MONETARY SYSTEM IS AN ESSENTIAL COMPONENT IN THE ARTICULATION OF COMPATIBLE , NATIONAL MONETARY POLICIES AIMED AT STABILITY AND CONVERGENCE . IT IS ALSO AN ESSENTIAL BRIDGEHEAD FOR THE COMMUNITY IN ITS ECONOMIC RELATIONS WITH THE REST OF THE WORLD IN SEVERAL WAYS : THE EXCHANGE RATES BETWEEN THE ECU , DOLLAR AND YEN ARE OF VITAL CONCERN TO THE COHERENCE OF THE COMMUNITY'S TRADE POLICIES IN THE WORLD ; THE ECU HAS A POTENTIAL ROLE IN THE CHANGING STRUCTURE OF INTERNATIONAL RESERVE ASSETS . COMMON ACTION IN ENERGY POLICY WOULD REQUIRE FURTHER EFFORT IN INVESTMENT AND RESEARCH ( SUPPORTED IN PART BY THE COMMUNITY'S OWN FINANCIAL INSTRUMENTS SUCH AS , LOANS BY THE EIB AND THE USE OF THE NEW COMMUNITY INSTRUMENT ) AS WELL AS A REINFORCED CONCERTATION OF NATIONAL ENERGY POLICIES IN THE PRICING , FISCAL AND REGULATORY DOMAINS .
2 . MEASURES FOR STABILIZATION AND RECOVERY
( A ) MONETARY POLICY
THE PRIORITY OBJECTIVE OF MONETARY STABILITY , BOTH FOR ITSELF AND AS A PRECONDITION FOR THE RESUMPTION OF GROWTH , REQUIRES THAT CONTROL OF THE MONETARY AGGREGATES BE KEPT ON A STEADY COURSE . POLICY HAS IN THIS RESPECT BEEN MORE EFFECTIVE IN THE RECENT PERIOD , THAN FOR EXAMPLE IN 1973 TO 1975 . NOTWITHSTANDING SHORT-RUN PROBLEMS OF MONEY SUPPLY MANAGEMENT THAT HAVE ARISEN AT TIMES , MONEY SUPPLY IN THE AGGREGATE IN THE COMMUNITY HAS DECELERATED FROM 13.5 % IN 1978 TO ABOUT 10 % AT PRESENT , WHEREAS IN 1973 IT ROSE TO 17.5 % . IN THE YEAR AHEAD THE GROWTH OF MONEY SUPPLY SHOULD DECELERATE A LITTLE FURTHER ON AVERAGE , ALLOWING FOR SOME EASING IN MONETARY CONDITIONS IN MEMBER STATES WHERE PERFORMANCE IS BELOW THE TARGET RANGE AND CONSIDERABLY SLOWER MONEY SUPPLY GROWTH IN OTHERS .
A STEADY MONEY SUPPLY POLICY IN THE PERIOD AHEAD IS NOT INCOMPATIBLE WITH HELPING ASSURE A RECOVERY IN THE BUSINESS CYCLE . ON THE CONTRARY , IT COULD BE COMPATIBLE WITH A DECLINE IN INTEREST RATES , WHICH HAS ALREADY BEGUN TO TAKE PLACE IN SEVERAL MEMBER STATES . HOWEVER , THE RESTRICTIVENESS OF MONETARY POLICY , AND THE DESIRABILITY OF A CONCERTED EASING IN INTEREST RATES , BOTH DEPEND VITALLY ON A REDUCTION IN THE RATE OF INFLATION . IF THE RATE OF INFLATION IS REDUCED , THEN THE AVERAGE MONEY SUPPLY GROWTH POSTULATED WOULD NOT CURB A RECOVERY OF GROWTH . IF THE EXPECTED , UNDERLYING RATE OF INFLATION IS SIGNIFICANTLY LOWERED , IN ADDITION TO ACHIEVING IMMEDIATE RESULTS IN TERMS OF PRICES AND COSTS , THE PROSPECTS FOR FURTHER SIGNIFICANT INTEREST RATE REDUCTIONS WOULD BECOME GOOD , SUBJECT ALSO , HOWEVER , TO INTERNATIONAL INTEREST RATE MOVEMENTS .
( B ) INCOMES
A PRONOUNCED SLOWDOWN OF INFLATION IS A MAJOR CONDITION FOR AN IMPROVEMENT OF THE PROPENSITY TO INVEST AND A STRENGTHENING OF THE CONFIDENCE OF HOUSEHOLDS , WHICH IN TURN IS REQUIRED TO PREVENT A PRECAUTIONARY RISE IN THE RATE OF SAVINGS AND DECLINE IN CONSUMPTION . TRADE UNIONS