,/:
6,9
0,3
.5,9
ICommunity 4,0 -1,8 4,6 3,0 2,4(2,8 )4,0(4,5 )4,5(5,0 )4,8(5,3 )
United States
Japan3.1
6.2-1,8
2,46,1
j6,3,! 5
I 5?:5,6
1,3
L8,5
1,97,7
2,0v,C
2
Implicit consumer price .5®changea Balance oncurrent account :
(A'000 million )
Country1970 -
19741975 1976 1977 1970- !
19741975 ÎS'O 3'ni
Dsnmark
F,R,Germany
France
Ireland
Italy
Netherlands
Belgium
Luxembourg
United Kingdom7,9
6,3(«0
8,3 "'
10,8
8,7
8,0
6,3
6
7,53,8
5,3
11,6
21,8
17.6
10,5
12,1
30.7
23,48,5
4,4
9,9
17,0
17,5
9,1
8,8
9,8
15,29
4
9.0
14,5
19
7.1
7,5
7,8
15,0-1,0
3,1
-■1,1
••0,2
-1,3
2,1
1,0
-1,2-0,5
4,4
0
0
-0,6
1,7
0,3
-3,6-1.9
3,2
-5,3
-0,3
-2,9
2'5
-0,4
-2,6-1,6
3,0
-3,1
-0,5
_0,8
2,8
0
0,4
ICommunity 7,8 12,8 .Τ9,9 9,6 1,7 -6,1 0,2
United States
Japan6,0
10,58,0
10,95,1
8,36
8-3,5
1,911,7
-0,7-0,9
3,7-lis
+
(a)I97I-1974
Source tCommission staff i
- ; i

TABLE 8
WAGE COSTS AND "PRICES
" 1975-1977
/djehgnge onpreceding year )
CountryPercapita compensation
ofemployeesConsumer prices (implicit
price "index )Compensation ofemployees
perunit ofoutput in
economy asawhole
1975 I1976 1977(1 ) 1975 1976 1977(1 )1975 1976 1977(1 )
Denmark ■15,5 11,1 71/2 8,8 8,5 9 13,7 8,2 5,1
F,R.Germany 7,7 8,0 8,2 6,3 4,4 4 7,0 M 4,4
IFrance-17,7 14,8 11,8 11,6 9,9 9 17,6 9,1 8,5
IIreland 24,6 18,0 12 21,8 17,0 141 24,1
Italy 19,7 21,3 22 17,6 17,5 19 25,6 16,2 19,8
INetherlands 13,5 10,6 I[8,0
r10,5 9,1 7,1 14,0 6,7 4,5
IBelgium 15,6 12,411.2 [12,1 i8,8 lz" 16,4 7,5 7,8
1
ILuxembourg 12,5 10 10,2 10,7 9,8 73/4 13,5 5,3 7,4
United Kingdom 30,6 14,9 11,1 23,4 15,2 15 32,9 12,0 9,8
EEC16,7 12,911,A 12,8 9,9 9,6 17,4 7,6 8,3
(l)Estimates established inMay1977VCommission staff.