1999/570/EC: Council Recommendation of 12 July 1999 on the broad guidelines of the economic policies of the Member States and of the Community
Date: 1999-07-12
Institutions: Council of the European Union
Subjects: EU Member State, EU employment policy, economic growth, economic policy, monetary union

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II

(Acts whose publication is not obligatory)

COUNCIL

COUNCIL RECOMMENDATION

of 12 July 1999

on the broad guidelines of the economic policies of the Member States and of the Community

(1999/570/EC)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular to Article 99(2)
thereof,

Having regard to the recommendation from the Commission,

Having regard to the conclusions of the European Council

in Cardiff of 15 and 16 June 1998,

Whereas a resolution on the recommendation from the Commission was adopted by the European
Parliament,

HEREBY RECOMMENDS:

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Contents

I. GENERAL ECONOMIC POLICY GUIDELINES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

1. Main priority: strong, sustainable growth and employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

1.1. Launch of the euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

1.2. Economic and employment situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

1.3. Policy strategy for sustainable growth and employment: Towards a European Employment Pact . . . . . . . . . . . . . . 38

2. Growth and stability-oriented macroeconomic policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

2.1. Macroeconomic policy mix in the euro area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

2.2. Macroeconomic policy mix in the Member States outside the euro area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

2.3. Sound and efficient public finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

2.4. Appropriate wage developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

3. Comprehensive and coordinated economic reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

3.1. More efficient product (goods and services) markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

3.2. More integrated and deeper capital markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

3.3. Better functioning labour markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

II. COUNTRY-SPECIFIC ECONOMIC POLICY GUIDELINES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

1.

Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

2. Denmark. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

3. Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

4. Greece. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

5.

6.

7.

8.

9.

Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Luxembourg. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

10. Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

11. Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

12. Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

13. Finland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

14. Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

15. United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

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I. GENERAL ECONOMIC POLICY GUIDELINES

1. Main priority: strong, sustainable growth and employment

1.1. Launch of the euro

The successful birth of the euro on 1 January 1999 constituted a milestone in the process of European
integration. It is the culmination of an unprecedented degree of economic and political cooperation. This
process has made an essential contribution to stability and the prospects for prosperity within the Union.
The introduction of the euro is bound to act as a powerful lever for further integration and to strengthen
the Union's position in the world economy.

At the same time, the introduction of the euro emphasises the challenges that lie ahead. More than ever,
economic and social conditions in each of the participating Member States will be profoundly influenced by
economic developments and policies in partner Member States. The durable success of economic and
monetary union will demand discipline from all policy actors, including the social partners, as well as
well-functioning labour, product and capital markets, a deepened and adequate coordination of economic
policies and a continuous and fruitful dialogue between the Council and the ECB.

The new institutional framework, the clear mandates given to individual policy actors, and enhanced
surveillance and coordination instruments ensure that economic policy making in the European Union
countries has the potential to achieve substantial benefits in terms of durably higher economic growth and
employment. However, the realisation of this potential is not assured. Exploiting to the full and in a
resolute and coordinated manner the mutually-reinforcing effects of growth and stability-oriented macroe-
conomic policies and sound structural policies at both the European Union and the national level is key. By
pursuing this overall sound policy approach, the European Union Member States will also make a positive
contribution to solving global economic problems.

The introduction of the euro and the completion of the Single Market have led to the creation of one of the
largest economic entities in the world. This implies global responsibilities for the Community and the
necessity to speak with one voice and to be represented effectively on issues of particular relevance to EMU.
The Union is confronted with a twofold need:

(i) to engage in an effective dialogue with its main trading partners with a view to promoting sound
economic policies in all of the major currency areas, thereby contributing to exchange rate stability in
the international monetary system; and

(ii) to help ensure that the architecture of the international financial and monetary system is adapted to the
globalisation of financial markets, by promoting inter alia: enhanced institutional arrangements for the
international monetary system;
improved transparency and better policy making procedures;
strengthened financial sector surveillance; a well-sequenced and orderly approach to liberalising finan-
cial markets and mechanisms for cooperative crisis management involving the private sector.

1.2. Economic and employment situation

Since the summer of 1998, when the previous Broad Economic Policy Guidelines were adopted, the
recovery of the European Union economy lost momentum. This essentially reflects the direct and indirect
impact of the sharp deterioration in the world economic situation on exports and investment in the Union.
Although there are still some downside risks, on the back of sound economic fundamentals, some
improvement of the external economic environment and confidence-building economic policies, economic
activity is expected to regain its momentum. The recent lowering of interest rates by the ECB in the context
of its monetary policy strategy aimed at price stability in the euro area will be helpful in further exploiting
the considerable growth potential of the euro area.

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The pace of job creation in the European Union quickened markedly during the last two years and in late
1998 the European Union unemployment rate dropped below 10 % for the first time since 1992.
Employment growth is expected to continue at a moderate pace,
implying a further, albeit gradual,
reduction in unemployment.

However, at about 61 % in 1998, the employment rate in the European Union as a whole is low, both in
historical and international comparative terms. Achieving a significantly higher employment rate and lower
unemployment rate over the medium term would be beneficial for improving living standards significantly,
facilitating the sustainability of public finances and ensuring a cohesive society. The overall European Union
employment situation masks, however, important differences between countries. The countries that have
made most progress in structural reforms while pursuing growth and stability-oriented macroeconomic
policies, have achieved the greatest improvement in their employment and growth performance in recent
years.

Economic conditions favourable to growth and a rapid rise of production capacity should provide the basis
for high economic growth and a high employment rate. It is essential, therefore, that the currently
favourable investment conditions, in terms of high profitability and low interest rates, are fully exploited. In
addition, the realisation of the trans-European transport, energy and communication infrastructure should
be actively pursued.
Investment in infrastructure, knowledge and skills should also be enhanced to
accelerate the development of the high-technology, high-skilled and service-based sectors of the economy.
The Member States' and the Community's financial instruments and the EIB have to continue to play a key
role. The contribution made by public and private partnership should be explored.

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1.3. Policy strategy for sustainable growth and employment: towards a European Employment Pact

Europe's employment challenge is the key priority for economic policy. The successful launch of the euro
and a well-functioning EMU set a favourable framework. However, creating the conditions for high and
sustainable growth and employment, which is primarily a matter for Member States, will require a
comprehensive and coherent strategy that consists of three mutually-reinforcing key components:

(i) sound macroeconomic policies that are conducive to growth, employment and price stability, involving

full respect of the stability and growth pact and continued appropriate wage developments;

(ii) policies that improve the overall functioning of labour markets and in particular improve employ-
ability, entrepreneurship, adaptability and equal opportunities via a steadfast, prompt and transparent
implementation of the employment guidelines tailored to Member States' conditions; and

(iii) economic reforms that enhance the efficiency and flexibility of goods, services and capital markets,
reinforce private sector confidence, benefit consumers and favour an environmentally-sustainable
growth path,
involving a close monitoring of the Single Market, a vigorous competition policy,
regulatory reforms and more efficient taxation and benefit systems. Given that economic reforms can
imply adjustment costs, the reform agenda should attempt to reconcile efficiency and equity considera-
tions.

These three components are reflected in the three pillars of the European Employment Pact.

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The pursuit of this strategy will be essential to achieve self-sustaining, non-inflationary,
investment-
supported growth over the medium and longer term. To this end, on the national and the European level,
all economic policy actors in line with their respective responsibilities should contribute to sound public
finances, a stability-oriented monetary policy, appropriate wage developments and economic reforms.

All actors and groups of actors are urged to maintain a fruitful macroeconomic dialogue while retaining
their respective responsibilities and preserving their independence with a view to realising positive syn-
including the greater synergy requested by the Vienna European Council between the broad
ergies,
economic policy guidelines and the employment guidelines. In this context, it will be essential to enhance
the policy dialogue on the basis of mutual trust on both the national and European level, with particular
emphasis to be given to improve the effectiveness of the policy coordination in the Council and reinforce
the dialogue between the Commission, Council, the ECB and the social partners. To be as effective as
possible, such a dialogue process would have to be suitably structured and be based on comprehensive
information.

On this basis, the European Employment Pact should define the process whereby all the policy actors enter
into a dialogue with a view to achieving the Union's central economic and social objective of high
employment within the framework of a strong and sustained medium-term growth process.

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As indicated by the Treaty (Article 99), the broad economic policy guidelines are the corner-stone of the
coordination of economic po1icies. The 1999 broad economic policy guidelines consist of general
guidelines and country-specific guidelines that are equally valid. The general guidelines, which are applicable
to all Member States, indicate the required direction of economic policies. Within this broader frame, the
country-specific guidelines seek to identify economic policy priorities for each Member State, taking
account of their particular circumstances. It must be noted in this context that Member States are currently
revising their National Action Plans for Employment to take account of the 1999 employment guidelines.
The country-specific guidelines, in so far as labour market issues are concerned, therefore complement the
1999 employment guidelines and underpin the implementation of the revised National Action Plans.
Finally, the basis for the 1999 broad economic policy guidelines is the economic situation and outlook in
the Member States and the Union as outlined in the Commission services' Spring 1999 Economic Forecasts.
Although a substantially different unfolding of economic developments would not profoundly alter the
strategy articulated in the guidelines, it might nevertheless require an adjustment of the policy setting.

2. Growth and stability-oriented macroeconomic policies

2.1. Macroeconomic policy mix in the euro area

A policy mix conducive to growth, employment and stability in the euro area should consist of the
following elements:

(i) sustained efforts to bring budgets securely to close to balance or to a surplus over the medium term
through a full and determined implementation by Member States of their stability programmes (see
section 2.3);

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(ii) a monetary policy aimed at maintaining price stability in accordance with the Treaty;

(iii) a continued responsible behaviour on the part of the social partners that supports wage developments

that are consistent with price stability and job creation (see section 2.4); and

(iv) a commitment from the Member States to press ahead with front-loaded, coherent and comprehensive
economic reforms with a view to enhancing the adaptability and efficiency of product, capital and
labour markets (see section 3).

In the light of prevailing economic conditions characterised by a considerable slack in product and labour
markets in most Member States, concrete actions by governments and the social partners that contribute to
continued low inflationary pressures, make it easier for monetary policy to pursue its primary objective of
maintaining price stability and, without prejudice to the latter, to contribute further to an overall environ-
ment which supports the general economic policies in the Community.

The implementation of economic policies that are adequate in the present context is a key test for the euro
area.

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The framework for an effective coordination has been established, notably by creating the Euro-11 Group,
but experience with the procedures needs to be gained. In this context and in full respect of the provisions
of the stability and growth pact, the economic and budgetary situation will be periodically examined with a
view to assessing the policy mix in the euro-area.

To overcome the current difficult environment, it will be essential to establish an open dialogue involving
all policy actors, including, where appropriate, the European social partners notably in the framework of
the European Employment Pact, with a view to exchanging information and standpoints on, policy issues
and creating a climate of mutual trust in the ability of policy actors to deliver on their respective
commitments. The macroeconomic dialogue process, which is a key element of the European Employment
Pact, could contribute to a smooth interaction between macroeconomic policies.

2.2. Macroeconomic policy mix in the Member States outside the euro area

The Member States not participating in the euro area are subject to different macroeconomic policy
challenges than the euro-area Member States in so far as they retain national responsibility for monetary
and exchange rate policy. However, they are subject to most of the provisions of the stability and growth
pact. The non-euro-area Member States will also need to maintain stability-oriented macroeconomic
policies as the basis for sustained growth and employment creation. In addition, monetary and budgetary
policies will need to be conducted so as to maintain, and where appropriate foster, price stability and the
sustainability of the government financial position. This would also help to prepare countries for the
adoption of the euro.

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In the two Member States whose currencies participate in the ERM 2, the main focus must be to maintain
sound monetary and budgetary policies in order to respect exchange rate commitments. In the two Member
States that pursue a direct inflation target, it is important that the conduct of monetary and fiscal policy be
consistent with the achievement of that target, thus creating the conditions for exchange rate stability. To
these ends, all of the non-euro-area Member States should continue the rigorous implementation of their
convergence programmes.

2.3. Sound and efficient public finances

Visible progress in reducing general government budget deficits was made in 1996 and 1997. Yet,
budgetary consolidation was generally only modest in 1998 even though economic activity generally
expanded at a strong pace and the budgetary positions of most Member States were not in line with the
medium-term objective of the stability and growth pact.

Further budgetary consolidation is therefore needed. This will create the necessary scope to face adverse
cyclical developments. In addition, Member States should strive to reduce the vulnerability of budgets to
rising interest rates, make government spending and taxation more conducive to growth and employment
creation and to prepare for the longer term budgetary challenges associated with an ageing population.

Within the framework of the stability and growth pact, all Member States submitted stability programmes
or convergence programmes that set out the medium-term objective for the budgetary position of close to
balance or in surplus and the adjustment path towards this objective. Up to the first few months of 1999,
the Council examined all programmes and delivered an opinion on all programmes.
In conducting
budgetary policies during 1999 and beyond, Member States are urged:

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(i) to achieve budgetary positions of close to balance or in surplus no later than by the end of 2002 in

conformity with the stability and convergence programmes;

(ii) given the expectation of a mild, temporary slowdown, to meet fully their 1999 budgetary targets; and

(iii) provided the economic outlook unfolds better than expected in their stability or convergence
programmes, to front-load the budgetary adjustment efforts envisaged in their programmes as of the
year 2000 and, where programmes target minimum adjustment, to aspire to more ambitious objectives
and update stability/convergence progammes accordingly.

General government net lending/borrowing

(% of GDP)

Stability and convergence programme projections

Stability programmes

Date (1)

1998

1999

2000

2001

2002

B

D

E

F

IRL (3)

I

L

NL (5)

A

P

FIN

DK

EL

S

UK (8)

12/98

1/99

12/98

1/99

12/98

12/98

2/99

10/98

11/98

12/98

9/98

10/98

6/98

12/98

12/98

– 1,6

– 2,5

– 1,9

– 2,9

– 1,7

– 2,6

2,1

– 1,3

– 2,2

—

– 1,1

1,1

– 2,4

1,5

0,8

– 1,3

– 2,0

– 1,6

– 2,3

– 1,7

– 2,0

– 1,0

– 2,0

– 1,0

– 0,7

– 1,5

– 0,4

– 0,3

– 1,0

0,1

– 2,0 (2)

– 1,6 (2)

– 1,2 (2)

– 1,4

– 1,5

– 1,6

– 1,0

1,1 (4)

1,2 (4)

1,3 (4)

– 1,3

– 2,0

– 2,0

2,4

Convergence programmes

2,5

– 2,1

0,3

– 0,3

—

– 1,7

– 1,5

2,2

2,8

– 1,7

1,6

– 0,3

—

– 1,5

– 1,2

2,1

2,6

– 0,8

2,5

– 0,1

—

—

1,7 (4)

– 1,1 (6)

– 1,4

– 0,8

2,3

(7)

—

—

0,2 (9)

(1) Date when programme was adopted.

(2) Prudent scenario; favourable scenario projection: – 1,7, – 1,2 and – 0,8 % of GDP, respectively,

in the years 2000 to 2002.

(3) Figures based on ESA 95 conventions. Compared with the ESA 79 conventions on which the table is generally based, these reduce the

surplus by about 0,4 % of GDP from 1999.

(4) Central scenario. Low/high growth scenario projections: 0,9/1,2, 0,8/1,5, 0,7/1,9 and 1,0/2,5 % of GDP, respectively, in the years 1999

to 2002.

(5) No annual data provided for the years 2000/2001.

(6) Cautious scenario; middle and favourable scenario projections: – 0,25 and 0,25 % of GDP, respectively,

in the year 2002.

(7) Projection for the year 2005: 3,5 % of GDP.

(8) Data for the financial years beginning in each of the calendar years indicated.

(9) Projection in the financial year 2003/2004: 0,1 % of GDP.

Source: Commission services.

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it has to take into account the
For budgetary adjustment and restructuring to take place efficiently,
particularities of each Member State's economic, social and institutional conditions. In general, and without
threatening the necessary ongoing consolidation process, Member States are urged to:

(i) improve their budgetary positions through expenditure restraint rather than through tax increases; in
this context, to enhance the credibility of budgetary consolidation and to influence private sector
expectations positively, Member States would be well advised to introduce or enhance the mechanisms
and institutions that help control spending so that taxes could be cut without jeopardising the
achievement or maintenance of healthy budgetary positions; and

(ii) improve the sustainabiliaty and effciency of their public finances through:

(a) reviewing pension and health care systems in order to be able to cope with the financial burden on
welfare spending by the ageing of the population and the need to influence future labour supply, in
line with the options already being examined by the Member States;

(b) reversing, where appropriate, the decline in government investment; in this context the Union and
the Member States should be guided by the Commission's four-point action plan that was submitted
to the Vienna European Council;

(c) giving incentives for investment in human capital and providing for the necessary financing of other
active labour market policies that are called for in the employment guidelines while taking into
account the national budgetary position;

(d) reducing the overall tax burden and especially the tax wedge on the lower paid preferably via
reduced spending or through shifts to environmental, energy or consumption taxes; to increase the
employment effects of reductions in the fiscal burden on labour and non-wage labour costs, the
social partners are urged, at their various levels of responsibility and action, to commit themselves
to actions aimed at improving the conditions for job creation and investment;

(e) improving the efficiency of their taxation systems; and

(f) pursuing tax coordination further so as to ensure a smooth functioning of the Single Market and to
avoid harmful tax competition; the Council awaits the outcome of the ongoing discussions on the
VAT-system, taxes on energy, the taxation of corporate income and the taxation of the interest on
savings in line with the conclusions of the European Council held in Vienna in December 1998.

In just the same way as the Member States, the Community also is called upon to continue to maintain
strict budgetary discipline. Strict budgetary discipline must be applied to all categories of the financial
perspectives, while respecting the inter-institutional agreement on budget discipline and the improvement
of the budget procedure.

2.4. Appropriate wage developments

As underlined in the Amsterdam resolution on growth and employment, the social partners are responsible
— at the national, regional, sectoral or even at a more decentralised level following their respective
traditions — for reconciling high employment with appropriate wage settlements and for setting up a
suitable institutional framework for the wage formation process, supported, where appropriate, by public
authorities. In EMU, with a single monetary regime, the link between wages and employment will become
more apparent and strict.

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Wage cost developments in Member States should be allowed to reflect different economic and employ-
ment situations. Governments can create the right framework conditions which facilitate the negotiations of
social partners. For wage developments to contribute to an employment-friendly policy mix, the social
partners should continue to pursue a responsible course and conclude wage agreements in Member States
in line with the general principles set out in previous broad economic policy guidelines:

(i) nominal wage increases in Member States must be consistent with price stability; thereby in the euro
area, aggregate wage increases will be consistent with keeping price increases within the price stability
objective of the ECB;

(ii) real wage increases in relation to labour productivity growth should take into account the need to
strengthen, where necessary, and subsequently maintain the profitability of capacity enhancing and
employment-creating investment. This implies that in countries where overall
labour productivity
growth is slowing down, the scope for real wage increases will be reduced. More specifically, a
reduction in working time should not lead to an increase in real unit labour costs. For improved
profitability to result in higher investment in the Community, it is essential to forge an investment-
supportive environment in terms of demand developments, labour market conditions, taxation and the
regulatory framework;

(iii) in order to improve employability, wage agreements should better take into account differentials in

productivity levels according to qualifications, skills and geographical areas; and

(iv) especially within the euro area, it will be of crucial importance to avoid a convergence of nominal and
real wages across countries and regions in advance of productivity; therefore, wage imitation effects
should be avoided. Labour cost differences between Member States should continue to reflect discrep-
ancies in labour productivity.

To achieve the right results, effective dialogue at all the appropriate levels will be essential. The outcomes
should be jointly assessed from a growth and employment point of view.

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3. Comprehensive and coordinated economic reforms

improving productivity,
Structural reforms have a key role to play in stimulating economic growth,
enhancing private sector confidence and fostering employment in the European Union. Structural reform
will enhance the ability to deal with globalisation, environmental problems and technological change. It is
also essential to the success of Economic and Monetary Union: better functioning markets will increase the
growth potential of the European economies. Economic reform is also required to increase employment
and to lower the substantial level of structural unemployment in Europe. The fact that monetary policy is
geared to maintaining price stability in the euro area as a whole underscores the need to ensure that
product and labour markets are flexible enough to respond smoothly to country-specific economic
developments. Opening up markets to competition, at both a national level and European Union level, will
mean lower prices for consumers and more efficient production. The entry of new firms into the markets
will facilitate innovation and the transmission of new technologies, which will increase overall levels of
output and employment.

Whilst reforms are being implemented throughout the European Union, they often lack comprehensiveness
and progress remains uneven across policy fields and Member States. In general, progress is relatively
satisfactory in goods and capital markets, but much remains to be done in services, including financial
services, and labour markets.

Member States should therefore carry out in a transparent manner the employment guidelines and use the
Cardiff process on economic reforms to increase competition, speed up regulatory reforms and improve the
working of the Single Market. It is particularly important to reform existing mechanisms and structures in
such a way that people without jobs and potential entrepreneurs are enabled to get a better access to labour
and product markets.

Open and competitive international markets are an important driver for growth, prosperity and stability in
the Community. The Community should seek further trade liberalisation in accordance with the conclu-
sions of the European Council

in Vienna.

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3.1. More efficient product (goods and services) markets

Thanks to the Single Market Programme, European Union product markets are relatively integrated and
function quite well. However, price differences between Member States and between the European Union
and the United States of America suggest that there is scope for improvement. Regulatory reform is another
cornerstone of efforts to improve the functioning of product markets. Regulatory reform consists of
improving the quality of regulations, and may or may not involve deregulation. To attain these goals,
Member States are urged to undertake the following measures:

(i) the Single Market and competition policy should be strictly applied and closely monitored; more
effective enforcement of the Single Market should be ensured especially in the areas of public
procurement and technical standards via renewed commitments from the public authorities; a
purposeful continuation of work to resolve issues arising in connection with limitations on parallel
trade,

leading to higher prices, should be pursued;

(ii) for State aids, there is a need for the Commission to control them strictly and for Member States to

exercise rigorous self-discipline;

(iii) regulatory reforms should be pursued and speeded up in telecommunications, transport and energy,
with a view to increasing competition among service providers; benefits in terms of lower prices
and/or higher quality resulting from the liberalisation process will be transmitted without delay to
consumers and industrial users due to increased competition, and will also support initiatives such as
the information society and electronic commerce; thus, these regulatory reforms will bring about new
investment opportunities and new jobs;

(iv) the quality of the legal and regulatory environment has improved but further progress should be made,
especially for SMEs; procedures and administrative delays for business start-ups should be reduced. In
this sense, Member States should set themselves targets and deadlines for such reductions; moreover,
regulations aimed at consumer protection should be further improved and better enforced;

(v) VAT should be further revised and simplified in order to ensure that it is adapted to the Single Market;

(vi) further progress should be made to avoid harmful tax competition in line with the conclusions of the

European Council

in Vienna; and

(vii) Member States should also put more emphasis on the environmental dimension of economic policy.
The promotion of environmentally-friendly technologies and the use of market-based instruments
could contribute to a more sustainable development. A sound environmental po1icy would also bring
benefits in terms of higher growth and employment.

3.2. More integrated and deeper capital markets

Despite substantial progress, differences in both national regulatory environments and fiscal regimes
continue to fragment the European Union capital market. By offering the prospect of a large, sing1e capital
market, the introduction of the euro creates a further incentive to increase transparency and to remove the
remaining barriers. Deeper and better functioning risk capital markets would facilitate the expansion of
small and medium-sized enterprises (SMEs), through easier access to fund-raising on the stock market and
the development of venture capital, and promote research and development (R&D) and innovation, thereby
leading to stronger growth in our economies and more and better jobs. Therefore Member States are urged
to:

(i) coordinate their efforts for reducing differences in national regulations and tax regimes, while

preserving the consistency with prudential and fiscal national requirements;

(ii) ensure, where appropriate, that additional host country requirements only apply to financial services
offered to retail customers and not to professionals; this implies the pursuit of a policy distinguishing
between retail consumers and those operators acting in their professional capacity;

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(iii) ensure that existing national ‘general good’ rules, which aim at ensuring consumer protection and
promoting cross-border business, are applied in a transparent and proportionate manner as called for
in the Commission communication ‘Financial services: building a framework for action’; and

(iv) promote risk taking and innovation in Europe; in this respect follow up quickly on the risk capital
action plan, facilitating access to both risk capital for SMEs and capital for R&D for all enterprises.

3.3. Better functioning labour markets

The functioning of labour markets in the European Union can be improved significantly and this would
make a major contribution to the reduction of high unemployment. However, the problem differs
considerably between Member States, between regions within Member States and between categories of
labour. These differences also suggest a number of lessons: (i) differences between Member States indicate
that countries which have made most progress in structural reforms while pursuing sound macroeconomic
policies, have been able to improve their employment situation; (ii) differences in regional unemployment
in several countries highlight the need in these countries to account for productivity differences according
to qualification, skills and geographical areas in collective bargaining and the need to enhance labour
mobility; and (iii) the particularly high incidence of unemployment among certain categories of labour (low
skilled, women, youth) mainly reflects labour supply behaviour and recruitment patterns, including de facto
discrimination, but also the high costs of some of these labour categories (in particular unskilled workers)
and the inadequacy of skills.

To tackle these problems, the integrated four-pillar strategy set out in the employment guidelines should be
fully implemented and in a prompt and transparent manner. Member States should give particular attention
to the following:

(i) policies should act on both the demand for and supply of labour by applying the preventive approach
of the employment guidelines and by reducing the gender gap; this should include raising the
employability of the individual, in particular by means of access to labour market training, education
and lifelong learning, a lowering of taxes, especially on low-paid workers and an assessment of
duration and eligibility criteria in benefit systems, combined with active policies to reintegrate the
unemployed; in accordance with the Vienna European Council conclusions the national action plans
for Employment should include concrete national targets and deadlines where appropriate;

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systems

to ensure that

(ii) reviewing and adapting, where appropriate, the tax and
benefit
they actively support
employability and job creation; the portability of pension
entitlements should be improved, to the extent possible, in
order to sustain labour mobility across sectors and regions
in the European Union; achieving the appropriate balance
between economic efficiency and social inclusion; transfers
of unemployed to expensive, passive systems should be
avoided; and

(iii) the social partners should be encouraged to modernise the
including flexible and annualised
organisation of work,
working time arrangements; any overall
reduction of
working time must prevent an increase in unit labour costs
and take future needs in terms of increased labour supply
into account; efforts to increase women's participation in
working life and to encourage the combination of career
and family life should be pursued.

Product and capital markets

Belgium's authorities have taken important steps to liberalise
product and capital markets and to promote competition.
However, further efforts are needed in specific areas:

— despite

steady

improvement

since November 1997,
Belgium's record on implementing Single Market Directives
could still be improved, especially in areas such as telecom-
munications and transport, and

— liberalisation of

the network industries (telecommunica-
is generally keeping pace
tions, post, energy, transport)
with the requirements of Community legislation. Further
opening-up of these markets should entail lower prices for
business and consumers.

II. COUNTRY-SPECIFIC ECONOMIC POLICY GUIDELINES

Labour markets

1. Belgium

Economic growth will decelerate in Belgium in 1999 to about
its trend rate, but should be sufficient to bring about a further
gradual decline in unemployment.

Budgetary policy

Budgetary policy should focus on the following:

— any risk of slippage from the 1999 budget target for the
primary surplus of 6 % of GDP should be offset by timely
corrective measures, thus enabling the target of 1,3 % of
GDP for the total deficit to be met,

— real primary expenditure in the current and subsequent
years should be monitored closely in order to ensure that
its annual growth rate remains in compliance with the
target of 6 % of GDP. The stability
primary surplus
programme provides for an annual increase in real primary
expenditure of 1,5 %,

— in future years, the primary surplus should be maintained at
6 % of GDP and the total government deficit reduced as
planned in the Belgian stability programme so as to secure
a continuing rapid reduction in the general government
debt ratio, and

— within the Belgian institutional framework,

it would be
desirable to renew from 2000 the ‘cooperation’ agreement
signed in 1996 between the Federal government,
the
regions and Communities, with a view to ensuring the
coordination of budgetary policy during the period covered
by the stability programme.

The Belgian labour market is characterised by persistently high
long-term unemployment and relatively low employment rates.
Labour market policies are still overemphasising the im-
portance of income maintenance measures. The trend towards
an active policy has been reinforced with the 1998 National
Action Plan for employment. As a consequence,
reforms
in particular, on the following areas:
should focus,

— while activation of the unemployed is being pursued with
particular focus on low skilled and youngsters, more needs
to be done, especially concerning unemployed adults,

— in order to create incentives to participate in the active
measures and to take up new job offers, the active policy
measures should be combined with a review of benefit
duration and a closer scrutiny of the availability of the
unemployed,

— employment protection legislation in Belgium is considered
to be relatively strict
for white-collar workers. Further
consideration should be given to this matter since more
likely to
flexible employment protection legislation is
improve Belgian labour market performance, and

— given substantial differences in regional unemployment, it
is desirable to facilitate the use of opening clauses to allow
labour market
wage negotiations to better reflect
conditions or the financial situation of the enterprises.

local

2. Denmark

A slowing in economic growth in Denmark to below its trend
rate is likely in 1999 as economic activity is close to capacity
limits and in response to counter-cyclical budgetary measures
at central government level. Unemployment is likely to stabilise
at its already low level.

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Budgetary policy

— the various leave schemes should be reconsidered in the

light of the need to increase labour supply.

Budgetary policy should focus on the following:

— the implementation of budgetary policy should seek to
maintain a strong government surplus in 1999 — in line
with the planned surplus of 2,5 % of GDP — through strict
adherence to expenditure targets, in particular at the level
of local governments, and

— in the medium term, the reduction of distortions in the tax
system (included in the ‘Whitsun package’), should be main-
tained and allowed to produce its results.

3. Germany

The slowdown in Germany in 1999 appears to be more
pronounced than in most other Member States, because of a
generally greater exposure to weaker world trade and some
specific domestic influences, such as substantial processes of
structural adaptation in the New German Länder especially in
the construction industry. This carries the risk of an interrup-
tion in the decline in unemployment.

Product and capital markets

Budgetary policy

The Danish authorities have significantly advanced structural
reforms in a number of markets. Nonetheless, further efforts
are needed in specific areas:

— competition problems (high prices, high concentration
ratios, high margins and low degrees of foreign penetration)
are noticeable in certain sectors, calling for a strengthening
and a more vigorous application of existing regulations,

— the Danish public sector is comparatively large, so the
authorities' efforts to increase its efficiency by introducing
competitive tendering in the provision of public services are
particularly appropriate,

— significant progress has been achieved in deregulating the
network industries. Recently-agreed reforms in the elec-
further liberalisation should be
tricity sector aimed at
implemented without delay, and

— the liberalisation of shop-opening hours, which has already
led to increased employment, should be further reviewed.

Labour market

Denmark has a high employment rate and a low unemploy-
ment rate. The country is part of a group of Member States in
which the
structural
reforms, in particular in the labour markets, has produced clear
positive results. Nevertheless, reforms should focus,
in par-
ticular, on the following areas:

implementation of

comprehensive

— given the relatively large part of the active population on
benefits and the need to increase the labour supply, it is
important that the recent reforms, including the reform of
the early retirement scheme, are fully implemented and
closely monitored, with a view to evaluating whether in-
centives to take up or remain in jobs are sufficient,

— the latest tax reform which aimed at, inter alia, reducing the
tax burden on low incomes and the increased incentives
should be evaluated with a view to a possible reinforcement
because the tax wedge on labour is still high, and

Budgetary policy should focus on the following:

— implementation of budgetary policy in 1999 should respect
the target for the government deficit of 2 % of GDP. This
should be possible through tight control of expenditure,

— if

the strengthening of

the economy in 2000 will be
stronger than envisaged in Germany's stability programme,
this should be used to make faster progress towards the
medium-term objective
in the
for
programme, and

deficit

the

set

— the guiding principle of the planned tax reform, i.e. a cut in
tax rates and a simultaneous widening of the tax base, is
appropriate. In order to maximise its positive impact, the
reform should result in an effective simplification of the tax
code.

Product and capital markets

There is evidence that the functioning of German product
markets is improving. However, further efforts are needed in
specific areas:

— since November 1997, Germany has made significant
progress in completing the legislative work necessary for
the implementation of the Single Market. In public procure-
ment, however, further progress could be made,

— in the past, the level of State aids had increased due to
reunification, but since then, it has decreased. This process
should be continued, especially for sectoral aids,

— significant progress has been achieved in liberalising the
network industries leading to lower prices. A similar effort
should be considered for other services, including opening
hours in retail distribution after the review of the 1996
liberalisation, and

— business registration procedures for creating SMEs were
simplified and accelerated. Further accelerations seem to be
possible.

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Labour markets

and privatisation of public companies, should be imple-
mented as scheduled.

The German labour market has been characterised by weak job
creation over the past five years. The unemployment rate in the
East is nearly twice as high as in the West. Active labour
market policies have traditionally focused on the promotion of
vocational and prevocational training,
job creation schemes,
structural adjustment measures and rehabilitation measures,
the Public Employment Service is being
while the role of
strengthened further. The 1998 National Action Plan for
employment focuses on employability by further developing
the successful dual apprenticeship system, as well as actions for
disadvantaged youth. As a consequence, reforms should focus,
in particular, on the following areas:

— the emphasis put on active labour market measures should
be supplemented by a review of the benefit and assistance
schemes in order to ensure that for all groups sufficient
incentives exist for participating in job training and taking
up job offers,

— the government's decision to lower non-wage labour costs
— financed via increased energy taxes — and income taxes
for especially low-paid workers is welcomed. Such moves
should be continued in order to reduce labour costs further
at the lowest end of the wage scale, while respecting the
need for fiscal consolidation; and to assess the employment
legislation for SMEs with a view to its impact on job
creation.

4. Greece

Economic growth in Greece has been strong in recent years
and any slowdown in 1999 is likely to be modest. Unemploy-
ment is expected to decline gradually.

Privatisation receipts should be used to contribute to a rapid
reduction in the general government debt ratio.

Product and capital markets

Greece has striven to liberalise its economy in the last few
years. Nonetheless, efforts need to be reinforced in specific
areas:

— the Greek authorities should improve their transposition
record on implementing Single Market legislation, which is
worse than average, particularly as regards public procure-
ment,

— to improve productivity,

restructuring
management in state-owned enterprises should be accom-
panied by a sustained effort to privatise,

the strategy of

— although the creation of new firms is encouraging, reducing
further the administrative burden for registering a new
this
company could stimulate entrepreneurship.
would be accompanied by a strategy to develop further
venture capital markets, as Greek SMEs find raising finance
difficult. The plan for the enlargement of the stock market
so that small dynamic companies can start trading within
1999 is a significant first step in the strategy to help Greek
SMEs in raising finance, and

Ideally,

— although recent measures to stimulate business R&D ex-
penditure from its currently low level are encouraging,
further measures along similar lines should be envisaged.

Budgetary policy

Labour markets

Budgetary policy should focus on the following:

— the target set in the budget for a government deficit in
1999 of 1,9 % of GDP should be achieved. The proposed
restructuring of government expenditure in favour of
investment should be effectively implemented,

— the budget for 2000 should aim for a further decline in the
deficit helped by a reduction in the primary current
expenditure ratio to GDP in order to contribute to lowering
for
inflation expectations. Clear
securing expenditure
to be
control
respected,

and binding norms
should continue

— in parallel, the Greek authorities should, in line with the tax
law adopted in the recent past, further pursue their efforts
to increase the efficiency of the tax system by combating
tax avoidance and evasion; and the public sector should be
further reformed with vigour; in particular the restructuring

The Greek labour market is characterised by a low employment
rate, stagnating unemployment and high long-term unemploy-
ment. A reform of the labour market aimed at enhancing
flexibility entered into force last year. The law introduces new
types of work contracts, flexible working hours and private
employment offices. The 1998 National Action Plan for
employment and the implementation report point to the estab-
lishment of a more general employment strategy to tackle these
problems. Particular efforts have been made to address key
problems affecting young people and women, both of which
have high unemployment rates. As a consequence, reforms
should focus,

in particular, on the following areas:

— the preventive approach of labour market policies should
be reinforced. Efforts to reform training and education
systems with a view to taking better account of the needs
of the productive system should be further pursued, and

— the use of new types of part-time contracts and more

flexible working hours should be encouraged.

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5. Spain

In the Spanish economy, high and above trend growth is
expected in 1999, although at a somewhat lower rate than in
previous years. A further substantial decline in the still very
high level of unemployment is anticipated.

— while privatisation and deregulation have been significant
and may permit an increase in efficiency in goods and
service markets, competition policy should be reinforced in
order to guarantee that the benefits of this process are fully
transmitted to consumers.

Budgetary policy

Labour markets

Budgetary policy should focus on the following:

— the implementation of budgetary policy in 1999 should
ensure that the target for the government deficit of 1,6 % of
GDP is met, if necessary, through a further tightening of
primary current expenditure, taking advantage of the better-
than-expected results in 1998 and the potential for larger
savings in interest payments,

— the budget

for 2000 should reaffirm the targets and
strategy outlined in the stability programme: i.e. a deficit of
1 % of GDP based on the containment of primary current
expenditure. This will allow room for
strengthening
government investment, given the catching-up needs of
Spain. If evidence of overheating emerges, a tighter fiscal
stance should be adopted, and

— control of government expenditure should be re-enforced
through the planned reform of the National Budget Law;
given the increasing role of territorial governments in many
fields of expenditure, the existing internal stability pact
between the regions and the state should be monitored
closely and respected fully.

Product and capital markets

Over the recent period, Spain has made serious endeavours to
improve the functioning of product markets. Nonetheless,
further efforts are needed in specific areas:

— despite progress in transposing Single Market legislation
during 1997 and 1998, further improvement is still neces-
sary, especially in transport,

— a large part of non-agricultural State aid takes the form of

sector-specific aid. Such aids should be reduced,

— under regulatory reforms, much has been done to deregu-
late telecommunications, electricity, gas and air transport. A
similar effort should be made in retail distribution,

— the administrative burden facing Spanish companies is
high, both in terms of the number of procedures and of
delays for company registration. Measures should be taken
to rectify this situation, and

— the law for the promotion of industrial innovation being
prepared by the Spanish government to stimulate industrial
innovation is particularly welcome, given the present low
share of R&D expenditure,

Although the unemployment rate decreased by more than 2
percentage points in 1998, to reach 18,7 %, Spain has one of
the most difficult starting points of all Member States. Apart
from high rates of youth,
long-term and female unemploy-
ment, the Spanish labour market suffers from a low employ-
ment rate, a low rate of female participation and a low rate of
part-time work. The 1998 National Action Plan for employ-
ment represents a significant move towards activation and
prevention. Furthermore, a new law recently introduced should
enhance the attractiveness of part-time work for employers and
employees, while the new decentralised management model of
the National Employment Institute will help improve employ-
ability. Negotiation structures have been created to actively
involve the social partners in the definition and implementa-
tion of employment policies. As a consequence, reforms should
focus,

in particular, on the following areas:

— the high levels of long-term and youth unemployment call
for a shift from passive to active labour market policies,
with particular emphasis on investment in training and
education to increase human capital and adaptability as
indicated in the 1998 national action plan for employment,

— efforts in line with the recent personal income tax reform
to reduce the tax wedge, combined with further reforms of
the pension system aimed at discouraging early retirement,
should provide additional incentives on the supply side of
the labour market, while helping to ensure the sustain-
ability of social protection in Spain,

— recent agreements with the social partners to reduce the
cost of dismissal should be reinforced in order to diminish
the relative weight of temporary contracts, while enhancing
part-time work and thereby introducing more flexibility in
the labour market, and

— striking regional differences as regards unemployment rates
indicate that the social partners should review wage forma-
tion systems with a view to adapting wage developments to
productivity differentials at geographical,
sectoral and
company level.

6. France

Economic growth in France will decelerate in 1999 to about its
trend rate. A further but less rapid decline in unemployment is
expected.

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Budgetary policy

Budgetary policy should focus on the following:

— implementation of budgetary policy in 1999 should
respect the target for the government deficit of 2,3 % of
GDP. This requires the French Government to respect the
expenditure targets that have been set,

— government expenditure in 1999 and subsequent years
should be strictly controlled and any slippage should be
promptly corrected. In particular, social security spending
should be closely monitored. The government should
rapidly announce measures that will ensure a durable
compliance with the expenditure ceilings established in the
stability programme, and

— the expected strengthening of economic activity in 2000
and beyond should be used to make progress towards the
medium-term objective for the deficit projected in the
favourable scenario of France's stability programme.

Product and capital markets

The French authorities have made efforts to deregulate and
promote competition in product and capital markets. Nonethe-
less, further efforts are needed in specific areas:

— despite steady improvement since November 1997, France's
record in implementing Single Market Directives could still
be improved, particularly in telecommunications,

— the large proportion of non-agricultural State aid which has
been devoted in recent years to rescuing and restructuring a
number of firms facing exceptional difficulties should be
reduced. As the French authorities themselves recommend
in their report on French economic reforms, an increased
emphasis should be given to generic measures to improve
firms' ability to adapt and innovate,

— although liberalisation of the network industries (telecom-
munications, post, electricity, gas, transport)
is generally
keeping pace with the requirements of Community legisla-
faster progress could be made, particularly in the
tion,
energy sector, and

— measures already taken to simplify formalities and to
encourage innovation should be closely monitored and the
effort made in these areas should be continued.

job creation, especially in
are important programmes of
emerging community services. Also, new initiatives on life long
learning are under discussion. As a consequence, reforms
should focus,

in particular, on the following areas:

— the increased emphasis on active labour market policies of
the 1998 national action plan for employment should be
backed up by a review of both unemployment benefit
schemes (job availability requirements) and employment
protection legislation. Such a review should aim at
removing the impediments to take up jobs, encouraging
participation in active
and
enhancing the incentives to create jobs,

labour market measures

— provided budgetary room is created, the recent policy of tax
cuts at the lower end of the wage scale and the promotion
of jobs in certain service areas should be continued, and

— a prominent reform of the French labour market is the
gradual
introduction of the 35-hour working week. The
bulk of the implementation remains to be done. Special
attention should be paid to the avoidance of increasing the
cost of labour and to the introduction of more flexibility
regarding work organisation and working time (annualisa-
tion of working time).

7. Ireland

Very rapid growth in the Irish economy is expected to continue
in 1999, albeit not quite as strongly as in the previous two
years. Unemployment should decline further at a significant
pace.

Budgetary policy

Budgetary policy should focus on the following:

— since the public finances are already in strong surplus, the
main challenge for budgetary policy is to ensure stability.
Should there be evidence of wage inflation continuing to
gather pace, there should be a readiness to use budgetary
policy appropriately to restrain the economy; and

— the growth in government consumption should be steadily
restrained from the estimated 5 % volume increase in 1998
to 2 % in 2001, as outlined in the stability progamme.

Labour markets

The employment rate is relatively low, in particular for workers
aged 55 and more. The unemployment rate, including youth
is higher than the European Union average.
unemployment,
Recent reforms have improved the employment content of
growth by means of a good combination of active and prevent-
ive measures. The 1998 National Action Plan for employment
has clearly addressed the prevention of youth unemployment,
as well as the integration of the long-term unemployed. There

Product and capital markets

Reforms of product and capital markets are key elements of the
government's economic strategy. Nonetheless, further efforts
are needed in specific areas:

— Ireland should accelerate the reduction of its transposition
deficit on Single Market legislation especially in transport,

— the Competition Authority should be given power to
enforce directly Articles 85 (cartels) and 86 (abuse of domi-
nant positions) of the EC Treaty,

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— liberalisation and regulatory reform of the Irish network
industries generally follows progress made in European
Union legislation. However, telecommunications, electricity
and gas supply, and domestic and international transport
are dominated by state-owned companies. Telecom Eireann
is being partially privatised this year. Similar initiatives to
promote competition in these sectors should be considered,
and

— venture capital in Ireland is modest. This is a handicap to
Irish SMEs particularly in the start-up phase. However, since
1995, improvements are being made in the venture capital
market and efforts in this direction should be continued.
R&D expenditure is a1so low. In view of this, measures
should continue to be taken to create incentives encour-
aging venture capital and local R&D and the government
should continue to participate and could consider particip-
ating more fully to improve Ireland's R&D performance.

Labour markets

Ireland has made substantial progress both in increasing the
employment rate and in reducing the unemployment rate,
which has been more than halved in four years. The 1998
national action plan for employment places most emphasis on
employability, relying strongly on active policies. To address
the problem of long-term unemployment, specific preventive
measures involve young unemployed and older workers, while
a clear commitment has been made to raise the participation
level of the long-term unemployed in training from 11 to
20 %. Reflecting such measures, but especially its recent strong
growth, Ireland's unemployment rate was well below the Euro-
pean Union average by late 1998, while its employment rate is
now approaching the European Union average. Long-term
unemployment has fallen faster than unemployment as a whole
and is continuing to decline. However,
further efforts are
required to reintegrate the long-term unemployed and those
with low educational qualifications. As a consequence, reforms
should focus,

in particular, on the following areas:

— the 1999 National Action Plan for employment should
place greater emphasis on a balanced approach involving
preventive as well as active measures. Furthermore meas-
ures to increase the participation rate of the long-term
unemployed and the low-skilled in education and training
programmes remain important,

— in line with the fourth national economic programme —
Partnership 2000 —, adherence to the social pact plays an
important role in furtherance of the wage moderation that
is necessary for the maintenance of employment growth,
and

— while the setting of a minimum wage can be important for
addressing issues of social inclusion and poverty, potential
negative effects from setting the minimum wage level too
high should be avoided.

8. Italy

Economic growth in Italy continues to be subdued, with both
domestic and external demand lacking strength, and there has
not yet been any significant decline in unemployment.

Budgetary policy

Budgetary policy should focus on the following:

— given that GDP growth in 1999 is expected to be clearly
below what was foreseen in the budget, implementation of
budgetary policy in 1999 should aim at limiting any slip-
page from the target for the total deficit of 2 % of GDP,
which in any event will stay below 2,4 %. In such a case,
reaching the objective of 1 % of GDP in 2001 could require
additional corrective measures on a larger scale than envis-
aged,

— the budget for 2000 should aim to re-establish the primary
surplus of 5.5 % of GDP indicated in Italy's stability
programme. This is necessary to ensure a continued rapid
decline
ratio. The
the privatisation programme should be
momentum of
maintained and privatisation receipts should be used to
reduce public indebtedness further,

in the general government debt

— government current primary expenditure in the current and
subsequent years should be tightly controlled, in order both
to respect programme targets and to allow room for the
desired expansion in government investment, and

— targeting the stabilisation of pension expenditure as a
percentage of GDP is welcome. Since current and future
developments in pension expenditure give some reasons for
concern, the Italian government is encouraged to reassess
the reform of the pension system.

Product and capital markets

Past years have witnessed continuous progress in Italy's macro-
economic adjustments and some structural reforms aimed at
promoting competition and enhancing efficiency. Nevertheless,
further efforts are needed in specific areas:

— Italy has made recent progress in the transposition of Single
Market legislation. Since the past record of transposition is
relatively poor, measures should be taken to rectify this
situation, especially in areas such as transport and public
procurement,

— efforts should be made to reduce further the overall level of
non-agricultural State aid and improve its structure,

— liberalisation of

the network industries

is generally
progressing in line with the requirements of Community
legislation. However,
liberalisation should be
intensified, especially road and rail transport, and

transport

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Official Journal of the European Communities

17. 8. 1999

— recent reforms have set the stage for a significant reduction
of the time necessary for registering a company. However,
the measures should be closely monitored and reinforced in
order to cut more radically both the high number of
procedures and the long time-span for establishing new
businesses.

Labour markets

The Italian labour market is characterised by low employment
rates and high unemployment rates,
in particular, very high
rates of youth and long-term unemployment and severe imbal-
ances between the North and South. The recent adoption of a
tailor-made approach vis-à-vis the newly unemployed shows
that efforts are being made towards preventing the drift into
long-term unemployment. Furthermore, the tightening of eli-
gibility criteria of unemployment benefit schemes and the
should improve the
targeting of employability measures
current situation. As a consequence, reforms should focus, in
particular, on the following areas:

— efforts to improve active labour market measures would
need to be substantially increased in addition to recent
measures concerning job-search assistance,
training and
apprenticeships,

— the effort to shift the tax burden away from labour to other
tax bases, undertaken with the Italian Tax Reform of 1997
(in particular with the introduction of
the IRAP) and
recently confirmed by the so-called Carbon tax imple-
mented in the 1999 Budget, should continue to be pursued
intensively within the process of fiscal consolidation,

— such efforts have to be combined with reforms of benefit
schemes to reduce the number of employed being trans-
ferred to pensions and other schemes,

— without compromising the budgetary targets, early activa-
tion and adequate unemployment benefits should ensure an
increased labour supply and greater labour mobility,

— a review of employment protection legislation should also

have positive results, and

— tripartite local agreements in the South introducing wage
flexibility in line with lower labour productivity should be
encouraged.

9. Luxembourg

Economic activity in Luxembourg is likely to expand robustly
in 1999, although not as rapidly as in 1998. Unemployment
should stay at its very low level.

Budgetary policy

Budgetary policy should focus on the following:

— government expenditure should be monitored closely, so
that the high government surplus does not rely just on the
rapid increase in tax receipts linked to strong economic
growth, and

— structural reforms, in particular regarding the social security
system, should continue in order to contribute to the main-
tenance of sound public finances and to prepare for the
challenge of population ageing.

Product and capital markets

Several sectors are undergoing structural reforms in Luxem-
bourg. However, further efforts are needed in specific areas:

— despite recent efforts to catch-up, Luxembourg has been
relative1y slow to implement Single Market regulations.
Implementation should be stepped up, particularly in the
areas of telecommunications and transport,

— in Luxembourg, regional aids account for a very large part
of non-agricultural State aids, a high percentage for a pros-
perous country. Evaluating the necessity and effectiveness
of these aids therefore seems appropriate, and

— price levels in Luxembourg are relatively moderate except
in the construction sector. The country maintains an ex-
tensive system of price regulation that is unique within the
European Union. The purpose of the system is to help
reduce pressures on wage levels, which are indexed to the
rate of inflation. In order to alleviate the administrative
burden of firms, the abolition of the price regulation system
should be considered and the emphasis shifted to a more
active competition policy.

Labour markets

The overall performance of the Luxembourg labour market is
among the best in the European Union. Low unemployment
rates coexist with high employment growth rates. The latter
has mainly been achieved due to a large share of cross-border
commuters, who count for almost one third of employees.
However, the Luxembourg labour market performance is weak
with regard to the low employment rate of women and older
workers. As a consequence, reforms should focus, in particular,
on the following area:

— the 1998 national action plan for employment envisages
measures to remedy this situation by, inter alia, on-the-job
training in firms and the creation of additional childcare
facilities. This could also help to reduce the risk of over-
heating through rapid wage increases in this fast-growing
economy.

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Official Journal of the European Communities

L 217/57

10. The Netherlands

Labour markets

After several years of rapid expansion, the Dutch economy is
expected to slow in 1999 to about its trend rate. Nevertheless,
the already low unemployment is likely to fall further.

Budgetary policy

Budgetary policy should focus on the following:

— any deterioration in the budgetary position in 1999 should
be limited and should not lead to a general government
deficit exceeding the budget target of 1,3 % of GDP, taking
advantage of the better-than-expected result for 1998. In
particular, some increases in expenditure planned in the
1999 budget should,

if necessary, be reconsidered, and

— the very limited planned reduction in the deficit to 1,1 % of
GDP in 2002 in the context of the cautious scenario of the
Dutch stability programme should in any case be con-
sidered as a minimum objective and the Dutch government
is encouraged to achieve better budgetary results.

Product and capital markets

The Netherlands is a good example of a country in which
important product market reforms have already taken root.
However, problem areas remain, particularly in the non-traded
sectors
services where
construction and some
competition is relatively weak. In this context, further efforts
are needed in specific areas:

such as

— although the Netherlands has a generally good record in
transposing Single Market directives, its transposition deficit
is concentrated in a small number of sectors, particularly
transport. With a view to enhancing competition, trans-
position should be stepped up,

— important reforms were made to competition policy in
1998 and their efficiency should now be assessed. This
includes the innovative Dutch ‘Competition, Deregulation
and Legislative Quality Project’ (‘MDW operatie’), launched
in 1994. Central to the ‘MDW operatie’ is the intensifica-
tion of competition and the removal of regulatory obstacles
wherever possible. Such obstacles continue to hinder busi-
ness start-ups, in spite of the important measures already
taken (reducing both the administrative costs and number
of steps needed to set up a business). The implementation
of such measures should be strictly followed,

— liberalisation of the public transport sector is still

little
advanced and reforms in this area should be speeded up,
and

— in the retail sector, shop-opening hours have been extended
but spatial planning regulations continue to be a constraint
and should be reviewed.

regarding

to comprehensive

youth unemployment

Due
reforms and sustained
structural
economic growth, the Dutch labour market performance is one
of the best in the European Union, both in terms of employ-
ment increases and unemployment reductions. Nevertheless,
the share of long-term unemployment in total unemployment
is still high. Personalised integration plans may be effective
tools in preventing youth and long-term unemployment. Dutch
performance
already
relatively good, partly as the result of a lower minimum wage
for younger workers. The government's continued efforts to
reduce taxes on low wages and to reduce the share of the
working-age population dependent on benefits deserve to be
recognised, although there is still a large number of persons on
disability benefits. Furthermore, the social partners take the
interests of unemployed outsiders to a great extent
into
account. The privatisation of the sickness benefit system has
helped reduce sickness-related absence from work. As a conse-
quence, reforms should focus, in particular, on the following
areas:

is

— the tax burden on average wages remains one of

the
highest in the European Union. Continued efforts are there-
fore needed to reduce the overall tax burden on labour,
especially at the lower end of the labour market, and

— further efforts seem to be required to ensure sufficient
incentives in benefit and assistance schemes to encourage
take-up of job offers and to increase the effective labour
supply,

in particular, among older workers.

11. Austria

Austria is likely to experience a slowdown in economic growth
in 1999 to about its trend rate, allowing the already low
unemployment rate to remain broadly stable.

Budgetary policy

Budgetary policy should focus on the following:

— tight control of government expenditure is needed in order
to ensure that the recent adaptation of family taxation does
not lead to a build- up of pressures on the budget and that
the target of 2 % of GDP for the government deficit in
1999 is met,

— for the years beyond 1999,

the Austrian Government
should do its utmost to overachieve, as in the past, the
budgetary targets set in the stability programme and ensure
that the general government debt ratio is kept firmly on a
downward path, and

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Official Journal of the European Communities

17. 8. 1999

— while the net tax relief provided by the recently adopted tax
reform is to be welcomed, significant savings on the
expenditure side will be necessary in order not to compro-
mise the objective of a further reduction in the deficit from
2000 onwards.

Product and capital markets

Several measures have been taken to promote competition and
entrepreneurship in Austria. However,
further efforts are
needed in specific areas:

— Austria should accelerate transposition of Single Market
into domestic law in transport and public

Directives
procurement,

— the Austrian cartel law (dating from 1988) is not in line
with Community law. However, the government intends to
reform the present law and create an independent Cartel
Office. These reforms should be put in place as soon as
possible,

— efforts should be continued to reform public services and
the deregulation process of utilities should be accelerated,

— acknowledging a recent

liberalisation of
hours further steps should be considered,

shop-opening

— recent Austrian initiatives to simplify the procedures neces-
sary to start a new business such as the development of
‘one-stop shops’ should be continued and expanded to
include all registration procedures, and

— measures should be taken to develop the venture capital

market,

— the government is invited to meet its objective to increase
R&D expenditure to 2,5 % of GDP by 2005, inter alia by
improving tax allowances.

Labour markets

A key element of the relatively high employment and low
unemployment rates in Austria is the traditional consensus
approach of the social partners, helping to smooth out the
effect of business cycles on the labour markets and also to
adjust ex post to wage agreements which turn out to be harmful
for growth. One weakness is the low activity rate, and rising
unemployment, among older workers. As a consequence,
in particular, on the following areas:
reforms should focus,

— the 1998 national action plan for employment represents a
further move towards a more active labour market
approach, supported by a substantial increase in budgetary
resources. The new 1999 national action plan should make
clear how the targets will be met,

ising the organisation of work and reviewing early retire-
ment conditions,

— special emphasis needs to be paid to low-wage and low-
skilled workers, as their share among the unemployed
recently started rising, and

— recent reforms to encourage part-time work and increase
the working time flexibility during the year (annualisation
of working time) should support
the rather successful
labour market performance in Austria relative to most
other European Union countries.

12. Portugal

Although economic growth in Portugal is expected to slow in
1999, it will remain close to the trend rate and should allow a
further decline in unemployment.

Budgetary policy

Budgetary policy should focus on the following:

— the implementation of budgetary policy in 1999 should
ensure that the target for the government deficit of 2,0 % of
GDP is fully met; the opportunity presented by the favour-
able economic growth conditions and the budgetary
outcome in 1998 could be used to bring the deficit down
further;
lower interest payments should also be used to
improve the deficit,

— the budget execution should pay close attention to primary
current expenditure, especially health expenditure and the
in order to generate an efficient
government's wage bill,
and permanent budgetary consolidation;
if evidence of
overheating will emerge, a tight fiscal stance should be
adopted,

— the structural reforms with a direct impact on the budget
outlined in the stability programme (e.g. standardisation of
accounting systems and multiannual programming of
current expenditures) should be swiftly implemented to
achieve better budgetary control and to improve expend-
iture efficiency, and

— where possible and necessary, more intense introduction of
private-public partnerships in health care systems, which
are already applied in some cases in Portugal, and reviewing
the eligibility criteria of pensions should cope with demo-
graphic trends, without significantly increasing the tax
burden on labour.

Product and capital markets

— the difficulty in retaining older workers in activity suggests
in particular the need to reconsider the revision of the
overall framework by: improving work incentives, modern-

Developing economic integration has helped improve the func-
tioning of product markets in Portugal. However,
further
efforts are needed in specific areas:

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Official Journal of the European Communities

L 217/59

— Portugal has been relatively slow to implement Single
Market Regulations. Measures should be taken to rectify the
situation, especially in areas such as public procurement,
telecommunications and transport,

— the level of non-agricultural State aids is relatively low.
However, still a significant part of this aid is devoted to
restructuring and sector-specific measures. Efforts should
therefore be made to reduce the share of these aids,

— the anti-trust legislation is currently being reviewed with
the aim of bringing it into line with the European Union
legislation. This reform of competition law should be
implemented as soon as possible,

— liberalisation of the network industries, which is generally
progressing in line with the requirements of Community
legislation, should be pursued further,

— in retail distribution, a problem of excessive concentration
has been identified. The competition laws have been
strengthened to deal with abuses. However,
the law
restricting the licensing of large retail outlets may not be an
appropriate solution,

— administrative

requirements

to create a business are
complex and can take a very long time. The Portuguese
Government should develop the National Network of
Enterprise Formalities Centres, created in 1998, as well as
the multipurpose Administrative Services Centres (‘Loja do
cidadao’), which will strengthen the strategy of simplifying
and speeding up procedures, and

13. Finland

After several years of rapid growth, the Finnish economy is
expected to expand more slowly in 1999. But further progress
in reducing unemployment is expected.

Budgetary policy

Budgetary policy should focus on the following:

— while taking into account the impact of the economic cycle,
the government surplus should be improved further so as
to cope with the rapidly ageing population and the pressure
that this will

impose on the social security accounts,

— priority needs to be given to the reduction in central
government deficit, given its still unbalanced position and
the need to reduce further the central government debt
ratio,

— further fiscal consolidation should be based on a reduction
in government expenditure (in percentage of GDP) which
would also create room for the needed reduction in the
high tax burden, especially aimed at supporting job crea-
tion, and

— the stability programme set annual ceilings on central
government expenditure. Whereas the ceilings for the years
2000 to 2002 are non-binding,
they should be firmly
respected in the budget laws for those years.

— efforts should be made to develop a venture capital market

and to improve innovative activity.

Product and capital markets

Labour markets

Although the overall unemployment rate is much below the
European Union average, long-term unemployment and unem-
ployment among the unskilled is relatively high. Given this
situation, and the ongoing restructuring of
the Portuguese
economy,
the 1998 national action plan for employment
envisages enhanced education and training, as well as an
improved coordination between both systems. As a con-
sequence, reforms should focus, in particular, on the following
areas:

— measures to improve education and training should be
accompanied by an adequate benefit system to ensure
appropriate incentives to participate in these active meas-
ures and to take up job offers, and

— a number of laws aimed at improving the performance of
the labour market have been implemented in the past few
years, including the easing of dismissal and job assignment
rules and the introduction of higher working time flex-
ibility. This policy should be pursued further with a view to
enhancing labour market flexibility.

The progress of structural reforms has been important
in
Finland. However, competition problems persist in sheltered
sectors. Further efforts are needed in specific areas:

— significant reforms to extend the powers of the competition
authority have been carried out recently. National author-
ities should, however, be given the power to enforce
Articles 85 (cartels) and 86 (abuse of dominant positions)
of the EC Treaty, and

— because the Finnish public sector is comparatively large,
areas where public and private enterprises compete to
provide services should be closely monitored. Efforts made
to create a competitive environment in those areas should
be continued.

Labour markets

Both employment and unemployment rates are higher than the
European Union average. The labour force participation rate
among older workers is very low. The 1998 national action
plan for employment is a combination of preventive and curat-
ive action, contributing to a reduction of the stock of the
rate. The
unemployed while increasing the employment
government is aware of the incentive problems of the tax-
benefit system and has taken several steps to improve the
current situation. These measures have been successful to some
extent. As a consequence, reforms should focus, in particular,
on the following areas:

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Official Journal of the European Communities

17. 8. 1999

— in order to improve the employment content of growth,
measures should be directed at a reduction of the overall
tax burden on labour,

— benefit and assistance systems need to be reviewed with the
aim of increasing job availability, making job search more
effective, and ensuring sufficient incentives to take up a job
offer, and

— given the impact of ageing on future labour supply,
pension systems should be strengthened by reviewing the
conditions for access to early retirement.

14. Sweden

Economic growth in Sweden is likely to slowdown in 1999,
but a further gradual decline in unemployment is expected.

Budgetary policy

Budgetary policy should focus on the following:

— the government should adhere to its announced policies
since these are expected to achieve the government's budg-
etary targets of a rising government surplus,

— the government should ensure the maintenance of the tight
expenditure control on which its budgetary outlook is
heavily reliant, and

— given the high burden of taxation in Sweden, the govern-
ment should seek ways of reducing the burden further
while ensuring the achievement of its budgetary targets.

Product and capital markets

Sweden has a good record of reforms to goods and capital
markets. However, further efforts are needed in specific areas:

— there are competition problems (high prices and high
concentration ratios) in the retail and wholesale distribution
and construction sectors. Measures should be taken to
improve the situation. The Swedish competition authority
should be given the power to enforce Articles 85 (cartels)
and 86 (abuse of dominant positions) of the EC Treaty,

— the Swedish public sector is comparatively large, so the
authorities' efforts to improve its efficiency are particularly
appropriate,

— Sweden is among the Member States that have undertaken
the most comprehensive reforms of utilities liberalisation in
the Union. In spite of efforts to ensure equality amongst the
different suppliers, further efforts should be taken to ensure
that dominant firms do not constitute a potential threat to
market efficiency. Further measures to increase competition

and to promote new entry in these sectors should be
envisaged, and

— Regulations limiting the establishment of grocery stores

reduce competition in retail distribution.

Labour markets

Total employment has been falling throughout the 1990s as a
result of weakened economic activity, although showing some
recovery in 1998 and still remaining among the highest
employment rate for the European Union. The employment of
women is concentrated in a limited number of sectors, espe-
cially in health and social services. Sweden stands above the
European Union averages as regards fema1e and part-time
employment rates. The unemployment rate was below the
European Union average in 1998. The Swedish labour market
policy rightly puts emphasis on investment in human capital,
through employment training and skill development in the
workplace. It has emphasised active labour market measures,
which have, however, proved to be less effective in circum-
stances of high unemployment. As a consequence, reforms
should focus,

in particular, on the following areas:

— on the government's plans to promote job creation in
private firms and to reduce the overall number of people in
labour market programmes while focusing the programmes
more precisely and increasing the share of people in labour
market training,

— given the disincentives that stem from the very high tax
burden on labour, in particular, on low and medium wages
in combination with generous welfare benefits, the govern-
ment's aim to use the budgetary room for manoeuvre for
reducing taxes on labour with a priority for low and
medium-paid workers is also welcome, and

— further reviews of benefit and assistance schemes in order
introduce gradually rising
to clarify eligibility criteria,
demands on the unemployed, strengthen the supervision of
the administration and ensure efficient incentives to take up
a job offer, should strengthen and balance the efforts in
taxation and activation schemes.

15. United Kingdom

Economic growth in the United Kingdom in 1999 is likely to
be lower, falling below trend.

Budgetary policy

Budgetary policy should focus on the following:

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Official Journal of the European Communities

L 217/61

— announced expenditure plans should be strictly adhered to,
so that the government's fiscal rules — on average over the
cycle, borrowing only to invest and not to finance current
expenditure, and keeping the net public debt ratio at a
stable and prudent level — can be respected. As a con-
sequence, the medium-term objective of the public finances
broadly in balance can be achieved, as projected in the
budget for 1999/2000, and

— the government should take corrective action promptly if
there is evidence of a deterioration in the government
balance which cannot be explained by the economic cycle.

Product and capital markets

Since the 1980s, the United Kingdom has undertaken con-
siderable reforms of its product markets. Nonetheless, areas of
weakness in competitiveness remain. As a result, further efforts
are needed in specific areas:

— although the United Kingdom has a relatively good record
in transposing Single Market legislation, little progress has
been made over the recent period and further efforts are
necessary, particularly in the area of transport,

— in the area of competition policy, new legislation will
strengthen the powers of the Office of Fair Trading. The
enforcement of these reforms should be strictly applied,
and

— growth of small business into larger firms, innovation and
R&D expenditure (especially R&D by SMEs) are all relatively
weak in the United Kingdom. The United Kingdom has a
highly developed venture capital market, but only a small
share of such funds go to early-stage business. The govern-
ment adjustment of the tax structure in favour of SMEs and
alteration of laws on insolvency and bankruptcy should
help redress the situation.

Labour markets

The labour market reforms pursued in recent years have
contributed much to the improved employment and unem-
ployment performance of the United Kingdom. At 71 %, the
United Kingdom's employment rate is among the highest in the
European Union, while the unemployment rate fell from over
10 % in 1992 to around 6 % in 1998. The New Deal and the
Welfare to Work initiatives should lead to an improved
performance among the young and adult long-term unem-
ployed groups and to a start in addressing investment in educa-
tional skills. As a consequence, reforms should in particular
focus on the following areas:

— the emphasis in 1998 on the national action plan for
employment on active labour market policy should be
accompanied by continued efforts to lower marginal effect-
ive tax rates on low-paid workers, and

— further efforts are planned or have recently been put in
place to deal with regional unemployment differences and
to address the issue of social inclusion. In this context, the
full
implementation of new initiatives relating to self-
employment at a local level and the promotion of afford-
able child care should prove helpful. It remains to be seen
whether further action along the lines of these programmes
will be needed.

Done at Brussels, 12 July 1999.

For the Council

The President

S. NIINISTÖ