ARE BASICALLY OF MEDIUM-TERM CHARACTER , BUT WHERE CONJUNCTURAL POLICY IS RELEVANT THIS IS INDICATED .
3.2 THE FINANCIAL POLICY FRAMEWORK
3.2.1 A PAUSE IN THE GROWTH OF PUBLIC EXPENDITURE
UNTIL VERY RECENTLY PUBLIC EXPENDITURE HAD BEEN GROWING AS A SHARE OF GDP PRACTICALLY WITHOUT INTERRUPTION SINCE THE BEGINNING OF THE POST-WAR PERIOD . IN 1958 , WHEN THE EEC WAS FOUNDED , THE RATIO WAS 32,5 % OF GDP FOR THE EC AS A WHOLE . IN 1983 THE RATIO REACHED ITS HISTORICAL PEAK OF 47,8 % OF GDP , FOLLOWED BY A DECLINE TO AN ESTIMATED 47,3 % IN 1984 . PRELIMINARY INFORMATION SUGGESTS THAT THIS DECLINE WILL CONTINUE IN 1985 AT A SOMEWHAT FASTER RATE , TO 46,4 % OF GDP . WHILE THE VOLUME OF PUBLIC EXPENDITURE WILL BE INCREASING SLIGHTLY IN BOTH YEARS , THIS SMALLER SHARE IN GDP TAKEN BY PUBLIC EXPENDITURE MAY MARK AN IMPORTANT CHANGE IN STRUCTURAL TREND FOR THE EUROPEAN ECONOMY . SEVERAL COUNTRIES ( GERMANY , UNITED KINGDOM , DENMARK , NETHERLANDS ) HAVE ESTABLISHED FIRM MULTI-ANNUAL PROGRAMMES FOR CONSOLIDATING THIS TREND , AND THIS PRACTICE MERITS ADOPTION BY OTHER MEMBER STATES .
THERE ARE SURELY MANY UNSATISFIED AND WELL-FOUNDED DEMANDS FOR BETTER SOCIAL SERVICES : HEALTH CARE FOR EXAMPLE . HOWEVER , IT APPEARS NOW TO BE WIDELY RECOGNIZED THAT TAXATION , SOCIAL SECURITY LEVIES AND SOCIAL TRANSFER PAYMENTS IN THE COMMUNITY HAVE IN THE AGGREGATE GROWN TOO FAST AHEAD OF THE CAPACITY OF THE ECONOMY , THUS WEAKENING THE GROWTH POTENTIAL OF THE ECONOMY ITSELF . THEREFORE A REVERSAL OF PAST TRENDS IN THE GROWTH OF PUBLIC EXPENDITURE SHOULD NOW BE A MAJOR FEATURE OF THE MEDIUM-TERM RECOVERY OF THE EUROPEAN ECONOMY . THESE NEW TRENDS SHOULD LEAD TO REDUCTIONS IN TAX BURDENS , SHOULD HELP RE-ESTABLISH WORK INCENTIVES AND REDUCE INFLATIONARY PRESSURES ( THE LATTER MAY BE AGGRAVATED BY TAX-PUSH WAGE INFLATION OR BY MONETIZATION OF BUDGET DEFICITS ) .
THE ELIMINATION OR REDUCTION OF OPERATING SUBSIDIES FOR UNECONOMIC ENTERPRISES IS PROCEEDING WITH UNEQUAL SPEED AND FIRMNESS IN DIFFERENT SECTORS AND COUNTRIES . THE EFFICIENCY AND ECONOMY WITH WHICH PROGRAMMES OF SOCIAL BENEFITS ARE ADMINISTERED CLEARLY LEAVES SUBSTANTIAL ROOM FOR PROGRESS IN SOME COUNTRIES .
IN THE MULTI-ANNUAL PUBLIC EXPENDITURE PROGRAMMES OF GERMANY AND THE UNITED KINGDOM VERY SIMILAR OBJECTIVES HAVE BEEN SET FOR THE PERIOD 1984 TO 1988 . IN GERMANY THE SHARE OF PUBLIC EXPENDITURE IN GDP IS TO DECLINE FROM 47 TO 43 % , IN THE UNITED KINGDOM FROM 44,5 TO 40,5 % . IN MOST OTHER EC COUNTRIES , THE PRESENT LEVEL OF PUBLIC EXPENDITURE IS SUBSTANTIALLY HIGHER THAN IN THE TWO COUNTRIES MENTIONED ( 57 % FOR ITALY , AND NEARLY 60 % OR MORE FOR THE BENELUX , DENMARK , AND IRELAND ) . THERE IS STILL SCOPE FOR GREATER EFFICIENCY IN PUBLIC EXPENDITURE PROGRAMMES IN THESE COUNTRIES , IN SPITE OF RECENT EFFORTS TO ECONOMIZE . THE EC AS A WHOLE COULD THEREFORE ENVISAGE PROGRESS IN ACHIEVING STRUCTURAL CHANGE