23.1. 78 Official Journal of the European Communities No C 18/1 
II 
(Preparatory Acts) 
ECONOMIC AND SOCIAL COMMITTEE 
Opinion on the annual report on the economic situation of the Community in 1977 
The text referred to the Committee has not been published in the Official Journal of the 
European Communities. 
A. LEGAL BASIS FOR THE OPINION 
On 21 October 1977 the Council referred the abovementioned report to the Economic 
and Social Committee in accordance with Article 198 of the Treaty establishing the 
European Economic Community. 
B. OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE 
The Economic and Social Committee prepared its opinion on the above matter at its 
152nd plenary session held in Brussels on 26 and 27 October 1977. 
The full text of the opinion is as follows: 
THE ECONOMIC AND SOCIAL COMMITTEE, 
Having regard to the Treaty establishing the 
European Economic Community, and in particular 
Article 198 thereof, 
Having regard to the resolution of 22 March 1971 
of the Council and the representatives of the 
Governments of the Member States concerning the 
realization, 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 Community, 
Having regard to the request made by the Council 
of the European Communities on 21 October 1977 
for an opinion on the Commission's annual report 
on the economic situation in the Community in 1977, 
Having regard to the decision taken by its Bureau 
on 25 October 1977 instructing the Section for 
Economic and Financial Questions to draw up an 
opinion on the matter, Having regard to the report submitted by the 
rapporteur, Mr Clark, and to the opinion adopted by 
the Section on 20 October 1977, 
Having regard to the discussions at its 152nd 
plenary session held on 26 and 27 October 1977 
(meeting of 27 October), 
HAS ADOPTED THE FOLLOWING OPINION 
with no votes against and 36 abstentions: 
1. Introduction 
1.1. The Committee would point out that 
production of its opinion in the time available since 
publication has inevitably meant that it was unable 
to give the in-depth consideration to the report 
which is required for such an important subject. It 
therefore repeats its previous request that the 
timetable for preparation and publication of the 
report be radically revised. 
No C 18/2 Official Journal of the European Communities 23.1. 78 
1.2. The Committee draws attention again to the 
difficulties caused by the lack of comprehensive and 
up-to-date statistics and also by the frequent 
amendments to existing figures. It urges the Member 
States to consider with the Commission as a matter 
of urgency, the measures required to improve the 
situation. 
2. The economic situation in 1977 
2.1. This year's annual report shows clearly how 
the Community's economic performance has failed 
to match almost all of the short-term targets set in 
the 1976 annual report (*) and adopted by the 
Council, and even the less ambitious revised 
targets (2) agreed in the spring of this year. 
2.2. At around 2-5 % the rate of economic 
growth of the Community as a whole will be more 
than 2 °/o lower in 1977 than in 1976. The numbers 
out of work will have risen by about 600 000 
and the rate of unemployment by 0-6 °/o of the 
working population. The rate of inflation year-on-
year will be scarcely lower than in 1975/76, though 
there appears to have been a deceleration since the 
spring. Only the target for reducing the Community's 
balance-of-payments current account deficit will be 
surpassed, and that will have been due partly to the 
slowing down of the pace of economic recovery. 
2.3. Slower growth and rising unemployment arise 
from a number of factors. The increase of demand 
for exports from the Community to third countries 
was less than expected, as also was the increase in 
consumer demand. This, in turn, resulted in a 
reduction in the rate of growth of intra-Community 
trade. Private investment also continued at a low 
level. The failure of industrial investment to show 
any significant recovery remains, in the opinion of 
the Committee, a matter of special concern, given 
the need for more investment to provide a basis for 
sustained growth and to ensure that Community 
countries remain competitive in world markets. But 
the lack of investment cannot be regarded as 
surprising given the extent of below-capacity working 
in many sectors, the continued sluggishness of 
demand, and the still-poor — albeit slightly 
improving — level in real terms of profitability of 
many enterprises. 
2.4. The changes observed through 1977 in the 
rate of growth, unemployment and the rate of 
increase of prices appear all the more disappointing 
when viewed against the medium-term targets agreed 
by the social partners at the June 1976 tripartite 
conference and adopted for the Community's fourth 
medium-term economic policy programme. If the 
targets set for 1980 are to be achieved, then 
H OJ No L 358, 29. 12. 1976. 
(2) OJ No L 119, 12. 5. 1977. performance will have to be significantly improved 
in the intervening years. 
2.5. It is, in the view of the Committee, vitally 
important to recognize that the high level of 
unemployment of labour — and also the present 
low level of capacity utilization — reflects not only 
the lack of total demand but also severe structural 
imbalances. We welcome the greater emphasis given 
to the problem of structural unemployment in the 
Commission's latest assessment of the economic 
situation. In this connection, the Committee draws 
attention to recent opinions prepared by the 
Committee on industrial policy and on other aspects 
of structural change (3). 
3. Outlook for 1978 
3.1. The Committee notes that the Commission 
expects that if the Community continues on its 
present course, the rate of economic growth of the 
Community as a whole for 1978, compared with 
1977, will be only 3-5 °/o. This would be insufficient 
to bring about any improvement in the employment 
situation in most Member States. Indeed, the 
Committee fears, as does the Commission, that rates 
of unemployment are more likely to rise. Such a rate 
of growth would also be insufficient to get the 
Community back on course towards its agreed 
medium-term growth and employment targets. 
3.2. This judgement of growth and employment 
prospects follows from expectations that, taking the 
Community as a whole, consumer expenditure, 
spending on fixed investment, and public sector 
demand for output will all increase slightly faster 
than in 1977, but there will probably be a slightly 
slower increase than last year of exports to countries 
outside the EEC. The Committee would emphasize, 
however, that there will be significant differences 
between individual Member States in the behaviour 
of the various components of total demand. 
3.3. The outlook for prices, assuming unchanged 
policies, is slightly more encouraging. The progress 
shown since the spring of 1977 towards reduced 
rates of inflation is likely to be carried through into 
1978. Even so, the rate of increase of consumer 
prices would remain exceptionally high at 8 to 
8-5 %>. 
3.4. It seems likely that the rate of growth of 
world trade in 1978 will remain at about 6 to 6-5 °/o 
in volume. But it is reasonable to expect that the 
reduction of the Community's current account deficit 
(3) OJ No C 97,16. 8.1974: Shipbuilding industry. 
OJ No C 62, 15. 3. 1975: Pulp, paper and paper board 
industry. 
OJ No C 113, 12. 6. 1976: Data processing industry. 
Industrial change and employment — A review of the 
Community's industrial policy and future prospects. 
23.1. 78 Official Journal of the European Communities No C 18/3 
in 1977 will be followed in 1978 by a surplus. This 
would reinforce the recent improvement in stability 
of exchange rates. The achievement of a surplus 
must, however, be judged against the heavy deficits 
which many Community countries have accumulated 
from the past. 
3.5. It must be emphasized that the outlook 
remains uncertain. The outcome depends on the 
extent to which the EEC economy may be stimulated 
by expansion of world trade, and by the effects 
of the stimulatory measures already introduced in 
a number of countries. 
4. Policies for 1978 
4.1. The Commission's guidelines for 1977 differ­
entiated clearly between Member States expecting 
falling inflation and/or balance-of-payments surpluses 
and those in the opposite situation. While 
all were urged to exercise close control over 
monetary expansion and public sector deficits, the 
former were urged to follow a slightly reflationary 
approach to demand management, while the latter 
were urged to continue to restrict demand, especially 
consumers demand. 
4.2. The Committee takes the view that whilst the 
guidelines suggested for 1977 were in the right 
direction, the scale and timing of the measures 
applied in Member States clearly did not enable the 
Community to achieve a satisfactory rate of growth 
or an improvement in the very serious unemployment 
position. The Committee does not believe they 
would produce the desired results if they remained 
unchanged for 1978. 
4.3. The scope for adjustment of the guidelines 
in each of the Member States must depend upon 
their respective rates of inflation and the state of 
the balance of payments. The Committee believes 
that the progress obtained in these areas is now 
sufficient to justify a more reflationary strategy for 
the Community, although due allowance must be 
made in applying such a strategy for the differences 
between one Member State and another. It therefore 
supports the change in emphasis in favour of 
expansion and welcomes the greater flexibility in 
the guidelines which the Commission has proposed 
for the coming year. 
4.4. The new guidelines are based on a 'scenario', 
including the objective of a 4 to 4-5 °/o in GDP in 
1978. This compares with the 3-5 °/o which would 
have been expected if the Community were to 
continue on its present course. The Committee 
recognizes that the growth objective adopted for 
the Community must be realistic and that, in particular, it must not encourage excessive demand, 
which would jeopardize recent reductions in rates 
of inflation and balance-of-payments deficits. 
Nevertheless, having regard to the employment 
situation, and to the extent of unused capacity, the 
Committee feels that, as a quantitative indication 
of what should be possible, a growth rate of 4 to 
4-5 % should be regarded as a minimum and that 
every effort should be made to improve upon it. 
There now appears to be scope for more expansion 
in the surplus countries which would act as a 
stimulus to faster growth in other parts of the 
Community; in the deficit countries there appears 
to be a case for a relatively greater shift of 
emphasis in policy. 
4.5. The Committee agrees with the Commission 
that to get the economy moving again requires the 
active participation and support of the social 
partners. It believes that this will be forthcoming 
only if the social partners are convinced that: 
— policies to improve the employment situation will 
be effective, 
— that gains from improvements in the rate of 
growth — through wage settlements or tax 
reductions for example — are distributed fairly, 
and with due regard to those who have suffered 
most from the effects of unemployment and 
inflation. The interests of consumers must also be 
borne in mind. 
4.6. The Committee agrees with the Commission 
that, in framing stimulatory measures, care should be 
taken to encourage such a growth of demand as will 
provide a basis for sustained growth and the 
continued provision of more jobs. Sustained recovery 
is also dependent on improving the competitiveness of 
Community output in world markets. For these 
reasons it is necessary to encourage an up-turn in 
investment, especially in industry. 
4.7. Investment will not be significantly increased, 
however, unless there is continued recovery of actual 
and prospective profitability. This cannot occur unless 
costs can be kept under control and there is some 
increase in consumer expenditure to create the 
demand for the output from the new investment. 
4.8. The establishment of a firm base for recovery 
must depend, to a certain extent, on public sector 
demand. In this context, therefore, the public sector 
must attach greater importance to investment. 
4.9. The prosperity of the Community continues 
to depend to a considerable degree on the growth of 
world trade. It must therefore use its influence to 
foster international trade and the avoidance of 
protectionism. It must encourage efforts by those 
enterprises which, because of limitations on markets 
No C 18/4 Official Journal of the European Communities 23.1. 78 
available to them within the Community, are aiming 
particularly at developing markets in third countries. 
5. The implementation of the new policy guidelines 
Community level action 
5.1. The Committee attaches great importance to 
the development of the role of the Community 
institutions in bringing about impovements in the 
economies of Member States. As the Community 
develops, this role should be extended. In the 
meantime, however, their role will be largely confined 
to proposing, and obtaining agreement on, broad 
economic and monetary policy guidelines, and to 
developing the framework for other policies — for 
industry, trade, agriculture, less prosperous regions, 
etc. — in which policy measures taken in accordance 
with those guidelines can have the maximum 
beneficial effect. The practical application of the 
guidelines to encourage growth and reduce 
unemployment, while still continuing the fight against 
inflation and maintaining a satisfactory balance of 
payments, will be primarily the responsibility of 
national governments, but coordiniation of measures 
at Community level will be of great importance. The 
measures chosen by national governments must 
always be framed by reference, not only to their own 
interests, but also to the collective interests of the 
whole Community. The Committee remains 
concerned at the slow progress made with policy 
coordination, despite the improvement of the 
machinery for close consultation; continued lack of 
coordination will undoubtedly undermine the 
effectiveness of Community policies. 
5.2. Community institutions represent the focal 
point for closer coordination of national policies, 
in order to attain the Community's economic 
objectives, including convergence of national 
economies, by: 
— making proposals for short-term economic and 
monetary policy guidelines within the framework 
of a medium-term programme, 
— regularly monitoring the extent to which Member 
States are following the agreed guidelines and 
pressing for their close observance, 
— developing policies and mechanisms (e.g. the 
Regional and Social Fund and the EIB) to 
transfer resources within the Community so as 
to raise the general level of, and reduce 
disparities in, performance, and assist adjustment 
of the economic structure to meet changing 
demands, 
— raising finance from national and international 
capital markets for use in support of such 
policies and mechanisms, — defining a common commercial policy which 
enables the Community to put itself forward as 
an economic unit with its own interests to 
defend in international trade negotiations. 
Some, but insufficient, progress has been made in 
all of these areas; there is a clear need for greater 
effort and new initiatives. The Committee particularly 
welcomes the Commission's proposal for closer 
coordination of national monetary policies; the 
emphasis which it has given to improving 
coordination of financial and other measures to 
encourage investment; and the fact that it is putting 
forward proposals for new measures to make supply 
more flexible and facilitate structural change. 
National level action 
5.3. In applying Community guidelines at national 
level, governments will have to consider what are 
the appropriate ways for injecting more purchasing 
power into the economy, e.g. by tax reductions 
(either direct or indirect) or by increased government 
expenditure. In view of the importance which the 
Committee attributes to an improvement in the 
level of investment, this should be given special 
consideration in deciding upon the 'package' of 
measures which are to be applied. Under an active 
employment policy a distinction would have to be 
made, in government measures to stimulate 
investment, between (1) rationalization measures 
which may be desirable or even essential on account 
of the competitive position of the firms in question, 
but which do not create any additional employment, 
but on the contrary generally make for a reduction 
in the number of jobs, and (2) expansion investments 
that create new jobs. A selective approach must 
therefore be adopted in government action to 
promote investment, with the emphasis being on 
labour-intensive investment in both the private sector 
and the public and mixed sectors. Incentives for 
investment should achieve a proper balance between 
the provision of jobs, especially in the less 
prosperous regions, and the maintenance of fair 
competition between Member States. They should 
also include measures designed to improve the 
viability and encourage the setting up of small and 
medium-sized businesses, which are relatively large 
employees of labour. 
5.4. Since the Committee agrees with the 
Commission in its annual report that the rate of 
growth that can be expected in 1978 is very unlikely 
to reduce the level of unemployment, and indeed 
may increase it, there is a strong case for special 
measures to deal with the very serious unemployment 
situation. Where temporary job maintenance and 
23.1.78 Official Journal of the European Communities No C 18/5 
job-creation measures are in operation, these should 
be continued although, as with special investment 
incentives, they should be forward-looking, 
Governments should pay more attention to the need 
for training and re-training facilities in order to 
improve occupational mobility, and to policies to 
improve geographical mobility, e.g. new housing 
schemes. Special attention should also be given to 
the problems of women and young people. 
5.5. The Committee welcomes the in-depth study 
of 'the cost-effectiveness and implications for 
industrial performance of different means of 
work-sharing', suggested by the June 1977 tripartite 
Done at Brussels, 27 October 1977. 
THE ECONOMIC AND SOCIAL COMMITTEE, 
Having regard to the request made by the Council 
on 18 November 1976, under Article 198 of the 
Treaty establishing the European Economic 
Community, for an opinion on the proposals made 
by the Commission and submitted to the Council 
on 8 November 1976 concerning Community policies 
for the electronic information industries, 
Having regard to the decision made by the Bureau 
of the Economic and Social Committee on 
23 November 1976 instructing the Section for 
Industry, Commerce, Crafts and Services to draw up 
an opinion and a report on the matter, ' conference which should be pursued as a matter of 
urgency. The Committee hopes that it will be 
possible for the Committee to contribute to this 
study, which it believes should take account of 
demographic projections not merely to 1980 but 
beyond. 
5.6. The Committee would stress, however, that 
any measures to encourage investment or job-
creation, or to assist the workings of labour markets, 
will have only limited effect unless general economic 
conditions are improved and a stable and consistent 
policy framework established so as to encourage 
increased activity. 
The Chairman 
of the Economic and Social Committee 
Basil de FERRANTI 
Having regard to the Council resolution of 
15 July 1974 on a Community policy on data 
processing (1), 
Having regard to the opinion adopted by the Section 
for Industry, Commerce, Crafts and Services on 
5 October 1977, 
Having regard to the report submitted by the 
rapporteur, Mr Wylie, 
Having regard to the discussions at its 152nd plenary 
session held on 26 and 27 October 1977 (meeting of 
26 October), 
H OJ No C 86, 20. 7. 1974. Opinion on the communication from the Commission to the Council concerning 
Community policies for the electronic information industries 
The text referred to the Committee has been published in Official Journal of the 
European Communities No C 39 of 16 February 1977, page 2. 
A. LEGAL BASIS FOR THE OPINION 
On 18 November 1976 the Council referred the abovementioned communication to the 
Economic and Social Committee in accordance with Article 198 of the Treaty 
establishing the European Economic Community. 
B. OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE 
The Economic and Social Committee prepared its opinion on the above matter at its 
152nd plenary session held in Brussels on 26 and 27 October 1977. 
The full text of the opinion is as follows: