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COVMISSION OF THE EUROPEAN COMMUNITIES 
C0M(93) 629 final 
Brussels, 24 November 1993 
Commission Recommendation 
for the 
Broad Guidelines of the Economic Policies 
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SSfe^BSS of the Member States and of the Community 
drawn up in conformity with 
Article 103(2) of the Treaty on European Union 
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"Restoring growth and employment 
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Commission Recommendation 
Article 103 of the Treaty on European Union provides the framework for economic 
policy coordination from the start of Stage II of the process towards Economic and 
Monetary Union. The economic policy guidelines adopted under this article will 
constitute the reference for the conduct of the economic policies in the Community 
and in the Member States. 
Main Objectives 
The Community should aim to substantially increase employment creation so as to cut 
significantly the present high unemployment levels. A decrease in unemployment is 
imperative to reduce the negative economic and social consequences arising from this 
wastage of human resources. Higher employment creation is also necessary to achieve 
a more active society where all those wishing to join in the production process are 
given a chance to do so and where the weight of the factors leading to social exclusion 
is substantially reduced. Reducing unemployment, for instance cutting it by half by 
the year 2000, would imply the creation of at least 15 million new jobs. 
This employment objective should be obtained by a non-inflationary, strong and 
employment-creating growth, lasting over many years and respecting the environment. 
Higher growth is essential not only in relation to employment creation but also to 
enable the Community to reap the benefits of the internal market, to improve its 
economic and social cohesion and to meet its growing commitments in relation to the 
rest of the world. But growth cannot be artificially generated, it must be brought 
about mainly by market forces and by the dynamism of the European internal market, 
open to the outside world. 
Achieving higher sustainable growth also requires a strengthening of economic 
convergence among Member States. Convergence will set in place the conditions for 
stronger job creation and will allow the Community to reap the full benefits of the 
internal market. It will also make possible a successful transition to EMU. 
In this respect the task of policy-makers is to allow market forces to display their full 
potential by: 
i) providing a stable and coherent macroeconomic framework; 
ii) removing the macro and microeconomic obstacles to growth. 
In the present situation the challenge is a dual one. Firstly, to act decisively to 
support growth in the short-term without putting at risk the commitment to high 
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employment creation in the medium-term. Secondly, to create the conditions which 
will permit a stronger, durable and more employment intensive growth in the medium 
to longer term. 
Igniting the recovery process will require a restoration of confidence through a 
rebalancing of the current macroeconomic policy mix combined with credible 
structural measures. Lower interest rates, achieved on a sound basis, represent the 
most potent instrument presently available to boost short-term prospects in the 
Community. The sooner current and expected pay and budgetary trends incorporate 
the stability objective, the sooner interest rates can be further reduced substantially on 
a sound basis. Given the severity of the present situation, however, and the size of the 
budgetary adjustment to be undertaken in many countries, the recovery process may 
well be modest and hesitant. In these circumstances it may be necessary to envisage 
an intensification of the Community initiatives agreed at the European Council 
meetings in Edinburgh and Copenhagen, 
In the medium-term policies and behaviour must remain consistent with stability. 
They must help to overcome rigidities and to put an end to the damaging reduction of 
national saving inflicted by high budget deficits, thereby strengthening the investment 
conditions and the growth potential of the Community so that many years of stronger, 
and more employment-creating, growth becomes possible. 
Policy Guidelines 
In order to create the conditions to realise the Community's employment / 
unemployment objectives, the Commission recommends to the Council to adopt the 
following broad economic policy guidelines. 
Price and Exchange Rate Stability 
The Community will aim to keep a stable macro-economic framework. A rate of 
inflation of no more than two to three per cent should be reached for the Community 
average by 1996. 
Achieving this target implies that all policies and behaviours should be consistent with 
this stability objective. Those Member States who have already reached this target 
range should ensure that policy measures are consistent with the maintenance of this 
performance. For the other Member States, more courageous initiatives are needed 
involving determined action in relation to budgetary consolidation and to the wage 
evolution in order to allow a loosening of monetary policy on a sound basis. 
24-11-83 
If these measures are implemented with sufficient speed, short term interest rates could 
come down rapidly and long term rates would follow as inflationary expectations are 
stabilised. 
The high degree of integration and the reaping of the benefits of the single market 
demand that the Community continues to aim for exchange rate stability built on sound 
economic fundamentals embracing both nominal and real variables. 
The Community reaffirms its commitment to the EMU process and timetable as agreed 
in the Treaty on European Union. To this end it will intensify its efforts at achieving 
economic convergence. 
Sound public finances 
The restoration of confidence requires that in 1994 Member States prevent any further 
deterioration in their budgetary situations and aim to start the process of deficit 
reduction. In those Member States facing more worrying fiscal positions, confidence 
will benefit from an immediate strong pursuit of the consolidation process. This holds 
especially for Member States with very high and rising public debt ratios. The 
consolidation process should also start in those Member States expected to face a 
relatively favourable economic situation in 1994. In other Member States tight 
control of budgets will be necessary in 1994 but the emphasis should mainly be on 
credible medium-term consolidation strategies with measures to be already announced 
now which will take effect in future years as the recovery strengthens. 
From 1995, the Community will aim at making its public debt position sustainable 
again. Under the expected growth path for the years ahead, this means reducing 
budget deficits to the reference value indicated in the Treaty on European Union (three 
percent of GDP). The Community could achieve this goal by 1996/97. Most 
Member States have the potential to reach this goal by 1996, with the others needing 
more time. 
The measures used to consolidate public budgets will give priority to reductions in 
current expenditure and to improving the efficiency of the tax system. All Member 
States need to re-orient public expenditure to more productive uses and to increased 
investment in particular. In addition, it is necessary to adapt the tax system in a way 
which will contribute more to employment creation. Reductions in employers' social 
security contributions in a number of Member States, especially for the lowest paid 
and for younger workers, are particularly important in this regard although any action 
taken will clearly need to be revenue neutral given the scale of the budgetary 
adjustment to be achieved in many countries. 
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In the long term, Member States budgetary policies will be directed towards 
contributing to higher national savings and investment. This will entail much lower 
budget deficits (perhaps close to balance by the year 2000). 
Creating more employment 
Member States and the Community will take determined action to improve the 
functioning of their economies, aiming specifically at improving competitiveness and 
the Community's underlying capacity to create jobs. Such structural measures will be 
highlighted in the forthcoming White Paper on "Growth, Competitiveness and 
Employment" 
In addition to the micro-economic measures to be presented in the White Paper the 
overall evolution of wages and salaries will play a crucial role in creating jobs. To this 
end, governments and the two sides of industry will use all the instruments that 
national arrangements put at their disposal to ensure that wage developments in the 
Community adapt rapidly to the agreed inflation objective. 
In the short term, the need to create new jobs will not allow for real wage increases in 
most countries. Once the recovery sets in and real wages will be able to increase 
again, wage developments will allow an increase in investment profitability by keeping 
real wage increases below productivity growth. For example, between 1982 and 
1989 real wages per head increased by about one percentage point less per year than 
productivity growth. Furthermore, the wage evolution will provide for an appropriate 
differentiation according to member countries, regions, vocational qualifications and 
work experience. 
* * 
The policy guidelines laid out above will form the central core of all future multilateral 
surveillance exercises. The broad framework for, and assessment of, Member States 
convergence programmes will be established by the guidelines. By laying out a 
credible and coherent implementation programme for the broad policy orientations, 
individual convergence programmes will act as symbols of the degree of political 
commitment which individual Member States attach to the Community's overall policy 
objectives for the year 2000. 
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ISSN 0254-1475 
COM(93) 629 final 
DOCUMENTS 
EN 04 IO 
Catalogue number : CB-CO-93-664-EN-C 
ISBN 92-77-62148-6 
Office for Official Publications of the European Communities 
L-2985 Luxembourg