Source: EURLEX
Language: en
Format: md

#### **COMVIISSION OF THE EUROPEAN CQMVIUNITIES**

```
                             C0M(93) 164 final
 VERSION CONSOLIDEE

                             Brussels,22 April 1993

##### **PROMOTING ECONOMIC RECOVERY IN EUROPE** **(The Edinburgh Growth initiative)**

```

COMMISSION
OF THE EUROPEAN
COMMUNITIES

**PROMOTING** ECONOMIC RECOVERY IN EUROPE
(The Edinburgh Growth Initiative)

1. **The** Edinburgh declaration

The current weak performance of the European economy is a matter of
concern. Real GDP growth in the Community is slowing from only 1.1 % in
1992 to 3/4 % in 1993, with employment falling sharply in 1993 for the
second year in succession and the unemployment rate as a consequence
climbing further towards 11 % on average this year. A worrying feature of
the economic climate has been the sharp deterioration in business and
consumer confidence during the course of 1992. More recent information
suggests that in general, despite some brighter signs in a few countries, the
development of economic activity in the Community in 1993 is likely to
continue weak.

Against this background of weakening economic activity in Europe the
Commission proposed and the European Council, at its meeting in Edinburgh
on 12 December last year, called for measures to be adopted at both
national and Community level which would work to boost confidence,
reinforce the fundamentals of economic growth and encourage the creation
of new jobs (1). Early in February the Commission presented a
communication to the Council on the implementation of the Community
measures. It is now time for the ECOFIN Council to take stock of the
package of measures and actions to help recovery, the "growth initiative",
that have been announced by individual Member States . or agreed at
Community level so far. These measures will start to take effect in 1993.
Their aim, within the framework of appropriate fiscal, monetary, commercial
and other economic policies, is to provide opportunities and encouragement
and support in specific areas of weakness that are key to the Community's
**future** economic **prosperity,** so that confidence can be rebuilt and the
chances for recovery enhanced.

2. Coordinated policies for stability, growth and employment

The growth initiative includes measures at both Community and national
level. They are part of a concerted effort, the impact of which will be greater
than that of uncoordinated actions taken at different times in individual
Member States. Because the linkages between Member States' economies
are now so close (and are being developed further as a result of the Single
Market) a stimulus to growth in one country also benefits its Community
partners, while that country similarly draws advantage from the effects of

(1) _Conclusions of the Presidency_ - _Edinburgh, December_ _12,_ _1992;_ _Annex 4 to_
_Part A, Declaration on Promoting Economic Recovery in Europe._

**Rue** do ta Lot 200 - B-1049 Brussels                       - Belgium

**Telephone : direct** line **29** **exchange:** **299.11.11** **Telex:** COMEUB 21877 Telegraphic address : COMEUR Brussels Telefax : 299.33.02

**- 2 -**

measures introduced elsewhere. The effect a Member State could harvest
from individual action could be roughly doubled were it accompanied by the
others, with budgetary costs also reduced. Moreover measures in the
Community are being complemented by similar initiatives being taken by
EFTA countries, and measures to boost recovery are also being introduced in
the USA and announced in Japan. While efforts in individual countries alone
would not have a significant impact, coordinated action throughout the
developed world will help to hasten the global recovery.

The measures being introduced in the package will provide short-term
support to activity in the Community but in a way that improves the longerterm growth potential. Thus expenditure increases are focussed on capital
investment (improving infrastructures, encouraging private investment) and
investment in human capital of a kind that will already have an impact on
employment and unemployment this year while also having lasting beneficial
effects on the supply potential of the Community. Other measures and
reforms with less direct expenditure implications will help to make the
economic system more responsive and restore the dynamic to Community
output.

The growth initiative measures are designed to come into effect as quickly
as possible and will be concentrated in 1993 and 1994, although their
effects will extend over a longer time. Many of the specific spending
decisions announced by Member States are in the context of their budgets
for 1993. There will be an opportunity for Member States' governments to
reinforce these measures later in the year when national budgets for 1994
are presented, based on an assessment of prospects, needs and constraints
at that time.

As stressed in the Edinburgh declaration, the underlying objectives of
Member States' economic policies remain as set out in the Maastricht
Treaty: an open market economy with free competition, sustainable growth
respecting the environment, stable prices with sound public finances and
monetary conditions and a sustainable balance of payments. The policy mix
stemming from the Edinburgh declaration - exploiting the existing room for
manoeuvre of budgetary policy; switching public expenditure priorities
towards infrastructure and growth supporting expenditures; encouraging
private investment; implementing structural reform; and achieving wage
moderation - will enable growth to be resumed without jeopardizing the
achievement of the Maastricht budgetary obligations. Member States remain
determined to fulfil the convergence criteria established in the Maastricht
Treaty and to comply fully with the convergence programmes submitted to
the Council, including adherence to the medium-term goals of budgetary
consolidation.

In current circumstances there is limited scope for a boost to public
spending, which even if it gave some short-term support to activity would
add further to public indebtedness, put upward pressure on interest rates
and damage longer-term growth prospects. Instead the emphasis of the
measures is on selective actions and on shifting the structure of public
expenditure towards those areas which are more growth-enhancing.
Economic recovery, when soundly reestablished, will then facilitate the
overall convergence process within the Community, especially on the
budgetary side.

Those Member States in a more favourable budgetary position are taking
advantage of the room for stimulative action. On the other hand, those
countries faced by large imbalances in their public finances can do most to

**- 3 -**

countries faced by large imbalances in their public finances can do most to
restore confidence and improve the economic climate by credible pursuit of
measures to bring budget deficits under control so as to achieve the
medium-term targets set in the fiscal consolidation strategies of their
convergence programmes.

In the short term, however, the weakness of economic activity is depressing
tax revenues and putting upward pressure on some categories of social
expenditure, making progress in reducing budget deficits even more difficult.
Except in those Member States facing very high deficits and public debt
ratios, it is appropriate to allow some play to the automatic stabilizers,
especially on the revenue side. This mechanism automatically gives support
to domestic demand, which otherwise would be even weaker. But such an
approach implies that when recovery does get under way budget balances
must be improved rapidly to get back on track, both by allowing the
favourable cyclical effects to operate and by continuing the necessary
discretionary adjustment.

**3.** **Need for progress on other key economic policy issues**

Getting the Community economy back onto a satisfactory, sustainable
growth path will be helped along by the growth initiative measures, but its
effects would be significantly augmented by firm progress in resolving a
number of other inter-related problems, both political and economic, which
have caused much uncertainty during the last year and have depressed
confidence and delayed expansion :

    **ratification of the Maastricht Treaty** is urgently needed so that the way
forward for the Community and its enlargement is clearly established;

    - **further reductions in still very high European short-term interest rates** are
required, based on confidence that inflationary pressures are being
contained and that budgetary positions can be consolidated over the next
few years across the Community;

    **a return to steadier conditions within the European Monetary System,**
which is highly dependent on the two previous factors, will favour an
environment in which fuller advantage can be taken of the opportunities
opened up by the Single Market;

  - and in the international sphere, **conclusion of the long-drawn-out GATT**
**negotiations** is needed with a comprehensive and balanced agreement
which will offer much enlarged trading opportunities.

**4.** **The growth initiative package of measures**

**A** wide range of actions and measures has been announced and decided in
the last few months at national and Community level for implementation
during 1993; in some cases Member States are already taking advantage of
the new or enlarged Community facilities agreed in Edinburgh.

The main areas where national and Community action is being taken are :

  - greater **priority in public expenditure on infrastructure and other capital**
**investment and** **on** **other growth-enhancing spending** (e.g. research and
development);

                             - 4 

**- new facilities and incentives to encourage private investment;**

**- improved support for small and medium-sized enterprises, which hold**
**considerable potential for employment creation;**

**- additional training and other schemes to prepare the unemployed for work**
**and to improve the quality and skills of the labour force;**

**- wage restraint, especially in the public sector so as to keep current**
**expenditure under control, but also to encourage economy-wide wage**
**moderation to improve competitiveness and help reduce unemployment;**

**- structural reforms, to make markets work better (especially the labour**
**market), increase competition and remove distortions.**

**Besides the concrete measures they are taking, some Member States are**
**also giving support to activity by not attempting to offset the effects of the**
**cycle on their budget deficits.**

**Moreover, it should not be forgotten that the rapid progress towards the**
**completion of the Single Market, with the successful abolition of the internal**
**frontiers from January 1993, is the biggest structural reform in the**
**Community in recent time. It is making an important contribution to the**
**functioning of the Community economy.**

**The measures at Community level, detailed proposals for which have been**
**put forward by the Commission and by the European Investment Bank,**
**contribute especially to action in the first four areas above. Full information**
**about Community level measures which have been decided and proposed are**
**given in Annex A. Details of the growth initiative measures announced by**
**each of the Member States, covering all the areas for action, are presented**
**in Annex B. Important features of the main areas of action are highlighted in**
**the following paragraphs.**

Priority to public investment

A significant part of the growth initiative package concerns investment,
with contributions from both Community and the Member States. While
investment as a whole is a precondition for sustained growth, public
investment'can bei activated' more rapidly. In previous period! of economic
slowdown public investment has usually been one of the first categories of
public spending to suffer cut-backs. This time Member States, conscious of
the importance for long-term development of the economy as a whole of a
modern, efficient public capital stock, are first seeking to protect capital
spending from general budget economies and in addition have announced
increases over earlier plans in selected areas of public sector capital
expenditure, mainly on infrastructure projects. Besides its multiplier effect
public investment will induce a crowding-in of private investment.
Additional investment expenditures amounting in total to some
ECU 6 billion in 1993 have been announced by Member States so far, with
every single country making some additional effort.

The Edinburgh European Council gave the green light to several new and
enlarged Community schemes. A new temporary lending facility of ECU 5
billion has been established by the European Investment Bank. A European
Investment Fund with a capital of ECU 2 billion will be set up. Community

**5 -**

**structural** **funds are to be significantly increased for the period** **1994-1998**
**and a Cohesion Fund was created with an amount of ECU 1.5 billion**
**available for** **1993.** **These will be making a significant contribution to the**
**cofinancing of additional investment (both public and private), especially in**
**the four cohesion** **countries** **(Greece, Spain, Ireland and Portugal) and in**
**other less prosperous regions of the Community.**

**Particular emphasis is being given** **to** **using the new Community** **financial**
**instruments for capital infrastructure projects connected with trans-**
**European Networks (TENs), designed to make the Single Market work**
**better and to improve links with Central and Eastern Europe. The**
**Commission, after full consultation, has published the proposed guidelines**
**(schémas directeurs) for road transport, for the TGV, for** **combined**
**transport and for waterways. Consultation is well-advanced and the**
**Commission will put forward within six months the proposed** **shémas**
**directeurs for conventional** **rail,** **ports and airports, air traffic control and**
**Vessel Traffic Systems (VTS). In two other important sectors, energy and**
**telematic networks, guidelines or projects for** **action** **have also been**
**proposed. The** **identification** **of projects which fall within the schémas**
**directeurs is going ahead. In transport alone over ECU 40 billion is likely to**
**be needed for projects of Community interest which could be initiated** **in**
**1993/94,** **some of which will be eligible for loan or credit from the new**
**Community schemes or for structural or cohesion fund assistance.** **The**
**Commission has** **also** **taken steps to increase the** **financing** **by** **the**
**international financial institutions (especially the** **EIB)** **of** **TENs-related**
**projects in the countries of Central and Eastern Europe.**

**The EIB has already approved loans within the Community under the**
**temporary lending facility amounting to ECU** **1.6** **billion for 21 projects.**
**Over 90% of this additional lending concerns TEN** **projects** **or related**
**access** **infrastructure.** **In** **addition to** **these** **operations** **within** **the**
**Community, the EIB has also agreed the financing of two projects in**
**Central and Eastern Europe.**

**Encouraging private investment and help** **for** **small**
**and medium-sized enterprises (SMEs)**

**Recovery in private investment will primarily be driven by improved**
**business confidence about prospects for demand and profitability and will**
**be helped by a lowering of interest rates. With the aim of encouraging the**
**bringing forward of investment that would** **otherwise** **be delayed or which**
**may be having difficulty in obtaining finance in present conditions, Member**
**States'** **governments have announced a variety of new or enlarged**
**incentives and schemes. Several countries have increased tax reliefs for**
**investment (in some cases on a time-limited basis).** **Many** **have extended**
**schemes which provide loan guarantees or credit on** **favourable** **terms,**
**especially to small and medium-sized enterprises; it is estimated that the**
**national schemes included in the growth initiative package could support**
**investments by the private sector amounting to about ECU 6 billion in**
**1993.**

**The housing market is very depressed throughout much of the Community**
**and several governments have take steps to encourage housing demand,**
**often through reduced transaction taxes, and tax and other incentives for**
**repair and maintenance, provision of rented accommodation, etc.**

_**A**_ **proportion of the enlarged Community financial resources will be used to**
**support private sector investment projects. In particular the new European**

Investment Fund, plans for the setting up of which are now well advanced
so that it should come into operation this autumn after ratification of the
amended EIB protocol, will provide loan guarantees, e.g. for
telecommunications, electronics and transport projects (TENs) and for SME
projects. Preparatory work for the identification of projects is under way,
so that decisions can be implemented before the end of this year.

In addition to investment-related support, other measures to reduce
administrative burdens and to provide advice, information and technical
assistance to small firms have been announced or are under consideration
at national and Community level. In particular the Commission has
proposed a multi-annual programme of measures to support enterprises
(especially SMEs). The programme envisages actions to facilitate the
insertion of SMEs in the single market as well as measures to help SMEs
adjust to industrial changes and to enhance competitiveness, based on the
twin objectives of information and cooperation e.g. development of EuroInfo Centres, BRE/BC net, and the "Europartenariat" and "Enterprise"
projects, and promotion of transnational sub-contracting and the
strengthening of technological potential.

Making research and development more effective

A more competitive Europe will be able to create more jobs. Research plays
an important role in shaping the overall competitiveness of an economy.
Given the economies of scale and nature of risks there is a case for some
research expenditures to be made at Community level. In this light
additional actions worth ECU 900 million are now being put in place by the
Community; these actions include a substantive effort in favour of the
employment of researchers (including, specifically, technicians currently
unemployed) and will give rise to an improved competitive position for
industry. A recent independent evaluation has shown that supplementary
financing of research with widespread industrial application gave rise to
ECU 2.5 billion of direct economic effects and ECU 800 million of indirect
economic effects over a 5-year period. In addition, and in order to maintain
steady support to research, the Community is currently preparing the fourth
framework programme with a view to further projects of research and
technological development which will have industrial application and an
effect on efficiency and jobs.

Adapting and reinforcing training and employment schemes

The boost to investment resulting from the actions mentioned above will be
a source of job creation. However, more decisive actions are also needed to
counteract the current loss in jobs. National measures in the package aimed
at employment include incentives for job creation, extension and
reinforcement of training and labour market reform.

Carefully targeted training measures are a key element in facilitating the
adaptation of workers to the growing challenges of industrial change. Such
measures can both increase competitiveness and combat unemployment.
As industries adapt and modernise many of those who become unemployed
are experienced and relatively skilled. The risk of such people becoming
long-term unemployed can be minimized if early action is taken to retrain
them and prepare them for alternative employment.

                    - 7 

At Community level, the European Social Fund cannot presently intervene,
except in areas eligible for Community regional development assistance, to
help those who become unemployed unless they have been out of work for
more than a year. Thus there is a risk not just for the people themselves
who risk drifting into long-term unemployment but also for the Community
that their potential and skills will be lost to the economy. Concrete
proposals to apply the rules governing the Social Fund in a more flexible
manner were approved by the Commission in March and their application
can now be discussed with the Member States. A wider definition of longterm unemployment will be applied in certain specified conditions. This
derogation, the possibility of which is expressly foreseen in the Social Fund
Regulation, will permit a more effective use of the Social Fund and
constitutes an important response to the situation in the labour market at
Community level. It could be possible to redirect ECU 200 million or even
more in this context within the current Community support framework.

Sharing the burden of the slow-down through wage moderation

In relation to public sector pay, most Member States are achieving success
this year in moderating wage increases compared with 1992. Notably tight
wage policies are in operation in Germany, Greece, Italy, Spain, Portugal
and the United Kingdom. Slower growth in the wage bill is needed to make
progress with budgetary consolidation and to make room for other, more
growth-enhancing public expenditures.

Public sector wage moderation can also provide a lead to private sector
wage setting, where the social partners are increasingly aware that wage
increases out of line with productivity growth must be avoided so that
international competitiveness can be maintained or improved and
profitability safeguarded in order to encourage investment and employment.
Wage moderation in the private sector is increasingly evident this year, and
is especially welcome in Germany because of its implications for monetary
policy.

Implementing structural reforms to improve long-term growth potential

Structural reforms to make the EC economies more flexible, responsive to
change, innovative and efficient are an important part of the growth
initiative and will play an increasingly decisive role in influencing
performance in the Single Market in the coming years. Above all rigidities in
EC labour markets are still very evident. The high level of unemployment in
the Community is only partly due to the recent weakness of activity.
Labour markets are not functioning properly.

Measures have recently been announced in several countries intended to
start tackling labour market problems, such as establishing a more
appropriate balance between income support for the unemployed and
incentives to work, allowing a wider and more flexible range of modes of
working, reducing barriers to entry to certain activities and professions,
improving employment agencies and job counselling, introducing greater
regional and occupational pay differentials where justified, attacking
obstacles to mobility between jobs and regions such as rigid pension
arrangements and housing difficulties, and improving the skills of the workforce.

                                 - 8 

This is a long-term process which will only slowly bear results and which
will need to be pursued over many years, especially given the prospects of
unemployment rates remaining at too high a level through the mid-1990s.

Other areas of structural reform are also being addressed. Measures to
improve the operation of competition policy have been introduced or
proposed in Belgium, Germany, Greece, Spain, Ireland, the Netherlands and
Portugal, to adapt to Single Market pressures, strengthen legislation or
reduce barriers to entry.

Proposals for a shift of public **sector enterprises** into the private sector
(also with budgetary benefits) have been put forward in the **privatisation**
programmes announced or extended in Belgium, Germany, Greece, Spain,
France, Italy, the Netherlands and Portugal.

5. **The** economic impact of **the** package

Prompt implementation of the growth initiative package will have a positive
impact on the Community economy. The combined impact of those
measures being taken both at national and Community levels which can be
directly expressed in terms of additional expenditure (mainly extra
investment by public and private sectors) is assessed to add to growth in
both **1993** and **1994,** **taking real GDP in the Community in 1994 to a level**
**0.6% higher than it would have been without the growth initiative package.**
**This extra value added in the Community represents some ECU 35 billion.**
Corresponding to this boost to economic activity would be employment
creation over the two years of some **450 000** jobs, and an increase in the
level of total fixed investment in 1994 of 3%.

These results, already significant, account for only part of the full effects
which can be expected from the package. By their nature the scale and
timing of the positive effects of structural measures are difficult to quantify
and no credit for them has been given here. Moreover, further cuts in
interest rates are to be looked for in coming months based on evidence of
inflation being brought under control, successful wage moderation and
credible plans to reduce budgetary imbalances; but such falls in interest
rates remain uncertain at present and the favourable impact they would in
due course have on demand and debt servicing costs has not been allowed
for in the quantitative assessment. **Achieving a successful revival in**
**business and** consumer confidence **may be more important for economic**
**recovery than the direct impact of those measures that** can **be quantified.**

Also helping to combat the recessionary tendencies in the European
economies is the decision by several Member States to offset only partially
or not at all the deterioration in their budget deficits resulting from the more
pronounced weakening of activity than they expected when they announced
their budget plans for 1993 last autumn. The extent to which this has been
done or is appropriate varies from country to country depending in part on
starting conditions. In general it can be estimated that letting the **automatic**
**stabilizers** operate will offset about one third of the reduction in output
growth.

**6.** **A significant stimulus but the situation must be continuously monitored**

The very large number of measures at both national and Community level
which have been decided in the few months since the growth initiative was

**- 9 -**

**conceived already represent a significant stimulus to economic activity in**
**the Community.**

**Energetic follow-up is required in coming months to ensure implementation**
**of decisions: the ratification procedure for the setting-up of the European**
**Investment Fund needs to be completed as rapidly as possible; other**
**Commission proposals, e.g. in relation to research and development and**
**SMEs,** **await Council approval; the good start made by the Commission and**
**national authorities in identifying projects eligible for financial support needs**
**to be continued and rapid progress made in actually getting projects under**
**way; legislation necessary for some of the national proposals has still to be**
**passed so that practical application can begin.**

**In** **the area of structural reform there is a wide agenda still to be considered.**
**The measures announced recently (and those introduced in earlier years) go**
**in the right direction but are only a beginning. While** **subsidiarity**
**considerations suggest that often these issues are appropriately tackled at**
**national level having regard to institutional specificities and traditions, a**
**sharing of experience between countries and a parallel approach to reforms**
**are likely to be fruitful. The design of reformed labour market policies to deal**
**with high unemployment, which seems likely to persist even when economic**
**recovery resumes, is a major challenge for European governments. On a**
**remit from the ECOFIN Council, the Economic Policy Committee has already**
**presented an opinion on "Improving the functioning of the labour market" in**
**which it identifies a series of areas for concerted action.**

**The economic situation in Europe will continue to be closely monitored in**
**coming months to see whether recovery is getting under way, to assess the**
**impact of the growth initiative measures already taken and to decide**
**whether further action is required, e.g. at the time when budgets for 1994**
**are being formulated.**

**The actions being taken in the Community are an essential part of the wider**
**efforts by the developed countries to get the world economy back on a**
**soundly-based expansion path. Close consultation and cooperation with the**
**other main actors (USA, Japan, EFTA countries) is to be** **pursued** **and the**
**results** **will** **be assessed by the next Economic Summit in Tokyo in July.**

**COMMISSION**
**OF THE** **EUROPEAN**
**COMMUNITIES**

```
          PROMOTING ECONOMIC RECOVERY IN EUROPE

           (The Edinburgh Growth Initiative)

                  ANNEX A

        Actions and measures decided or announced

               at Community level

1. EIB temporary lending facility
2. European Investment Fund
3. Training for the unemployed. Increasing facility of the ESF
4. The place of SMEs in the growth initiative
5. The contribution of Community research
6. The contribution of structural measures

7. The single market harnessed to the cause of growth

                     Rue de lo Loi 200 - B-1049 Brussels - Belgium

```

**COMMISSION**
**OF THE EUROPEAN**
**COMMUNITIES**

```
            EIB TEMPORARY LENDING FACILITY

I. MAIN FEATURES

1. The European Council in Edinburgh called for the establishment of
   a new and temporary lending facility of 5 billion ECU within the
   EIB to accelerate the financing of infrastructure projects,
   notably those connected with the transeuropean networks (TENs).

2. The ElB's Board of Governors decided accordingly at the beginning
   of the year that the following kinds of investment would be
   el igible for the faclIity:

   - first and foremost, investments in TENs in transport,
     telecommunications and energy, using as a reference point the
     guidelines on priorities presented by the Commission to the

     Council. It was also decided that in the absence of such

     guidelines for particular categories of investment, the choice
     of projects would reflect an assessment of their contribution
     to improving intra-Communi ty flows-,

     investments in transport, telecommunications and energy
     designed to improve access to the TENs themselves (in line with
     Art. 129b.2 of the Treaty on the Union);

     investments in environmental protection and management.

   It was agreed that for qualifying projects the EIB would be able
   to finance up to 75% of total project cost (as against its normal
   ceiling of 50%); and where the Bank co-finances with a Community
   budget instrument (e.g. the ERDF), the ceiling on the combined
   contribution would be raised from the normal 70% of project cost

   to 90%.

I I . PROJECTS APPROVED

1. The EIB has already approved loans within the Community under the
   facility amounting to 1.6 billion ECU. These loans, which in some
   cases are raising the EIB contribution to between 70-75% of total
   project cost, are mostly of 15-20 year duration (longer than the
   maturities normally available from other sources). The facility is
   thus helping to ease the funding and to accelerate the
   implementation of 21 projects expected to be completed between

   1993 and 1997 with a total investment cost of over 9 billion ECU

   (Annex). The projects are estimated by the Bank to involve
   employment in construction of more than 70.000 man-years and the
   creation of over 11.000 permanent jobs. These figures take no

                     Rue de la Loi 200 - B-1049 Brussels - Belgium

```

```
                     A - 2

   account of the major indirect effects on employment in the
   equipment industries, which are particularly important in the case
   of the telecommunications and energy projects concerned.

2. Over 90% of the 1.6 billion ECU concerns TEN projects or related

   access infrastructure. In particular the Bank is helping to

   f inance:

     in teIecommunIca11ons: two major projects in, respectively, the
     new Lander and in Italy (each costing over 700 MECU) expanding
     the digital telephone networks;

     in energy: the renovation of a part of the gas transmission
     system in the new Lander (a project costing some 450 MECU); the
     part-financing of the Italian section of the Algerian-North
     Italian gas pipeline (a project of over 2 billion ECU); major
     projects to improve the electricity transmission and supply
     networks in parts of Spain, Portugal and Ireland;

     in transport : helping to construct sections of motorways in
     Denmark and France, modernising international rail links in
     Denmark, extending the air traffic control infrastructure of

     Eurocontrol and improving passenger handling facilities at

     three international airports.

   In addition to these operations within the Community, the EIB has
   also agreed the financing of projects in Central and Eastern
   Europe (road modernisation in Slovakia, Bulgaria and Romania and
   air traffic control in Poland and Bulgaria) which will benefit
   from the same financing conditions.

III. FUTURE INVESTMENTS

1. After full consultation with interested parties, the Commission
   has already published the proposed guidelines on TENs priorities
   for the high speed train, for road networks, for' combined
   transport and for waterways. Within the next six months, the
   guidelines for conventional rail, ports, airports, air traffic
   control and Vessel Traffic Systems (VTS) will also be put forward.
   In telecommunications, the Commission has already launched its
   proposals for telematic networks between administrations and
   expects shortly to come forward with further proposals on
   Integrated Systems Digital Networks (ISDN). As far as energy
   networks are concerned, the preparatory work by the Commission, in
   consultation with market operators, is at an advanced stage.

2. The financing needs are considerable. In transport alone over
   40 billion ECU is likely to be needed for projects of Community

   interest which could be initiated in 1993-94. Some of these

   projects will qualify for structural or cohesion fund assistance.

   Others will be more natural candidates for finance from the

   temporary lending facility. Others may require a combination of
   grants and loans under the European growth initiative.

3. Against that background, the EIB has been pursuing discussions
   with the Commission, national administrations and market operators
   on further potential candidates for finance. On present estimates,
   and in addition to the ElB's normal lending, over 2 billion ECU in

```

```
                 A - 3

further loans from the facility could be absorbed by the priority
transport projects; at least a further 0.5 billion this year alone
on major telecommunications projects, not counting possible new
projects in the ISDN field; and a similar amount by energy
transmission projects. These figures take no account of projects
involving networks with neighbouring countries, notably in Central
and Eastern Europe, or of environmental projects which may qualify
for support.

These estimates are being refined. They refer in most cases to
projects that are mature enough to be launched during the next
18 months provided that, where necessary, the appropriate
administrative steps are taken by national and regional
authorities and that the other complementary sources of finance,
including government contributions in some cases, can be secured.

In order to facilitate the creation of satisfactory financing
packages, the scope for co-financing operations between the
facility, the Structural Funds, the interim Cohesion Fund
instrument and the budgetary provisions for TENs is being actively
explored by the Commission and the Bank.

```

```
3)

```

```
Temporary Lending Facility: Projects Approved
        (up to March 1993)

                         (in MECU)

```

```
Project

 Cost

```

```
New Loans

(Temporary
FaciIity)

```

```
Total EIB

 ( incl .

 ear I 1er

 loans)

```

```
TRANSPORT

- Supporting Eurocontrol to set up a unified 79 176 368
 system of air traffic control

- Expanding and improving the passenger handling 136,1 346,7 1327
 capacity of three airports: Frankfurt, Paris Roissy, Torino-Case I le

- Construction of Danish and French 220 493 795

 motorways and main roads

- Modernisation of the Danish railways 150 460 688

             SUB-TOTAL TRANSPORT 585,1 1475,7 3178

ENERGY

```

```
 Algeria-Italy natural gas pipeline

 I talian sect ion

```

```
195,8 475,6 2246

```

```
- Renovation of natural gas transmission system 78 230 445

 in the new German Lander

- Upgrading the electricity grids of Ireland, 236,1 617,3 833
 Portugal and several Spanish regions

             SUB-TOTAL ENERGY 509,9 1322,9 3524

TELECOMMUNICATIONS

```

```
- Modernisation of trunk telecommunications 195,8

 in Italy

- Extension of the telephone network in the new 153

 German Lander

```

```
447,6

486

```

```
708

709

```

```
SUB-TOTAL TELECOMMUNICATIONS 348,8 933,6 1417

```

```
ENVIRONMENT

- Water treatment facilities in UK and Spanish 156
 regions; other smaller environmental projects

             SUB-TOTAL ENVIRONMENT 156

             TOTAL 1599,8

```

```
 585,4 1114

 585,4 1114

4317,6 9233

```

```
                    A - 5

      EIB Projects Approved in Central and Eastern Europe
       benefitting from Edinburgh facility conditions

TRANSPORT

Roads rehabilitation in Bulgaria, 96 MECU

Romania and Slovakia

Upgrading of air traffic services 110 MECU
facilities in Bulgaria and Poland

                         TOTAL 206 MECU

```

**COMMISSION**
**OF THE EUROPEAN**
**COMMUNITIES**

```
            EUROPEAN INVESTMENT FUND (EIF)

I . FEATURES

1. The EIF, with capital contributions from the European Investment
   Bank, the Commission (on behalf of the Community) and private and
   public sector financial institutions, is designed to facilitate
   investments in transeuropean networks (TENs), as well as projects
   by SMEs. especially in Community assisted areas.

2. The main business of the Fund will be to provide financial
   guarantees on loans; a secondary business at a later stage will be
   the limited provision of equity, largely through financial
   intermediaries. With a subscribed capital of 2 billion ECU, the
   Fund will be able to provide guarantees of 5 - 10 billion ECU and
   thereby support 20 billion ECU of projects.

I I . PREPARATORY STEPS

1. At the beginning of January, the Commission made the necessary
   legislative proposals for the creation of the Fund [1] . Following a
   positive opinion of the European Parliament, an Intergovernmental
   Conference of the Member States took place on 25 March and agreed
   an addition to the Statute of the European Investment Bank which
   will now be presented to national parliaments for endorsement. The
   European Parliament has also given a favourable opinion on the
   question of Community participation in the Fund; the issue is now
   under examination by the Council itself.

2. In the meantime, and following consultations with the Commission
   and prospective third party shareholders, the Statute of the Fund
   itself is close to finalisation by the organs of the Bank. A
   decision will be made during April following a special meeting of

   the Bank's Board of Directors.

III. ACCELERATING THE CONTRIBUTION TO GROWTH

1. Everything is on course to allow the EIF to make its first
   commitments in the autumn, provided that there are no unforeseen

  C0M(93) 3 final of 12 January 1993. Proposal for an Addition to the
  protocol on the Statute of the European Investment Bank empowering
  the Board of Governors of the EIB to establish the European
   Investment fund. Proposal for a Council Decision on Community
  Membership of the European Investment Bank.

                      Rue de la Loi 200 - B-1049 Brussels - Belgium

```

```
                  A - 7

delays in the remaining legislative process at national and
Communi ty level.

In order to maximise its potential impact this year, however, the
Commission intends to propose the immediate establishment of an

Interim Board of shareholders of the Fund. This Board will work on

the further arrangements for the entry into force of the Fund (its
internal rules, administrative provisions etc.). Most Importantly,
it will also begin discussions right away with project promoters,
financial institutions and national/regional administrations on
specific potential candidates for support. At the same time,
appropriate information on the Fund directed in particular at
SMEs,including the practical steps to be followed for submitting
projects, should be disseminated throughout the Community. On this
basis, the necessary groundwork will have been done to allow a
maximum of operations to begin immediately the legislative process
is completed.

```

```
    COMMISSION

    OF THE EUROPEAN

    COMMUNITIES

             TRAINING FOR THE UNEMPLOYED

            INCREASED FLEXIBILITY OF THE ESF

As part of the growth Initiative, the Commission decided on 24 March
1993 to increase the effectiveness of the European Social Fund in
combatting the growing problem of unemployment by increasing
flexibility in the use of the ESF so as to permit training throughout
the Community of those who have become unemployed.

I. TRAINING MEASURE

Training will play an important role in the growth initiative.
Carefully targetted training measures are a key element in facilitating
the adaptation of workers to the growing challenges of industrial
change. Such measures can both increase competItivity and combat
unemployment. As industries adapt and modernise many of those who
become unemployed are experienced and relatively skilled. The risk of
such people becoming long-term unemployed can be minimized if early
action is taken to retrain them and prepare them for alternative
employment.

Until now the European Social Fund has not been able to intervene,
except in areas eligible for Community regional development assistance,

to help those who become unemployed unless they have been out of work
for more than a year. Thus there is a risk not just for the people
themselves who risk drifting into long-term unemployment but also for
the Community that their potential and skills will be lost to the
economy. The Commission has therefore decided, on 24 March 1993, to
apply the rules governing the Social Fund in a more flexible manner. A
wider definition of long-term unemployment will be applied in certain
specified conditions. This derogation, the possibility of which is
expressly foreseen in the Social Fund Regulation, will permit the most
effective use of the Social Fund and constitutes an important response
to the situation in the labour market at Community level.

It will be for the Member States to bring forward proposals to avail of
this new flexibility and the Commission will encourage them to do so.
The indications are that,there is considerable interest in this

flexibility at Member State level.

II. POSSIBILITIES FOR COMMUNITY ACTION

In the context of increasing unemployment, and under existing Community
measures to combat unemployment, a number of Member States have asked
the Commission to make use of its powers under the terms of the first
indent of Article 2(a) of ESF Regulation 4255/88 concerning Objective 3

                       Rue de la Loi 200 - B-1049 Brussels - Belgium

```

```
                     A - 9

which lays down that the period of 12 months used to define long-term
unemployment "may be reduced in specific cases to be decided upon by

the Commission".

At its meeting on 19 February 1993, the ESF Committee declared itself
in favour of adopting such a derogation.

The Commission has decided to apply the derogation provided for in
Article 2(a) of ESF Regulation 4255/88 within the limits set out below.

The aim is to take account of unemployed people experiencing particular
difficulties on the job market, resulting in them in due course joining
the long-term unemployed. These difficulties relate to personal
characteristics (age, disability, insufficient vocational
qualifications, etc.), a geographical environment dominated by economic
recession and a significant increase in unemployment, and structural
factors associated with industrial change, all taking place against the
background of a changing economic and political environment at

internat ional level .

Workers who have been made redundant and find themselves in

difficulties on the labour market because of their age, or a disability
or because of insufficient vocational qualifications, can benefit from
this derogation if they meet one of the following two criteria :

   those who face an unfavourable geographical environment
   (employment area in severe recession, sharp rise in unemployment);

   those facing major difficulties due to changes in the economic
   environment, particularly with regard to the international
   situât ion.

Since the people in question would in all probability remain unemployed
for more than 12 months, the aim of combating long-term unemployment

requires action to be taken as quickly as possible.

This derogation is intended to apply a priori to all sectors and
regions of the Community, subject to the criteria above being met. The
Member States that wish, therefore, to benefit from this derogation
should, in the context of the programming or re-programming of the
existing CSF's in agreement with the Commission, take these criteria

into account .

III. CONTEXT

The derogation relating to long-term unemployment is not an isolated
measure. On the contrary, it forms part of Community policy, which
takes account of changes affecting the market for goods, services and
jobs and, in order to remedy imbalances in these markets, proposes
concerted Community measures ( the growth initiative ), measures aimed
at restructuring certain branches of activity, and measures relating to
human resources intended to accompany the industrial changes gradually
affecting many of the Community's economic activities.

The European Parliament has, for its part, decided to support the
efforts of the Commission, having voted credits of 45 MECU in 1993 for
training measures under the KONVER programme, in order to come to the
aid of regions affected by structural change in the arms industry and

```

```
                   A - 10

by the closure of military installations. The derogation in question
will also apply in the context of this programme.

The Commission has proposed a new Objective 4 for the Structural Funds
to make it easier for workers to adapt to industrial change and to
changes in production systems, involving anticipatory and preventive
measures to reduce the risk of unemployment in particular through
training and retraining programmes. Article 123 of the Treaty on
European Union will explicitly add this task to the traditional role of
the European Social Fund.

IV. FINANCIAL ASPECTS

From the financial point of view, the derogation relating to the
duration of unemployment places no additional financial burden on the
European Social Fund for 1993, as the resources used would be those

available under the CSFs for the Member States concerned. The

Commission is inviting and encouraging Member States to make full use
of the possibilities offered by the derogation. A number of Member
States have already expressed an interest in the proposed flexibility.
The Commission estimates, depending on the flexibility available in the
light of the implementation of current Structural Funds programmes and
on the priorities of Member States, that it could be possible to

redirect 200 MECU or even more in this context, within the current

CSFs, some of which might otherwise have gone unspent.

In other words, the Member States could revise certain existing CSFs so
that the financial resources for Objective 3 (long-term unemployment)
can be used to help those unemployed as a result of restructuring. Seen
from this point of view, the derogation relating to long-term
unemployment partly anticipates the ESF reform envisaged by the
Commission applicable, in principle, as from 1994.

```

```
    COMMISSION

    OF THE EUROPEAN

    COMMUNITIES

         THE PLACE OF SMEs IN THE GROWTH INITIATIVE

I. CONTENT OF THE COMMISSION'S PROPOSALS [1 ]

In order to ensure that Community enterprise policy involves a
significant value added element and to enable it to contribute to
economic revival, the actions most closely geared to the situation of
enterprises must be greatly developed and the interaction of

instruments intensified.

In the context of the Europeanization and internationalization of
enterprises, the effect of strengthening instruments is therefore a
crucial factor for growth. It must be based principally on the
fol lowing areas.

   The development of Euro Info Centres (EIC) to facilitate access to
   Community information

   Widely available information is vital to the proper functioning of
   the internal market. To this end, the aim is to adapt the EiC
   network so that it can fulfil the role of providing information
   and practical assistance to enterprises wishing directly to
   exploit the opportunities offered by Community programmes and
   increasingly open markets.

   The development _o_L non-conf identla I and conf ident ial
   partner-search networks: the Business Cooperation Centre (BRE) and
   the Business Cooperation Network (BC-Net)

   The common development strategy for the two partner-search
   instruments (BRE and BC-Net) will include improving the
   qua I I tat ive approach, which sets out to encourage the ongoing
   process of seeking alliances between enterprises in different
   industr ial and services sectors relating to all types of
   coopérât ion, bearing in mind the complexity of the economic

   structure and the novelty of this type of activity.

   Stepping U P activities to out businessmen in direct contact with
   one another under the Eurooartenarlat and Interprise programmes
   and prompt ino cross-border subcontracting

   Activities to put businessmen In direct contact with one another    which have already had some success - will be stepped up, with
   greater emphasis on seeking a structural impact by organizing a

```

```
"The enterprise
(C0M(92) 470 final)

```

```
dimension essential to European growth"

```

```
Rue de la Loi 200 - B-1049 Brussels - Belgium

```

```
                   A - 12

   methodical follow-up over time so that any potential identified is
   consolidated and is turned into a durable contribution to European
   growth. In this context, European and international alliances are
   a means of developing economic complementarity and of stimulating
   and coordinating cross-border relations via intermediate support
   bodies, in particular employer and trade organizations, chambers

   of commerce etc.

   The promotion of cross-border subcontracting should also be an
   important element in the modernization of enterprises, the aim
   being to establish new inter-industrIal relationships based on
   flexibility and total quality not only in products and services
   but also in firms' organization.

   Improving the administrative and legal environment of enterprises

   Turning the internal market to account also requires an increased

   effort to create a more favourable business environment in terms

   of both administrative simplification and assessing the impact of
   proposed measures. A special effort to coordinate activities and
   establish a partnership between the Community, the Member States
   and trade bodies should enable significant results to be achieved.

   Promoting Community instruments

   The increased communication and promotion effort should make for
   the widest possible participation by SMEs in the various
   programmes and measures which exist to support enterprises wishing
   to take advantage of the opportunities resulting from the size and
   diversity of the internal market. One priority will be to
   strengthen SMEs' technological potential, in particular as regards
   their wider and more rapid exploitation of the results of

   research.

The proposal for a Council Decision on the 1993-96 programme is
currently under discussion at the various institutional levels. It
should be adopted at the Council meeting on industry on 4 May 1994.
Adoption will make the SME contribution to growth more immediately
visible across the various measures. These measures should also, in

the medium term, make it easier for PMES to adjust to developments in
interindustrial relations resulting from the internal market, thus
helping them to be competitive.

II. SPIN-OFF EFFECTS

All the Commission's activities in the area of enterprise policy are
based primarily on the network effect, with the Commission relying on a
variety of intermediate bodies to provide most of the funding.
Community measures are thus a crucial stimulant, generating major
investment by partners In the public and private sectors.

For example, the total cost of the Euro Info Centres is estimated at
between ECU 40 and 50 million a year, of which the Community
contributes only some 25%. The EICs form part of a whole range of
services within the host structures, services which also benefit from

the European I zing effect of the EICs' activities. Consequently, if
account is also taken of the costs of these related services, the

Community's contribution is reduced still further.

```

```
                   A - 13

Likewise, charging for the services provided by BC-Net will also enable
the cost of this instrument to be significantly reduced while at the
same time enhancing the homogeneity and efficiency of this network of
600 consultants located throughout the Community and beyond.

The same applies to the Europartenariat programme, which aims
specifically to develop cooperation between enterprises situated in
Objective 1, 2 and 5b regions and enterprises in other Community
regions. Given that the Member State concerned pays a third of the
budget and that participating enterprises meet travelling and
subsistence expenses themselves, the multiplier effect can be estimated

at 300%.

To this should be added the exchanges of experience and know-how within
the networks between financial bodies, chambers of commerce and

industry, chambers of trade, private consultants and employer and trade
organizations. Greater spin-off will be obtained by encouraging
convergence between activities and cooperation between instruments and
programmes and between the various partners anxious to increase the
efficiency of SMEs' contribution to the functioning of the internal

market.

III. FINANCIAL ASPECTS

For the period 1993-96 the cost of the "growth" element of Community
activities has been estimated at ECU 85 million, with the following

breakdown:

   Development of Euro Info Centres (EICs)
   to facilitate access to Community information ECU 34 million

   Development of the partner-search networks

   BRE and BC-Net ECU 4 mi I I ion

   Stepping up activities to put businessmen

   in direct contact with each other under

   the Europartenariat and Interprise programmes
   and promoting cross-border subcontracting ECU 30 million

   Improving the administrative and legal
   environment of enterprises ECU 5 million

   Promoting Community instruments
   strengthening SMEs' technological potential ECU 12 million

These activities will be developed under measures to ensure the
continuity of enterprise policy with the aim of facilitating the
adjustment of enterprises to the induced effects of the internal
market, for which a total amount of only ECU 28 million has been
allocated over four years (1994-97). It is obvious that they can only

stimulate and innovate and will not achieve critical mass unless the

SME aspect is Incorporated into other Community programmes and
Community activity is dovetailed with national policies.

```

```
      COMMISSION

      OF THE EUROPEAN

      COMMUNITIES

            THE CONTRIBUTION OF COMMUNITY RESEARCH

  As part of the Community research programme and flanking and follow-up
  measures to promote research a series of measures is being proposed to
  respond to the growth initiative decided on in Edinburgh.

  These proposals take advantage of the additional ECU 900 million
  allocated to the framework programme in 1993 and 1994.

  These projects were selected with the aim of achieving an immediate
  positive effect on growth and employment. However, as is generally
  recognized, research activities also have major economic spin-off in
  the medium and long term.

  Having regard to the contribution of the additional funds and the
  3rd framework programme, the proposals from the competent Commission
  departments would make it possible to assist

  4 000 doctoral or post-doctoral research
       grants at a cost of ECU 200 million
   200 grant-holders ECU 12 million

   600 technicians ECU 20 million

  3 000 established researchers ECU 600 million

  and give rise to the medium-term economic effects an estimate of which
  is presented in point III.

  I. CREATION OF JOBS FOR AND THROUGH RESEARCH

  The objective is to improve the quality of scientific and technical
  staff in the Community and increase employment opportunities in this

  area.

  As regards the Human Capital and Mobility Programme, the additional
  funds make it possible to achieve and maintain a level of 2 000
  doctoral and post-doctoral grants in 1993 and 1994 at a cost of
  ECU 200 mi 11 ion, an amount which includes part of the associated
  research expenditure. This programme, which was adopted only in 1992,
  has expanded rapidly. It now accounts for more than 60% of the
  research grants awarded every year under the framework programme. The
  additional funds will allow specific research programmes to provide
  100 grants in 1993 and 1994 for an estimated amount of ECU 12 million.

  The Industrial and Materials Technology Programme will take on the
  employment and retraining of 300 unemployed technicians each year for a
  period of two months to two years at an estimated cost of
  ECU 20 million. These persons will be trained on the actual research

```

**Rue de** **to** **Loi 200 -** **B-1049** **Brussels - Belgium**

**Telephone: direct** **line 29** **exchonqe** **299.11.11 - Telex** **CC»CU** **B 21877 - Telegraphic oddress** **CO^UR** **Brussels - Telefox 299.33.02**

```
                   A - 15

projects administered by the programme. Low-impact technologies and
flexible production are regarded as the most promising areas.

In general terms, and based on the evaluation of the possibilities of
direct employment provided by shared-cost actions supported by the
additional funds and administered by the concerned Commission services,
the estimate is of some 3 000 established researchers' posts over
two years. This is in addition to the 2 500 grant-holders mentioned

above.

In conjunction with the programmes of the Human Resources Task Force,
particularly C0METT, the enterprises involved In Community research
programmes in the area of generic technologies will be eligible for
assistance to improve training and technical employment and speed up
technological developments in line with the conclusions of the European
Council, thus helping to create jobs as a result of an expansion in
research and the development of capacities.

I I . MARKET IMPACT

The Industrial and Materials Technologies Programme (TIM) is planning
to launch a series of targeted research projects guaranteeing close
links between researchers and users to speed up the adoption of generic
technologies by the industries involved. Projects have been identified
in the areas of clean technologies and flexible production including
light, low-emission vehicles, machine tools and new-generation
prototypes. So far, 41 projects have been selected at a cost of

ECU 147 mi I I ion.

The results obtained may be offered to other European programmes to
improve both the dissemination of results and consideration of the
needs of "upstream" Community research. As a general point, the
Commission is proposing that some of the additional funds should be set
aside for Eureka projects, which on the question of generic research
are of a very high quality. This approach should guarantee a more
immediate transfer of technologies.

The additional ECU 43.6 million granted to the agro-Industry research
programme (biomass) will be allocated by way of priority to non-food
uses of agricultural products. The creation of markets outside the
traditional sector of agriculture and agro-industry is a fundamental
aspect of this programme. Research will concern both the development
of new crops, new species and the non-food use of conventional
agricultural varieties. Around thirty proposals of a high standard

could be assisted.

In an associated area, the use of biomass for energy production, it is
estimated that 25 to 35 000 jobs could be created on a
million hectares, or 7% of the land in the Community which is currently
not in use. The actual economic effects depend on a number of factors,

of which market conditions are one. Research work in this sector, as

in the development of new and renewable energies, which are receiving
additional funds, will increase the chances of gaining access to these
new markets; much is at stake here, and the aim is to reduce by at
least 20% the production cost differential compared with other energy

sources.

```

```
                   A - 16

As regards aeronautical technology, studies by the concerned Commission
services show that research funded under the TIM programme in areas
such as composite materials and the reduction of engine emissions could
improve the competitiveness of the European aircraft industry and as a
consequence its market share.

III. MEDIUM-TERM BENEFITS

The recent evaluation by the BETA team at the University of Strasbourg
of a wide range of research projects with Industry involvement
concludes that the share of the additional funds granted to the
projects presented in the introduction alone will generate, In terms of
direct economic effects (sale of new products or processes, cost

reductions), around ECU 2 500 million and in terms of Indirect economic

effects (transfer of know-how) around ECU 800 million over a period of
f ive years.

```

```
      COMMISSION

      OF THE EUROPEAN

      COMMUNITIES

            THE CONTRIBUTION OF STRUCTURAL MEASURES

  Bearing in mind that the Structural Funds are intended to finance
  measures to resolve structural rather than cyclical problems and that
  their impact is over the medium to long term, they will contribute to
  the growth initiative in the following way:

  I. 1993 : NEW FINANCIAL INSTRUMENT FOR COHESION

  From 1 April 1993 and for the rest of the year, the Commission will

  have a total of ECU 1.5 billion available under the new Financial

  Instrument for Cohesion to finance major schemes relating to transport
  and the environment proposed by the four cohesion countries.
  Investments in transport infrastructures, where masterplans for the
  trans-European networks are being developed, and in environmental
  projects will have a particular Impact on growth in the four countries.
  The new EIB loan instrument may also be applied in this field.

  II. LAUNCHING OF THE NEW GENERATION OF STRUCTURAL FUNDS

  Since the reform in 1988, the Structural Funds have been operating
  through the Community Support Frameworks, 1993 being the last year of
  implementation of the first phase. This year, some ECU 20 billion will
  be committed. The Commission is endeavouring to develop synergies
  between the growth initiative and the structural measures already
  planned, and to speed up their application on the ground, while in
  conformity with budgetary limits.

  The considerable increase in the resources of the Structural Funds for

  1994-99 decided at Edinburgh brings the total budget to
  ECU 27.4 billion for 1999 and ECU 141 billion for the six years. In
  addition, there is the Cohesion Fund with ECU 2.6 billion in 1999 and

  ECU 13.65 billion for 1994-99. These instruments will allow additional

  investments to be made in such key sectors as infrastructures (notably
  transport, energy and telecommunications), human resources, rural
  development, improvement of agricultural and fisheries structures,
  chiefly but not only in the less-developed areas of the Community. It
  is worth noting here that there will also be a positive effect on the
  economies of the more prosperous regions which, although not direct
  recipients of the aid, will benefit from an increase in the demand for

  exports.

  Following the conclusions reached at Edinburgh, the Commission has
  proposed amendments to the existing regulations on the Structural Funds
  with a view to the next generation of CSFs, due to start on

                          Rue de la Loi 200 - B-1049 Brussels - Belgium

Telephone: direct line 29 exchonge 299.11.11 - Telex COCU 8 21877 - Telegrophic oddress COCUR Brussels - Telefox 299.33.02

```

```
                   A - 18

1 January 1994. The proposals are aimed, among other things, at
simplifying, improving and speeding up not only the procedures for
planning new programmes, and having them approved by the Commission,
but also their implementation. One of the aims of the amendments is to
stimulate a rapid acceleration of public investments by Member States.
As regards the social field, especially the need to combat unemployment
in the Community, the Commission has proposed a new Objective 4
intended to help the workforce adapt to Industrial changes and
developments in production systems.

It is essential to avoid a hiatus in financing at the beginning of 1994
and to reduce to a minimum delays in starting the new projects that
will be included In the new Community Support Frameworks (1994-99). To

that end, the Commission will endeavour, with the assistance of the

other institutions, to secure the adoption of the regulations before
the summer and has encouraged the Member States to submit proposals for
the financing of major projects forthwith.

```

```
      COMMISSION

      OF THE EUROPEAN

      COMMUNITIES

        THE SINGLE MARKET HARNESSED TO THE CAUSE OF GROWTH

  The single market is now in place. It constitutes the basis for
  achieving the new objectives of economic and monetary union and
  European citizenship set out in the Treaty on European Union.

  In eight years, the Community has established a new economic

  environment for firms. This environment is based on:

     freedom of movement,

     the easing of regulatory constraints.

  Firms have supported this major drive and have in part anticipated its
  effects. They must now be given a chance to benefit fully. Starting
  from what has been achieved, steps must be taken to improve the
  operation of the single market and inject renewed vigour into its
  development in order to restore a climate of economic confidence. The
  further development and deepening of the single market will also
  contribute to the economic and political integration of the Community

  as a whole.

  The creation of this climate of confidence will depend in particular on
  the Community's capacity to press ahead with its resolve to reinforce
  economic integration and to create public awareness of all that is
  being done to implement that resolve. These moves constitute a
  coherent whole: supplementing them with these measures can produce the
  expected effects, just as the measured introduced by the White Paper
  programme produced an anticipatory effect. Those moves must therefore
  be built into an overall strategic programme. The main components of
  this programme are as follows:

  1. a drive to promote transparency: firms must be given easier
     access to Community rules and regulations and in particular to the
     procedures for implementing them in the Member States. This is
     especially necessary in connection with the free movement of
     goods;

  2. implementation of Community legislation: in addition to the
     transposition of directives into national law, economic agents
     must have the assurance that the rules are properly applied. This
     means arranging on-the-spot controls that are tailored to the
     specific circumstances obtaining in each of the fields in question
     and that are consistent with the spirit of partnership.
     Application of the rules must be coupled with monitoring of their
     effects so as to ensure that they do in fact meet the needs of
     economic agents;

                          Rue de la Loi 200 - B-1049 Brussels - Belgium

Telephone: direct line 29 exchange 299.11.11 - Telex Cf>€U B 21877 - Telegraphic oddress COVCUR Brussels - Telefox 299.33.02

```

```
                 A - 20

Implementation of mutual recognition: mutual recognition promotes
simplification and deregulation, but its implementation is being
impeded by a lack of political will, legal certainty and trust
between authorities of the Member States-,

speeding-up the work on standardization: standardization does not
only serve the interests of the functioning of the single market

but also meets an industrial need. Additional measures will have

to be taken to ensure that the standardization process in Europe
Is effective by reinforcing the role of the standardization
bodies. This speeding-up hinges on the commitment of firms, which
Is itself linked to the drive to promote transparency. In order
to contribute to this speeding-up process, the Commission intends
to allocate to this action the necessary budgetary resources;

an ever more favourable business environment: the adoption of the
European Company Statute and the elimination of double taxation
will contribute to the simplification of cross-border cooperation.
Similarly, improved protection for intellectual and industrial
property will contribute to research and creativity and will
ensure maximum legal certainty for cooperation between firms.
Furthermore, the resumption of discussions on the elimination of
tax distortions would help to provide firms with a level playing

field-,

partnership as a means of assisting firms: the adjustment effort
required of the great majority of firms (standardization for
example,) must not be underestimated; before yielding benefits,
this effort carries a cost which is particularly difficult to
accept at a time of contracting activity and financial problems.
If firms, and in particular SMEs, whose significant contribution
to the European economy is widely recognized, are left to make
this adjustment effort alone without receiving the necessary
guidance and support, the Community and the Member States might
have difficulties in pursuading economic agents that the current
upheavals are worthwhile.

A concerted effort is therefore needed to support firms through
specifically targeted measures and improved access to financial
markets, thereby making them aware of the European dimension of
the market in which they are operating. This stimulatory effort
can be made only by coordinating Community and national
initiatives and "Europenizing" policies and measures to assist
SMEs, in parallel with the efforts to administer the regulations
connected with the single market;

infrastructure benefiting individuals and firms: the
trans-European networks are a key component of the functioning of
the single market, of the cohesion of the Community and especially
of economic growth because of the increased efficiency they bring
for firms in particular. Adoption of the strategic plans and
major guidelines envisaged in the Maastricht Treaty should
guarantee consistency in the use of the Community funds, the
European Investment Fund and the EIB lending facility by placing
individual projects in a trans-European context that enhances
their economic effectiveness. The interoperability of networks and
cooperation between firms should ensure that the networks do in

fact function across frontiers.

```

```
                   A - 21

The Commission is in the process of reassessing the progress made in
the above-mentioned fields and will present appropriate proposals if

necessary.

```

**COMMISSION**

**OF THE EUROPEAN**

**COMMUNITIES**

**PROMOTING ECONOMIC RECOVERY IN EUROPE**
**(The Edinburgh Growth** **I n i t i a t i v e )**

**ANNEX B**

```
           Actions and measures decided or announced

                   at national level

           (Contributions presented by Member States)

                          Rue de lo Loi 200 - B-1049 Brussels - Belgium

Telephone: direct I ine 23 exchonge 299.11.11 - Telex COCU B 21877 - Telegrophlc oddress COCUR Brussels - Telefox 299.33.02

```

```
 PROMOTING ECONOMIC RECOVERY IN EUROPE

   (The Edinburgh Growth Initiative)

           ANNEX B

Actions and measures decided or announced

        at national level

(Contributions presented by Member States)

```

```
Be I g 1 urn

Denmark

Germany

Greece

Spa in

France

Ireland

Ital ie

Luxembourg

The Nether lands

Portugal

United Kingdom

```

```
 Pages

 1 - 4

 5 - 7

 8 - 1 2

13 - 16

17 - 22

23 - 27

28 - 34

35 - 37

38 - 39

40 - 42

43 - 49

50 - 55

```

```
            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                     BELGIUM

I. PUBLIC INVESTMENT

1. At national level, the main areas of public investment are the railways

   and telecommunications.

   The SNCB's ten-year plan for 1991-2000, which includes the Star 21
   programme and the TGV, provides for investment of BFR 175 billion, of

   which BFR 91 billion are for infrastructure and BFR 80 billion for

   rolling stock. Investment for 1993 is expected to total BFR 18 billion.
   The central government's share of the financing will be BFR 144 billion,

   of which BFR 15 billion in 1993.

   in addition, the Belgacom programme will probably amount to
   BFR 25 billion in 1993. Belgacom has applied for an EIB loan, including
   use of the Edinburgh lending facility.

2. At regional level, the Flemish Community budget provides for an increase
   in investment of some BFR 15 billion in 1993 compared with 1992,
   bringing the total to BFR 106 billion. Of this increase, BFR 6 billion
   will be spent in infrastructure (mainly ports and roads).

   In the case of the Wal loon Region, investment wi I I increase by about
```

`BFR 3` `billion` `in 1993 (to some BFR 21` `billion).` `Nearly 65` _%_ `of the`
```
   investment programme will be allocated to public works, natural

   resources and the environment.

   As regards the Brussels Region, the increase in the Investment programme
   in 1993 will be BFR 206 million (from BFR 8.014 billion to

   BFR 8.220 bill ion).

I I. LABOUR MARKET

1. Belgium attaches great importance to the labour market study carried out
   by the Commission within the framework of the Economic Policy Committee
   and would point out that the OECD is also examining this question.

   A substantive discussion is thus called for at Council level.

2. Domestically, the Conference on Employment brings together the Federal
   Government, the Regions and the two sides of industry.

   The Conference focuses on :

     job creation : at national level no margin for manoeuvre seems
     avai I able-,

   - organization of work : adjustments can be implemented as the rules in
     this area are legally set at national level;

     labour costs.

```

```
                                                                  BELGIUM

   A nian for re-entry work ("pian d'accompagnement) has been Introduced
   whereby young unemployed persons will receive intensive training with a
   view to f inding a job.

   The plan addresses the following concerns :

   - better balance between supply and demand;
   - penalties for refusing to take part in the scheme;
   - incentive In the form of a reduction in employers' social security
    contributions for firms taking on unemployed persons.

   Some 100 000 unemployed persons are affected.

   The plan mainly concerns SMEs and the non-market sector, but large firms

   will probably be added.

   The plan will probably be financed by contributions from employers.

   Under the inter-trade agreement, firms will devote 0.25 % of gross wages
   and salaries in 1993 and 0.3 % in 1994 to promoting employment as

   fol lows :

   a) in 1993 and 1994, a contribution of 0.1 X to the financing of the
     plan for re-entry work.

   b) in 1994, a contribution of 0.05 % to the financing of initiatives

     relating to child-care facilities;

   c) in 1993 and 1994, a contribution of 0.15 % (details to be specified
     in an industry-1 eve I or company-1 eve I employment agreement).

   Following the agreements on constitutional reform (the Saint-Michel
   Agreements), the Flemish Government intends to allocate BFR 8.5 billion
   to employment for the three-year period 1993-95 : BFR 0.5 billion in
   1993, BFR 4.5 billion in 1994 and BFR 3.5 billion in 1995.

   The final decision, however, depends on the conclusions of the
   Conference on Employment.

   The Walloon Region recently decided to mobilize BFR 2 billion to support

   directly productive employment through selective recovery.

   An initial amount of BFR 1 billion will be released in consultation with

   the managers of companies in which the Region has a majority holding and

   will be earmarked for labour-intensive sectors.

   The remaining BFR 1 billion will be prefinanced by inter-municipal
   economic development associations in order to speed up the rate of
   activity.

III. WAGE MODERATION

1. The Law Safeguarding Competitiveness of 6 January 1989 is a key feature
   of the Belgian system.

   It empowers the King to take a series of temporary measures where the
   legislature finds that the competitiveness of Belgian firms Is

   threatened.

                     B - 2

```

```
                                                                  BELGIUM

   This power has never been exercised since the Law acts essentially as a

   safety net.

   The Law should be regarded as providing internal flexibility and as a

   counterpart to Belgian exchange-rate policy, which is anchored to the

   German mark.

   Notably as a result of the major adjustments in exchange rates, the
   Belgian economy has become less competitive. This was noted by the
   Central Economic Council in its opinion of 12 March 1993, submitted in
   accordance with the procedure laid down in the Law Safeguarding
   Competitiveness. Government, employers and unions will have to discuss

   any measures to be taken.

   The inter-trade agreement of December 1992 specifically mentions the
   desire that competitiveness should be preserved as a condition for
   expanding economic activity and employment.

IV. SMALL AND MEDIUM ENTERPRISES

1. A plan for SMEs was approved by the Council of Ministers at the end of

   January.

   Its principal objectives are : to improve monitoring of SMES activity,
   coordination at national/regional level, relations with the authorities
   (ombudsman) and the business situation of the self-employed; to ensure
   the continuity of small family businesses; to find appropriate solutions
   to the problems associated with the social status of SMEs and their
   social security position.

   The plan provides in particular for a set of new institutional
   arrangements, improved information for SMEs, and the adaptation of
   legislation and regulations on business activity.

2. Belgium considers that the new European Investment Fund should take du©
   account of the role of SMEs in creating employment and should,
   therefore, devote an appropriate share of its resources to them.

V. PRIVATIZATION

The Privatization Commission is currently focusing its work on public credit
institutions. The privatization target for 1993 is BFR 25 billion. The total
privatization target is BFR 60 billion, and this will mean widening the net
to cover more than just public credit institutions.

VI. COMPETITION

The Law Safeguarding Competition was amended in August 1991. It prohibits
practices which limit competition, i.e. any agreements between firms and any
concerted practices whose object or effect is to prevent, restrict or
significantly distort competition on the market. A Competition Council will
be set up and empowered to issue opinions on matters to do with compliance

with the Law.

                     B - 3

```

**BELGIUM**

**V I I .** **HOUSING**

```
The Regions apply a housing subsidies policy. In the Flemish Region, Domus
Flandria, a partly publicly owned company, was set up in September 1992 to
achieve various housing objectives.

                       B - 4

```

```
            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                     DENMARK

```

_**The Danish economy Is closely**_ _**Intertwined**_ _**with**_ _**the economies of**_ _**the EC and**_
_**the**_ _**Nordic**_ _**countries**_ _**and**_ _**Is**_ _**therefore**_ _**highly**_ _**Influenced**_ _**by**_ _**economic**_
_**developments**_ _**In foreign**_ _**markets.**_

_**Danish economic**_ _**policy**_ _**Is**_ _**based on the membership of the**_ _**ERU**_ _**and an open and**_
_**liberal**_ _**trade**_ _**regime.**_ _**Denmark**_ _**will**_ _**continue**_ _**to base**_ _**policies**_ _**on these**_ _**two**_
_**pi**_ _**Ilars.**_

_**The**_ _**Danish**_ _**Government**_ _**attaches**_ _**a**_ _**great**_ _**priority**_ _**to**_ _**a**_ _**reduction**_ _**In**_
_**unemployment and Is convinced**_ _**that**_ _**there**_ _**is room for**_ _**maneuvre**_ _to_ _increase_
_**employment**_ _._

_The_ _**reorientation**_ _**of Danish economic**_ _**policy**_ _**was**_ _**initiated**_ _**by the agreement on**_
_**the**_ _**Budget**_ _**for**_ _**1993,**_ _**giving**_ _**high**_ _**priority**_ _**to**_ _**the**_ _**Improvement**_ _**of**_ _**growth**_
_**perspectives**_ _**for**_ _**the**_ _**Danish**_ _**economy. The Budget**_ _**for**_ _**1993 is**_ _**expected**_ _**to**_
_**contribute**_ _**to a**_ _**lasting**_ _**improvement of the employment**_ _**situation.**_

_**At present**_ _**the Government is preparing**_ _**some further**_ _**initiatives**_ _**designed**_ _**to**_
_**increase**_ _**employment**_ _**and**_ _**decrease**_ _**unemployment.**_ _**The**_ _**initiatives**_ _**will**_ _**be**_
_**launched**_ _**before summer.**_

_Focus_ _is_ _**primarily**_ _**on actions**_ _**that**_ _**will**_ _**strengthen**_ _**long**_ _**term**_ _**growth**_ _**and**_
_**supply**_ _**capacity**_ _**of the economy.**_ _**In**_ _**the short**_ _**run**_ _**high**_ _**priority**_ _**is given**_ _**to**_
_**instruments**_ _**that**_ _**will**_ _**reverse**_ _**the**_ _**trend**_ _**of**_ _**increasing**_ _**unemployment**_ **`.`** _The_
_**initiatives**_ _**are guided by the**_ _**risk**_ _**that**_ _**the Job qualifications**_ _**of unemployed**_
_**persons may**_ _**deteriorate**_ **`-`** _**within**_ _**a relatively**_ _**short**_ _**period**_ **`-`** _**leading**_ _**to an**_
_**Increase**_ _**in the structural**_ _**unemployment.**_ _**At the same time,**_ _**it**_ _**is a**_ _**primary**_
_**objective**_ _**for**_ _**the Government that**_ _**the Danish**_ _**international**_ _competitiveness_
_should_ _be_ _improved._

```
The main fields of initiatives are the following:

   Increase in public investment

   Incentives for small and medium sized enterprises

   Incentives to Increase activity In the residential sector

   Structural reforms in labour market and taxation

```

_Actions_ _already_ _taken_ _will_ _be strengthened_ _by the_ _Government_ _this_ _spring._
_Below_ _is given_ _a survey_ _of_ _the_ _initiatives_ _included_ _in_ _the Budget_ _for_ _1993_
_and an indication_ _of the_ _initiatives_ _to be implemented_ _by the Government ._

```
I. INCREASE IN PUBLIC INVESTMENT

The 1993 Budget will increase public investment by about 4 billion DKK
originally planned for the years after 1993. Both central government and
local government activities will be affected.

```

```
                                                                   DENMARK

The extra investment wi I I cover a broad range. Investment in infrastructure
(traffic; approximately 1 1/2 billion DKK), environment and energy (sewer and
energy saving measures; aproximately 1 billion DKK), culture and education
```

`(i.e.` `before Copenhagen Cultural Capital 1996; total aproximately` _V*_ `billion`
```
DKK), building maintenance (aproximately fc billion DKK) and public
```

`investments in facilities for children and old age` `(aproximately` _M_ `billion`
```
DKK) are pr ior i tated.

Public investments of this kind will give a positive effect on private

investments.

The Government plans a further speeding up of investment in both 1993 and
1994. The following elements are under consideration:

1. Increased public investment at the local level.

2. Speeding up of the investment in landfaciIities of the bridge project

   across the Sound (to Sweden).

3. Infrastructure investments and building projects in Copenhagen.

II. INCENTIVES FOR SMALL AND MEDIUM SIZED ENTERPRISES

The Government gives high priority to small and medium sized firms and it is
recognized that there are important barriers to growth for these firms. To
increase the flow of risk capital to small and medium sized firms an
arrangement for guarantees for loans is included in the budget for 1993, as
well as efforts to strengthen the know-how and quality in these small firms
and means to increase their potential for exports. Total expenditure of
```

`approximately` _Vz_ `billion` `DKK is foreseen.`

```
The Government plans to add a favourable loan scheme for small and medium
s i zed enterpr ises.

In addition to this the Government is considering the possibility of
establishing a venture fund with a mix of private and public guarantees.

Specific structural initiatives were taken in the Budget for 1993 with
respect to agriculture and fishery.

Further initiatives aiming at alleviating the interest burden and debt ratio
in industry, agriculture and fishery are being put forward by the Government.

III. INITIATIVES TO INCREASE ACTIVITY IN THE RESIDENTIAL SECTOR

The activity in the Danish building sector has been depressed for several
years. The Budget for 1993 provided for an increase In the subsidy for
private maintenance expenditure, increased public and private urban renewal
and a more flexible mortgage system, both in terms of borrowing limits and
schedule of amortization. Private pension funds were given better
opportunities for investment in urban renewal. The Budget will allocate more
than 1 billion DKK for this purpose.

 In order to improve the housing market the Government plans a further
liberalisation of the mortgage system. It is expected that this initiative

                      B - 6

```

```
                                                                   DENMARK

will decrease first year cost for house buyers significantly. Stamp duties

will be lowered.

Stimulus is also given to the maintenance and renewal of rental appartments.
Tenants will be given stronger incentives to Improve their flats.

IV. STRUCTURAL REFORMS IN THE LABOUR MARKET

Several activation schemes for unemployed have been implemented in 1992,
including a package of training schemes for young people. Early in 1993 the
activation schemes were expanded with better possibility for leave of

absence.

The Government has set up a committee of ministers to prepare initiatives to
combat unemployment. One of the major issues is structural labour market

reforms.

It is planned to change the system of active labour market measures
completely to a decentralised and more flexible system adapted to the
individual needs of the unemployed. The ambition is that the system shall
contribute to a major improvement of the skills of the unemployed.

An improvement of the possibilities for leave of absence to (among others)
educational activities is also planned.

The measures require a restructuring and widening of the capacity in the
education and training systems.

V. OTHER STRUCTURAL REFORMS

A main objective of the new Government is a restructuring of the income tax
system, aiming at lower marginal tax-rates on personal income. This
restructuring will be partly financed by increased environmental duties and

labour market contributions.

An objective of the Government is further to reduce the structural barriers
to growth in the service sector, due to unfair competition from black labour
and do-it-yourself activities. This is regarded as important for the
employment outlook in the longer run.

VI. THE EFFECT OF AUTOMATIC STABILIZERS

As a supplement to the specific measures taken, economic activity in Denmark
will continue to be supported by automatic stabilizers. The effect is
expected to be slightly positive in 1993, but less than In 1992.

VII. THE WAGE AGREEMENT IN SPRING 1993

The preliminary experience from the wage negotiation round early this year
 indicates very moderate wage increases for the coming years. For the public
sector annual wage increases in 1993 and 1994 are expected to be
approximately 2 per cent.

                      B - 7

```

```
            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                     GERMANY

```

_The most_ _important_ _German_ _contribution_ _to_ _the_ _Edinburgh_ _initiative_ _is_ _the_
_solidarity_ _pact_ _which_ _invites_ _all_ _major_ _economic_ _agents_ _to_ _contribute_ _to an_
_improved_ _growth_ _performance._ _Within_ _this_ _context,_ _the Federal_ _Government_ _has_
_initiated_ _the Federal_ _Consolidation_ _Programme (hereafter_ _refered_ _to as_ _FKP)._
_It_ _is_ _designed_ _to_ _provide_ _a sound_ _financial_ _basis_ _for_ _an upswing_ _in_ _East_
_Germany,_ _to_ _continue_ _the_ _fiscal_ _consolidation,_ _to_ _settle_ _the_ _issues_ _of_
_ailocating_ _debts_ _emanating_ _from_ _German_ _unification_ _and_ _of_ _adjusting_ _the_
_fiscal_ _relationshlp_ _between_ _all_ _layers_ _of_ _government._ _In_ _the_ _short-run,_
_efforts_ _will_ _be made to stabi_ _I_ _ize_ _the economy,_ _e.g._ _by_ _doubling_ _the_ _volume_
_available_ _for_ _the_ _building_ _modernization_ _programme to DM 60 bn. Also,_ _instead_
_of raising_ _taxes,_ _the Federal_ _Government_ _will_ _let_ _automatic_ _stabiIizers_ _work_
_and accept_ _an increase_ _in government_ _borrowing_ _this_ _year._

_Recently,_ _the Federal_ _Government,_ _ail_ _the heads of the Lander governments_ _and_
_the_ _leaders_ _of the major_ _political_ _parties_ _agreed_ _upon the major_ _elements_ _of_
_the FKP. The_ _agreement,_ _the_ _clear_ _framework_ _thus_ _provided_ _and the_ _decision_
_not_ _to raise_ _direct_ _taxes_ _before_ _1995 are expected_ _to have a_ _positive_ _Impact_
_on_ _private_ _sector_ _confidence_ _and growth._ _In_ _the draft_ _of_ _the_ _1993_ _supplement_
_budget_ _the short-run_ _stabiI_ _izing_ _elements_ _have already_ _been put_ _In_ _place._

_Within_ _this_ _overall_ _framework,_ _a great_ _many of_ _more specific_ _budgetary,_
_structural_ _and other_ _measures_ _have already_ _been decided_ _upon or are_ _pending._
_The_ _list_ _below provides_ _an_ _overview._

```
I . BUDGETARY MEASURES

1 . Pub I ic investment

   Continuing emphasis on overhauling the eastern capital stock (1992
```

`east/west investment` `ratio` `almost` `30%),` _but also_ _substantial_ _Investment_
_in_ _west Germany,_ _e.g.:_

_federal_ _capital_ _spending_ _of DM 13bn on_ _transportât_ _ion_ _infrastructure,_

_-_ _Telekom_ _investment_ _amounting_ _to_ _more_ _than_ _DM 15bn_ _on_ _western_
_communication_ _infrastructure_ _(digitalIzation,_ _broadband_ _cabling_ _and_
_mobile_ _telephones)_ _this_ _year._

_Furthermore,_ _there_ _are_ _various_ _projects_ _which_ _appear_ _suitable_ _for_ _EIB_
_financing_ _(temporary_ _lending_ _facility_ _decided_ _on_ _in_ _Edinburgh;_ _list_
_aval_ _I_ _able)._

```
2. Promotion of private investment, also through SME

   Programmes in favour of eastern investment, partially upgraded as of

   1993.

```

```
                                                                        GERMANY

```

_Support for_ _SME_ _is focussing_ _on east_ _Germany:_

`-` _Investment_ _supplement (up to 20%),_
_-_ _special_ _depreciation_ _allowances_ _(up to 50%),_
`-` _Investment_ _grants (up to 23%),_

```
   ```
_capital_ _assistance,_
`-` _credits_ _at_ _préfèrentIal_ _rates_ _administered via_ _the ERP -_ _credit_
_programme (additional_ _DM_ _1.8bn_ _in_ _commitment appropriât_ _Ions to reduce_
_the Interest_ _burden of_ _SME_ _In the eastern Lander)._

_Besides_ _this,_ _the_ _Treuhand_ _activities_ _of_ _déconcentration_ _and_
_privatization_ _are highly conducive to the_ _emergence_ _of_ _SME._

_In_ _addition,_ _measures to_ _consolidate public_ _finances, with e.g. the_ _FKP_
_as the most Important endeavour,_ _contribute_ _to growth via their impact_
_on interest_ _rates and (business and consumer)_ _confidence._

```
3. Tax facilities for enterprises (Including SME)

   Some reductions in various taxes as of 1993 (reduction and

   simplification of corporate wealth tax, higher allowances and other
   reductions with respect to a special corporate tax (Gewerbesteuer)).

```

_The_ _law_ _to_ _Improve the_ _investment environment (St_ _andartslcherungs-_
_gesetz) can be viewed as stage two of the reform of corporate_ _taxation._
_In this context_ _it_ _is_ _planned_ _to reduce corporate_ _profit_ _tax to_ _44%_ _as_
_of 1994. Given budgetary problems the target ted net_ _Impact_ _on the budget_
_is zero (tax_ _dépréciât_ _ion_ _allowances_ _to be stretched out)._ _In_ _addition,_
_the_ _Standartslcherungsgesetz Includes measures In_ _favour of_ _SME:_

`-` _further_ _reductions_ _of_ _inheritance_ _tax_ _faciIItate_ _the transition_ _from_
_one_ _generation_ _of_ _owner-entrepreneurs_ _to the next,_

_the_ _introduction_ _of_ _a combined_ _dépréciât ion/savings_ _mechanism is_
_particularly_ _helpful_ _for_ _SME_ _to_ _overcome_ _their_ _specific_ _problems with_
_raising_ _funds._

```
   In 1995, the solidarity surcharge on income/corporate profit tax will be
   re-introduced, at a rate of 7.5% (to help finance the unification

   related debts).

4. Measures in favour of housing

   After their extension in 1992, there are now plans to reduce some tax
```

**`allowances`** **`in`** **`order`** **`to`** **`foster`** **`consolidation`** **`(FKP-proposal).`** _**However,**_
_mainly within_ _the recent_ _FKP-declsions,_ _extensive housing support_ _to_
_Initiate_ _growth was_ _agreed_ _upon:_

`-` _the_ _programme_ _to modernise housing, administered by the_ _specialised_
_banking_ _Institute_ _Kreditanstalt_ _fur_ _Wiederaufbau_ _(KfW), is now being_
_boosted by a further_ _DM_ _30 bn to_ _DM_ _60 bn (after_ _being Increased_ _DM_
_5bn in the 1992 supplementary budget and DM 10 bn in the 1993_
_**budget)**_ **`.`**

###### **`B - 9`**

```
                                                                        GERMANY

```

_the entitlement_ _to a 50% special_ _depreciation_ _allowance_ _for_ _Investors_
_In_ _eastern_ _housing_ _will_ _be extended_ _by_ _another_ _two_ _years_ _(until_
_1996),_

_an_ _additional_ _sum_ _of_ _DM 250_ _mln_ _has_ _been_ _committed_ _for_ _the_
_construct_ _ion of_ _social_ _housing,_

_privatization_ _of_ _eastern_ _housing_ _Is_ _being_ _supported_ _massively_ _by_
_interest_ _subsidies_ _and debt_ _relief_ _(DM 31 bn out of DM 51_ _bn)._

```
I I. STRUCTURAL MEASURES

1. Labour market

   Structural adjustments (spending cuts) on various training programmes as

   of 1993.

   Issue of escape clauses for wage contracts pending.

   Easier access to liberal professions planned.

```

_**Employer's**_ _**initiative**_ _**"training"**_ **`in`** **`eastern states.`**

```
   Another DM 2 bn wi I I be spent on active labour market policies in 1993.

2. PrI vat izat ion

   Ongoing sales by Treuhand.

   Continuing western privatization, including railways, telecom and
   motorways. The privatization of the railways (Bahnreform) has already

   been launched.

3. Comoet i t ion policy

   Various deregulation measures are pending.

III. WAGE MODERATION

1. General government and private sector

   There has been wage moderation compared to 1992 settlements in west

   Germany.

```

_A_ _re-orIentat_ _ion_ _in wage_ _settlements_ _is emerging:_ _the_ _settlement_ _in_ _the_
_public_ _sector_ _(west)_ _of_ _3% (based_ _on an annual_ _average,_ _civil_ _servants_
_get only_ _2% more) after_ _5 to 6%_ _In_ _the years_ _before_ _is signal_ _Iing_ _this._

_Appendix:_ _SolIdarity_ _pact_ _agreement_

```
                  B - 10

```

**GERMANY**

**Append** **i x**

```
        Results of the Federal Chancellor's closed meeting
             with the Lander heads of government
         and the party and parliamentary group chairmen

            held in Bonn from 11 to 13 March 1993

The financing of Germany unity in a generally difficult economic situation
necessitates great efforts from the Federal Government, the Lander and the
municipalities, partly in order to give the private sector a reliable
framework. This requires an effort of solidarity on the part of all Germans.
The participants agree on the long-term financing of German unity from 1995.

The main points of this agreement are:

1. The fiscal allocation of the new Lander and their municipalities is
   guaranteed by transfers of DM 55.8 billion in 1995. In addition the

   division of tax revenues between the Federal Government and the Lander

   is rebalanced.

2. Additional efforts are to be undertaken to eliminate old ecological
   debts and to safeguard and renew the core industries. With this
   objective in view, the Treuhand's credit limit is increased.

3. The suitability of the relevant instruments and the scale of financial
   resources necessary to promote sales of products from the new Lander is

   to be examined.

4. Basic agreement exists on the need for reform of the railways.

5. To increase residential construction in the new Lander the following is
   agreed:

   - The solution of the question of old residential construction debt

     could be achieved:

     Capping at DM 150 per square metre-, the sum of DM 31 billion produced
     from capping is added to the inherited debt fund. The proceeds from
     housing privatization are used to cover corresponding burdens in the

     inherited debt fund.

     The corresponding interest rate subsidies amount to DM 4.7 billion
     for 1994 and DM 2.35 billion for 1995 and are borne by Federal
     Government and new Lander in equal amounts.

   - So long as housing enterprises can not be entered as owners on the
     Land Register, transitional guarantees are granted.

   - The Federal Government's Reconstruction Loan Corporation programme
     will be boosted by DM 30 billion to DM 60 billion. DM 10 billion of
     this will be used to improve systems-built dwellings with an interest
     subsidy of 3 percentage points; for the remaining DM 20 billion an
     interest subsidy of 2 percentage points applies.

   - As part of the promotion of urban building in eastern Germany,
     improvement of the living environment Is continued.

                     B - 11

```

```
                                                                  GERMANY

   - The Assisted Area Law is extended by two years for investment in the
     building of privately-owned housing (50% special depreciation
     allowance in the first five years).

6. The Federal Government will make an extra DM 2 billion available to keep
   an active labour market policy in operation in 1993.

7. Standard social benefits are not reduced.

   Strenuous efforts will be made to combat abuse in the area of social and

   economic services.

8. It Is agreed that expenditure cuts and the reduction of tax subsidies
   must yield savings of over DM 9 billion. The additional savings
   necessary will be decided In the working party of the four Lander

   Finance Ministers with the Federal Minister of Finance which will

   consult representatives of the parliamentary groups in the Bundestag and
   will have full negotiating authority.

9. In introducing a 7.5% solidarity surcharge from 1 January 1995 there is
   agreement that a social component which exceeds the basic allowance is
   provided for. The private wealth tax is increased and the allowance
   adjusted from DM 70 000.00 to DM 120 000.00. It is agreed that the

   result will be an extra DM 28 billion available to the Federal

   Government in 1995.

10 It is agreed that for 1993 the Federal Government and the old Lander
   will make available their additional revenue from the withholding tax on
   interest income (Zinsabschlagsteuer) (DM 855 million and DM 1.3 billion
   respectively) to cover the fiscal need of the new Lander. In addition to

   this, the Federal Government and the old Lander will make a further

   DM 1.55 billion available, to be shared equally between them. As a
   result, the German Unity Fund is provided with an extra DM 3.7 billion
   altogether in 1993.

   The Federal Government and the old Lander wish to provide additional
   amounts to stabilize the yield from the German Unity Fund for 1994 as
   well. The working party of Finance Ministers is to discuss this with the
   object of producing a decision for the Federal Chancellor and the Lander
   heads of government. The Federal Government will contribute a sum of DM
   5.35 billion to these discussions. The old Lander are studying whether
   they will make additional amounts available for this over and above a
   promised sum of DM 3.5 billion.

                       B - 12

```

```
            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                     GREECE

I. COMPETITION POLICY

   Priority has been given to the lifting of administrative and legal
   barriers to market entry and competition (including those applying to
   professional associations). According to Law 2065/92, this was to be
   done by Presidential Decrees. A Decree opening up the profession of
   auditors was issued and restrictions on the baking and the sale of bread
   were lifted in July 1992. Another Decree liberalising shopping hours was
   issued in September 1992. On the basis of Law 2065/92 barriers to entry
   and restrictive practices in a number of other professions and
   industries are being examined, with a view to eliminate those that are
   considered to be unjustified. These added to earlier measures to
   liberalise the labour market with the introduction of part-time work and
   of restrictions to trade-union activity (Law 1915/90) and the gradual
   lifting of rent controls since 1991.

   In the area of liberalisation and deregulation a major step has been the
   establishment of a regulatory framework for telecommunications (Law
   2075/92), following the abolition of the state monopoly. Furthermore the
   banking system has been strengthened by the provisions of the Banking
   Law which incorporated the second banking directive, and by a major
   restructuring in the asset position of state banks. Moreover, all
   current transactions are now free of exchange controls and long-term
   capital movements have been liberalized. Finally, all price controls
   were lifted in May 1992, with the exception of pharmaceuticals,
   following the liberalisation of the oil market earlier.

11 WAGE MODERATION

   Law 2026, voted in April 1992, empowered the Minister of National
   Economy to impose limits on the wage bills of all public enterprises and
   entities in 1992. Under the tax bill voted in July 1992 the Law was
   extended to 1993 and 1994. For 1992 a wage-freeze applied in the public
   sector, while in 1993 a 4 % increase has been granted. The cumulative
   decline in real wages in the public sector in 1991-93 has been more than

   14 %.

III. TAX REFORM

1. Law 2065/92 introduced a favorable tax treatment of depreciation
   allowances for firms :

   - As from 1/1/93 regular depreciation becomes optional, Implying that
     new firms may postpone depreciation until they become profitable.

   - For assets exceeding Drs 200,000 an accelerated depreciation system
     applies. Machinery and equipment may be depreciated within a period

```

```
                                                                   GREECE

     of no more than four years thus enabling firms to replace and
     modernize their machinery more frequently.

   - Exceptionally, all industrial, handicraft, mining and quarrying
     enterprises, may in the two fiscal years following 30/12/92, carry
     our depreciation of their machinery and equipment acquired before
     30/12/92 using any depreciation rate, provided that the overall
     depreciation rate of their fixed assets is not higher than 20 % of
     the industry's aggregate net profits in any fiscal year.

2. The same Law simplified the system of direct taxation, reduced marginal
   income tax rates (the highest rate declined to 40 %) and introduced a
   significantly reduced flat rate of 35 % for corporate profits. Also, it
   provided for a number of penalties, incentives and other measures to
   help combat tax evasion, broaden the tax base and speed up the payment

   of tax arrears.

3. In the area of indirect taxation, the Special Tax on Banking Turnover,
   which adds about three percentage points to the borrowing costs, will be
   abolished as of 1/1/94, thus reducing borrowing costs by about three
   percentage points.

4. From 1/1/94 specific consumption taxes will be indexed for expected
   inflation. Moreover, an increase in revenue from the reduction of VAT

   evasion is expected, following the implementation of a series of
   structural and organisational measures in the process of assessment,
   control, cross-checking and collection of taxes. This is expected to
   yield one extra percentage point of GDP annually in 1993 and in 1994,
   thus offsetting the revenue loss from the abolition of the special tax

   on bank turnover.

IV. PRIVATISATION

   Two cement companies and two shipyards have already been sold, another
   shipyard and a textiles company are in the process of being sold or
   liquidated, while several other smaller companies have been disposed of.
   This year, the two state refineries will also be privatized.

   Regarding public enterprises, the sale of shares of the OTE has been
   assigned to a major international investment bank and the transaction is
   expected to be completed in 1993, through a sale to a strategic partner
   and an IPO. The award of two licences for mobile telephony was completed
   in August 1992 for a record fee.

   The 1993 Budget envisages privatisation proceeds of Drs 330 billion,
   while a further Drs 200 billion is expected in 1994.

V. INFRASTRUCTURE INVESTMENT

   There has been a major shift in priority from public consumption towards
   public investment projects. A major effort concerns the 100 % absorption
   of the Community Structural Funds. Consequently :

1. In 1993, expenditure of the Public Investment Budget is projected to
   increase to 5.6 % of GDP, from 4.8 % in 1992, while for 1994 and 1995
   the annual rates are projected to be 6 % of GDP. These rates are
   expected to be achieved via the thorough absorption of the Funds of the

                     B - 14

```

```
                                                               GREECE

Delors II package, and their rational allocation to a wide range of
large Infrastructure projects, such as :

- The Metro of Athens (already under construction),

- The Metro of Thessalonica,

- The Athens Airport at Spata,
- The Rio-Antirlo bridge,
- The Ancheloos River irrigation project,
- The modernisation and electrification of the existing railways,

- The dams of Rivers Evinos and Smocovos,

- The Mount Hymmetus tunnel,
- The Thessalonica water system,
- The Patras sewage system,
- The new Higoumenitsa harbor, and

- The modernisation of the Patras harbour.

The total cost of these projects has been budgeted at Drs 1,278 billion.
There are also ten more projects concerning construction and completion
of road transport networks whose total cost has been budgeted at Drs
1,292 bi I I Ion.

In addition, a large number of smaller road transport networks are
already under construction, while a series of other small projects are
expected to start as from 1/1/94.

It should be noted, however, that in the cases of the Athens Airport,
the Metro of Thessalonica and the Hymmetus tunnel the participation of
public funding is quite small as they will be constructed on a BOT

basis.

                  B - 15

```

```
i

```

```
                      GREECE

           Major Infrastructure Projects [1993-1998]

ROADS AND SECTIONS OF ROADS Length Expenditure

                                  in KM in DRA bi M ion

 Modernisation of the National Road to turn it into

 a mortorway in the section Ylikl to Katerini 350 460

 Construction of Egnatia Road in the section

 Igoumenitsa to Kavala 403 400

 National Road in the section Antirio-lgomenitsa 190 120

 Completion of the Northern road axis of Crete 90 50

 Outer Ring Road of Thessaloniki 20 26

 Rong Road of Patras 20 25

 Motorway between Tripolis and Kalamata 90 46

                                     I I :

 Improvements in the motorway between Corinth and Patras 15
 Eleusis - Stauros - Spata and the peripheral road of
 Hymettus (completion of Athens Ring Road) [expenditure
 additional to self-financing] 35

 Tunnel under Mr Hymettus
 [expenditure additional to self-financing] 15

OTHERS

 Athens Metro stages A and B 500

 Thessaloniki Metro

 [expenditure additional to self-financing] 40

 Diversion of the river Ache loos 120

 Modernisation and electrification of the railways 370

 Rion-AntirrIon Junction

 [expenditure additional to self-financing] 40

 New Athens airport
 [expenditure additional to self-financing] 25

 Dam on the river Evinos 40

 Modernisation works in the Kopais basin 25

 Thessaloniki water works 15

 Patras sewage works 10

 Smokovo dam 30

 New port of Igoumenitsa 10

 Modernisation of the port of Patras 23

 Western Attica Hospital 30

```

```
                                                                          SPAIN

            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                     SPAIN

I. GENERAL APPROACH

```

_Spain's_ _economic growth has recently_ _suffered_ _a_ _significant_ _deceleration,_ _as_
_has been the case_ _in_ _other European countries._ _The growth rate_ _recorded_ _in_
_1992 (1.0% according_ _to the latest_ _data)_ _is clearly_ _lower than our_ _growth_
_potentIal;_ _however, structural_ _inefficiencies_ _In our labour_ _market and the_
_evolution_ _of real wages in the last_ _three years have destroyed employment and_
_pushed our unemployment rate_ _well_ _above that of other_ _countries._

_During_ _the last_ _months, there_ _have been some considerable_ _improvements_ _in_
_some of our_ _macroeconomic_ _disequiIibria,_ _mainly_ _in the fields_ _of_ _inflation,_
_external_ _deficit,_ _and_ _public_ _sector borrowing_ _requirements._ _Moreover, a great_
_part_ _of the structural_ _reforms contained_ _In the Convergence Programme have_
_already_ _been presented_ _to_ _Parliament._ _Nevertheless,_ _the Government_ _believes_
_that_ _a new package of economic measures could help to_ _Improve activity_ _and_
_employment_ _création,_ _if_ _It_ _is_ _embedded_ _in_ _the European_ _initiative_ _and does_
_not affect_ _the Convergence Programme_ _targets._

```
The measures adopted by the Spanish Government can be grouped in three areas:

1. Measures favouring the financing and investment capacity of small and
   medium sized enterprises, in order to enhance economic growth and
   employment creation.

2. Measures directed to increase Infrastructure Investment without putting
   in Jeopardy fiscal consolidation.

3. Labour market measures.

```

_The next_ _section_ _includes_ _a_ _detailed_ _description_ _of_ _the_ _measures._
_Nevertheless,_ _it_ _is_ _important_ _to stress_ _that the Spanish contribution_ _to_
_the_ _Initiative_ _Is_ _not going to_ _entail_ _any_ _kind_ _of_ _deviation_ _from the_
_convergence path_ _described_ _in our Convergence Programme._

_First,_ _because the measures are_ _but_ _a deepening_ _in_ _the_ _structural_
_reforms_ _described_ _In_ _the Programme as_ _being_ _necessary for_ _increasing_ _the_
_Spanish_ _potential_ _growth._

_Second,_ _because the budgetary_ _impact_ _of_ _the_ _tax_ _reduction_ _and_ _the_
_additional_ _financing_ _for_ _private_ _enterprises_ _will_ _not_ _alter_
_significantly_ _the results_ _otherwise_ _obtained,_ _because the measures are_
_restricted_ _to new enterprises_ _and new_ _investments,_ _and because they_ _will_
_help_ _to counteract_ _the effects_ _on budget_ _deficit_ _otherwise_ _derived_ _from_
_the_ _automatic stabiI_ _izers._

_Third,_ _because the financing_ _of the additional_ _public_ _investment_ _will_
_come from EC funds and resources,_ _and EIB loans_ _will_ _be devoted to those_
_projects_ _with capacity_ _to generate enough returns_ _for_ _repayment._

```
                     B - 17

```

```
                                                                          SPAIN

```

_Finally,_ _because_ _the_ _restoratIon_ _of_ _agents'_ _confidence_ _may have_
_favourable_ _effects_ _on the rate of growth,_ _reinforcing_ _the intensity_ _of_
_economic_ _recovery._

```
II. DESCRIPTION OF THE MEASURES

1 • Financial measures In support of Small and Medium
   Sized Enterprises (SMEs)

   These companies suffer from the difficulty to find adequate financing.
   Lack of access to capital markets, insufficient guarantees provided to
   credit institutions and scarce information and advice facilities, render

   SMEs financing much more difficult. They have to rely on bank financing
   which is usually more costly.

   Therefore, some mechanisms to facilitate their financing capacity are
   needed, by promoting se If-financlng or making their access to other
   sources easier. To this purpose, the Government proposes the following

   measures:

   a) Credit Lines to SMEs

     i) Preferential credit from the Official Credit Institute (ICO)

     ii) A line of 100.000 million PTA for SMEs is committed, to be

        disbursed in the course of 1993-94. It is meant to finance

        long-term productive investment with the intermediation of Banks
        and Savings Institutions.

     iii) ICO will obtain the funds from its profits and bond issues.

   b) Interest rate subsidies

     The government will set up a 10.000 million PTA credit line in
     concessional conditions for SMEs high-technology equipment.

   c) EIB loans

     i) The EIB will provide funds through "global loans" channelled by
        credit institutions amounting to 50.000 million PTA in 1993-94.

     ii) In order to increase the percentage of "Global loans" in the
        total number of EIB loans to Spain, and to reduce their cost,
        the Government will undertake the following measures:

        - Favour any procedure enabling to make more flexible the
         concession of EIB Global loans, and their channelling to SMEs.

        - Create risk reduction mechanisms in coordination with the EIB

         to reduce financial institutions margins.

        - Foster the role of Regional Governments and Commercial
         Chambers, because their proximity to companies allow better
         knowledge of their needs. They may, on the one hand, provide
         information on EIB financing possibilities, and on the other
         hand, act as intermediaries in project selection.

                     B - 18

```

```
Reinforcement of Reciprocal Guarantee Companies

The role of Reciprocal Guarantee Companies (RGC) Is very much related to
the strategy of increasing resources to SMEs. These companies provide
guarantees allowing SME's access to bank finance, make their access to
concessional financing easier, negotiate better credit conditions with

financial institutions and offer them information and advice.

The government also believes that these companies can play an important
role In improving SMEs access to financial resources from the EIB.

a) RGC legal framework

  The Council of Minister approved on the 23rd of December 1992 the new

  Law on RGC regime.

  The Law is now being considered in Parliament. It provides SME with
  better financing possibilities through mutual guarantees enhancing
  their negotiation capacities with financial institutions, reducing
  credit costs and opening their access to a wide range of financial

  serv ices.

b) Establishment of a new Reinsurance Company

  In order to provide RGC with enough liquidity and solvency, we need
  to create a mechanism for reinsuring RGC guaranteed Credits.

  This new company will result from the merger of two existing
  companies: the mixed Company for Second Guarantees and SOGASA. Its
  equity will then be enlarged to 3.000 million PTA.

c) New Joint-venture fund in the ICO

  The ICO will create a 10.000 million PTA fund earmarked for taking
  minority stakes in newly created enterprises and providing
  participative loans.

d) SMEs access to Stock Exchange Markets

  The Government, after a previous report by the Stock Exchange
  National Commission, may create special stock negotiating areas for
  variable or fixed assets launched by SMEs.

Fiscal measures to support Investment and enterprises

The fiscal measures that the Government includes in the context of the

European Initiative for Growth are mainly focused on promoting creation
of new enterprises and investment in the existing ones by means of

reduction of their tax burden.

Four different types of proceedings are proposed :

a) In the field of fiscal Incentives to investment, the measures are
  meant to facilitate an accelerated process of depreciation of
  equipment.

  i) A Ministerial Order will be immediately published, which

     increases official coefficients.

                  B - 19

```

```
                                                                SPAIN

  ii) A 50% increase in the new maximum repayment coefficients will be
     allowed for investment carried out during the next two years.

b) In the field of new managerial activities :

  I) The present five year limit for loss compensation in the
     Corporate Tax will be abolished for all those enterprises
     created during 1993 and 1994. The managerial activities

     launched under the Initiative will benefit from an unlimited

     horizon to compensate losses In their tax payments.

  II) Three year 20% allowance of the net revenues of the "ob lect Ive
     estImatIon system" for those enterprises created during the life

     of the Initiative for Growth.

c) In the field of small individual enterprises, 10% general reduction
  of the 1993 net revenues of the "objective estimation system" will be
  applied. This measure is introduced in order to consider the
  specific situation of small individual enterprises, and to correct
  the 1993 net revenues in the light of the characteristics of the

  current situation.

d) In the field of enterprise financing, in order to finance the cost of
  the special lines of credit established in the "Official Credit
  Institute" for small and medium enterprises, this Institute will be

  exempt from the Corporate Income Tax for the next four years.

Measures to enhance investment in infrastructure and

environment.

The Government proposes that the financing from the EIB additional line
be used to carry out 100.000 million PTA of additional investment for

1993 and 1994. These investments will be focused on those

organizations, entities and public enterprises capable of generating
enough revenue to cover the service of the indebtedness.

The following investment programs have been selected : Airports, Ports,
Motorways, Confederaciones Hidrogrâficas, Postal Service, Electric
Energy and Pipelines.

In addition to this package of investments, financed with the credits
obtained by the organizations and public companies, the public
investment pipeline will be increased with regard to previous scenarios
for 1993 and 1994, by 200.000 million PTA, mainly financed by Cohesion

Fund resources.

Spain will probably receive from Cohesion Fund, 250.000 million PTA in
1993 and 1994. Spain has presented a 350.000 million PTA project
pipeline detailed In Table 1. In the Table, the 20% Spanish cofinanclng
requested by the Community has already been taken Into account. The
important volume of the pipeline and its adequacy to the Fund
objectives, allow to foresee that It will be possible to obtain the

volume of resources mentioned above.

The main characteristics of the projects Spain is proposing to finance
with the Cohesion Fund are the following :

                  B - 20

```

```
                                                                    SPAIN

   a) Proceedings In the field of transport represent 70% of total
     projected investment, and those In environment represent 30%.

   b) Environment. The Investment effort In environment this year will
     amount to 50.000 million PTA. Investment to improve water cycle
     management, investment in National Parks and aid to promote clean
     technology use In the industrial sector are the main domains taken

     into account.

   c) Transport Infrastructure. The projects in the field of transport
     will use up to 114.000 million PTA In 1993. The projects are focused
     on the improvement of the road network, railways, and airport and
     port infrastructure in the Islands.

5. Labour market measures

   The strong worsening of the Spanish Labour Market urgently requires a
   comprehensive and deep review of the legal framework, that has proved
   incompatible with the requirements of the European project.

   The measures here proposed obviously do not suffice to undertake the
   reform required. However, the Government's main target for the moment
   is to cushion the negative effect on employment of the current
   situation. Therefore, these measures have to be understood as a means

   to avoid a further worsening of the labour market conditions.

   The measures are the fol lowing :

   a) Possibility of extension to 1 year of the temporary contracts that
     expired during 1993. Employers may receive a 250.000 PTA subsidy if
     temporary contracts are transformed into indefinite.

   b) Part-time contracts signed after the implementation of the measures

     and until December 1993 will benefit from subsidies under the

     Indefinite contract promotion scheme; working hours minimum
     requirements are between 1/2 and 2/3 of the ordinary time-table.
     Subsidies will be determined according to timetable length.

   c) Changes will be introduced in apprenticeship and training programmes
     to finish their reform process.

   d) Temporary Work Companies will be allowed to actively participate in

     labour market intermediation.

                     B - 21

```

```
                  SPAIN

     INVESTMENT IN INFRASTRUCTURE AND ENVIRONMENT PROGRAMME

                (Mi I I ion PTA)

  PROJECTS 1993 1994

A) TOTAL TRANSPORT 113.997 129.255

1. ROADS 91.697 107.120

  Main Roads 56.228 89.300

  Conditioning 6.867 8.000

  City access 29.102 11.197

2. RAILWAYS 14.900 10.500

  Railway infrastructure 14.900 10.500

3. PORTS 400 1.500

4. AIRPORTS 7.000 10.135

  Infrastructure 6.600 9.335

  Air Navigation 400 800

B) ENVIRONMENT 50.450 56.150

  Water quality 4.000 11.000
  Sea Shores 6.950 7.000

  Hidrology - forestry 2.500 2.500
  Hldrologlc works 21.000 5.000
  National parks 3.000 3.000
  P.I.T.M.A. 3.000 10.000

  Reforestation 10.000 14.650

  TOTAL TRANSPORTS + ENVIRONMENT 164.447 185.405

```

```
            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                     FRANCE

```

_**Since**_ _**last**_ _**autumn,**_ _**France's**_ _**international**_ _**environment**_ _**has worsened :**_ _**the**_
_**OECD, which**_ _**in**_ _**June 1992 was**_ _**predicting**_ _**3 X growth for**_ _**Its**_ _**members in**_ _**1993,**_
_**has revised**_ _**Its**_ _**forecast**_ _**down to**_ _**1.9 X; the**_ _**deterioration**_ _**in the**_ _**economic**_
_**climate**_ _**is a**_ _**particularly**_ _**sensitive**_ _**matter**_ _**for**_ _**Community Member States.**_ _**The**_
_**OECD is now predicting**_ _**growth of**_ _**1.2**_ _**X for the EEC in 1993. The Commission is**_
_**even more**_ _**pessimistic**_ _**(0.8**_ _**X).**_

_**This**_ _**highly**_ _**unfavourable**_ _**international**_ _**context**_ _**will**_ _**inevitably**_ _**affect**_ _**the**_
_**economic situation**_ _**in France where growth in 1991 and 1992 was**_ _**export-driven**_
_**to a significant**_ _**extent.**_ _**In**_ _**1992 the French external**_ _**trade**_ _**balance**_ _**showed a**_
_**surplus**_ _**of**_ _**FF 30.5**_ _**billion,**_ _**i.e.**_ _**an improvement of**_ _**FF 60**_ _**billion**_ _**over**_ _**the**_
_**previous**_ _**year.**_

_**Growth in France cannot**_ _**therefore**_ _**be expected**_ _**to be**_ _**driven**_ _**by external**_ _**trade**_
_**in**_ _**1993. However,**_ _**the progress**_ _**made by France over many years**_ _**in**_ _**improving**_
_**its**_ _**competitiveness**_ _**will**_ _**mean that**_ _**its**_ _**external**_ _**accounts**_ _**will**_ _**remain**_ _**in**_
_**surplus**_ _**in**_ _**1993.**_

_**Growth**_ _**In**_ _**1993**_ _**will**_ _**also**_ _**be underpinned**_ _**by the sustained**_ _**level**_ _**of**_ _**private**_
_**consumption**_ _**(increase**_ _**of approximately**_ _**1.5**_ _**X per year)**_ _**which**_ _**will**_ _**in part**_ _**be**_
_**stimulated**_ _**by the**_ _**purchasing-power**_ _**gains**_ _**made by wage and**_ _**salary**_ _**earners**_ _**as**_ **`a`**
_**result**_ _**of**_ _**the**_ _**success**_ _**which**_ _**has**_ _**been**_ _**achieved**_ _**on**_ _**the**_ _**inflation**_ _**front**_
_**(consumer**_ _**prices**_ _**rose**_ _**by 2 X over**_ _**12**_ _**months**_ _**in**_ _**1992)**_ _**and**_ _**which should**_ _**be**_
_**sustained**_ _**in 1993 and reinforce**_ _**the economy's competitive**_ _**potential.**_

_**France**_ _**should**_ _**see growth**_ _**and domestic**_ _**demand levels**_ _**above the average**_ _**for**_
_**Community**_ _**countries,**_ _**and this**_ _**will**_ _**make a positive**_ _**contribution**_ _**to**_ _**activity**_
_**in**_ _**the**_ _**Community.**_

_**Despite**_ _**the successes achieved**_ _**on the**_ _**inflation,**_ _**competitiveness**_ _**and**_ _**external**_
_**trade**_ _**fronts,**_ _**growth**_ _**will**_ _**still**_ _**not be sufficient**_ _**to prevent**_ _**unemployment**_
_**from rising**_ _**unless**_ _**resolute**_ _**and sustained**_ _**action**_ _**is taken.**_ _**This**_ _**disturbing**_
_**phenomenon**_ _**Justifies**_ _**the**_ _**Government's**_ _**efforts**_ _**to**_ _**combat**_ _**long-term**_
_**unemployment through**_ _**the**_ _**examination**_ _**of the 900 000 individual**_ _**cases**_ _**recorded**_
_**last**_ _**year and the recent**_ _**measures to encourage**_ _**firms**_ _**to**_ _**increase**_ _**the number**_
_**of**_ _**part-time**_ _**Jobs.**_

_**However,**_ _**quite**_ _**apart**_ _**from**_ _**the**_ _**necessary**_ _**efforts**_ _**to**_ _**secure**_ _**a**_ _**better**_
_**distribution**_ _**of working**_ _**time and more**_ _**flexibility**_ _**in the labour**_ _**market,**_ _**the**_
_**Government is convinced**_ _**that**_ _**only**_ _**Increased**_ _**and**_ _**non-Inflationary**_ _**growth**_ _**Is**_
_**capable of curbing**_ _**the**_ _**rise**_ _**in unemployment by**_ _**creating**_ _**lasting**_ _**Jobs.**_

```
Having been aware, since the spring of 1992, of the seriousness of the
deterioration in the world economic situation, the Government has adopted a
two-pronged strategy :

   on the revenue side, the "automatic stabilizers" must be allowed to
   function to the extent compatible with the Government's medium-term
   objectives, and In particular the criteria laid down in the
   Maastricht Treaty;

```

```
                                                                   FRANCE

   without engineering an overall boost to the economy, specifically
   targeted measures must be adopted to assist certain sectors.

I. OPERATION OF THE "AUTOMATIC STABILIZERS"

Public finance provides powerful support for economic activity. The free play

of the automatic stabilizers will limit the deterioration in firms' cash

positions and In household incomes. The positive contribution made by public
finance to growth in 1992 can be put at more than half a percentage point. In
1993 the impact is likely to be less but should still be positive.

The rise in non-debt public spending remains moderate, and its structure is
not being unfavourably affected : government current expenditure as a
proportion of GDP has remained stable for a long time-, France's public
investment effort has been maintained over a long period and exceeds that
made by most of its trading partners.

France's medium-term objective is to maintain a public finance situation that
is healthy and compatible simply with balanced economic growth.

II. SPECIFICALLY TARGETED MEASURES

The support being given to the economy is selective :

   it is directed primarily at firms which are affected by the contraction
   in international demand and whose cash positions are impaired by the

   level of short-term interest rates. Households have benefited from the

   highly positive Impact of lower than expected inflation, which secured
   them substantial purchasing-power gains in 1992; the purchasing power of
   the hourly wage rate rose by more than 1.5 % between the end of 1991 and
   the end of 1992;

   government action Is designed to promote Investment since this will
   reinforce the country's long-term supply and growth capacity.

In the light of these objectives, the French Government, being aware of the
cyclical slowdown and having drawn the attention of Its European partners to
that fact, has concentrated its action in three directions since the autumn

of 1992 :

   assistance for small and medium-sized enterprises, including those in
   industry;

   the development of Infrastructure networks;
   support for the property sector, which has been particularly affected by

   the cr isis.

1. Assistance for small and medium-sized enterprises. Including those in
   industry

   In addition to general measures for alleviating the burdens on small and
   medium-sized enterprises - the most recent of which was the partial
   reduction in the one-month time-lag between the payment of VAT and the
   refunding of the tax on input (cost : FF 11 billion) - France has
   adopted specific measures designed to promote investment by such
   enterprises.

                     B - 24

```

```
                                                               FRANCE

In October 1992 France set up a guarantee fund for investment by small
and medium-sized firms, the aim of which is to provide a 50 % guarantee
for FF 20 billion of loans to such enterprises which have a turnover of
less than FF 2 billion and which implement industrial investment

programmes.

This guarantee fund has been allocated FF 500 million by the Government.
It Is administered by SOFARIS, a private-law company a majority of whose
shares are held by credit institutions and which underwrites with its
own capital the risk of the guarantee fund being exhausted. The
experience of this company should therefore ensure control of the risks

Incurred.

Guarantee applications are submitted by the credit institutions and

processed by SOFARIS.

The basis for calculating the guarantee is the amount of funding
provided for the tangible or intangible investment programme and the
increase in working capital resulting from that investment.

The credit institution must pay a guarantee commission, which ensures
that use of the guarantee fund is targeted on business investment
projects carrying above-average risks and therefore covers the marginal

areas of industrial investment at reduced cost.

This fund should make it possible to :

- boost the level of lending to firms by relieving banks of some of the
  financing risk and so contributing effectively - but without direct
  subsidy or aid - to the taking-on of greater risks by private

  operators;

- stimulate Industrial investment and therefore promote
  non-inflationary growth. By guaranteeing FF 20 billion of loans out
  of a total of some FF 150 billion of annual industrial investment by
  small and medium-sized enterprises, this stimulatory measure Is truly

  macroeconomic in scale.

The guarantee fund technique presents two main advantages :

  it is inexpensive because it exerts a substantial leverage effect,
  and only those firms which ultimately fail, which are still small in
  number, represent a real financial cost;

  It is a differential procedure, i.e. it is targeted on investment
  projects which would have had the least chance of being carried out
  without it. The payment of a guarantee commission causes the banks
  not to apply for guarantees on investment projects which they are
  prepared to finance alone.

  Although these arrangements have only just begun, the Initial results
  reflect the real interest being shown in them by credit institutions.

Infrastructure measures

Infrastructure investment has a particularly favourable Impact on
completion of the single market and promotes long-term growth.

                  B - 25

```

```
                                                                   FRANCE

   At the same time, it bolsters activity in the construction and public

   works sectors.

   The public enterprises in the transport and energy sectors and the water
   companies have been encouraged to invest FF 165.1 billion in 1993.

   This volume of investment Is at a historically high level, having grown

   by 7.3 % compared with 1992.

   Of that total, FF 80 billion will have a direct impact on the

   construction and public works sectors and will help to maintain or

   create jobs.

   This investment programme will Improve motorway infrastructures and add
   to the TGV network, both of which are of European importance. The
   studies on the launching of the Mediterranean TGV project will in
   particular be financed in 1993 (estimated cost : FF 27 billion).

   In the same spirit, the Government decided on 10 February to launch the
   TGV East project, which will involve an investment of FF 20 billion.

   Finally, investment by the water companies is to increase by almost 17 %
   In 1993, which represents a major effort in the environmental field.

3. Investment in the property sector

   a) In the autumn of 1992 measures were taken to boost investment in

     property for letting purposes in order to satisfy the needs of
     households and to bolster the construction industry :

   - the Quilès-Méhaignerle arrangements under which natural persons
     investing in new housing intended for letting are eligible for tax
     relief have been extended in the case of housing where rents do not
     exceed a given level;

   - the legal status of the "sociétés civiles de placement immobilier"
     (SCPIs, collectively administered property investment organizations
     benefiting from tax transparency) has been radically altered. Loans
     granted under housing-1 inked savings plans can now also be used to
     finance the purchase of shares of SCPIs specializing in housing. The
     development of the SCPIs, which have channelled some FF 10 billion of
     savings per year to property investment in recent years, will be
     boosted considerably by these two measures;

   - special attention has been paid to subsidized rented housing. This is
     reflected In the increase in the appropriations allocated to such
     housing : 90 000 HLM housing units (financed through subsidized loans
     for rented property) will be built In 1993, as against 80 000 in
     1992. These measures will bolster activity in the building industry.

   b) Similarly, the Government has sought to promote home ownership :

        a new home-ownership assistance system is to be set up at the
        beginning of 1993 : the "Fonds de Garantie de l'accession
        sociale" (FGAS - assisted home-ownership guarantee fund). This
        will enable some 150 000 people aspiring to own their own homes
        to be granted loans at moderate rates, with the Government

                     B - 26

```

```
                                                                   FRANCE

        partially underwriting the risk incurred in respect of such

        loans;

        legislative and administrative measures have been taken to speed
        up, during the first part of 1993, the introduction of the
        subsidized ownership loans ("prêts aidés à la propriété" or PAP)
        which will provide funding for 35 000 dwellings for households
        with modest incomes in 1993 : 24 000 loans should be granted
        during the first half of the year. Similar measures have been
        taken with regard to the subsidized loans for rented property
        ("prêts locatifs aidés" or PLA). The aim of this measure is to
        concentrate assistance at the time when growth is likely to be
        weakest and thus to provide a boost for the construction sector;

        the top rate of duty on transfers for valuable consideration is
        to be cut in the case of housing by 0.5 % per year up to 1995.

   c) Finally, measures have been taken to enable those working in the
     property sector to adapt to the crisis affecting the property market,
     particularly in Ile de France, and to pave the way for a soundly
     based recovery in that market :

        the maximum period during which property dealers may hold
        buildings free of duty on transfers for valuable consideration

        has been increased. This measure will enable such dealers to

        spread their property selling programmes out smoothly over the
        next few years. Property market prices will be less affected as
        a result, which should benefit all those active in the sector

        and their creditors;

        the SICOMIs, companies specializing in property leasing, will be
        granted tax relief over a wider field of operations. These
        companies have the capacity to carry out a large number of
        operations, and this measure will thus bolster the market;

        the administrative approval procedure for the establishment of
        office tenants In I le de France has been suspended. This measure
        will provide support for the Parisian property market by
        boosting the attractiveness of Paris as a location, particularly
        among large foreign companies.

The French Government has thus adopted a series of measures which form part
of a coherent strategy and which should provide short- and medium-term
support for activity in those sectors most sensitive to cyclical changes in
the economy.

Taken together, these measures should lessen the negative impact of the
worldwide economic slowdown on the French economy and contribute to growth in

Europe.

                     B - 27

```

```
            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                     IRELAND

```

_Despite_ _the_ _weakness_ _of_ _the_ _International_ _economy,_ _Ireland_ _achieved_ _GDP_
_growth_ _of_ _almost_ _3% In_ _1992._ _This_ _Is_ _estimated_ _to_ _have_ _been the_ _highest_
_growth_ _rate_ _In_ _the European_ _Community_ `.`

_Consumer_ _spending_ _grew by some 3,5%_ _in_ _1992,_ _helped_ _by_ _strong_ _growth_ _In_ _real_
_disposable_ _incomes._ _Consumer prices_ _rose_ _by 3%,_ _well_ _below_ _the EC_ _average._
_Total_ _Investment_ _remained_ _unchanged,_ _being_ _adversely_ _affected_ _by_ _weak_
_international_ _conditions_ _and_ _high_ _real_ _Interest_ _rates._ _Ireland's_ _trade_
_surplus_ _rose substant_ _ial_ _ly_ _and was equivalent_ _to over_ _12% of_ _GNP._

_Employment_ _held_ _up_ _well_ _relative_ _to_ _the_ _general_ _international_ _performance,_
_with_ _a modest_ _increase_ _in_ _numbers at_ _work outside_ _agriculture._ _Employment_
_performance_ _was_ _nevertheless_ _far_ _short_ _of_ _what_ _Is_ _necessary_ _for_ _our_
_exceptional_ _employment_ _needs._ _Unemployment rose_ _substantIally_ _as a result_ _of_
_the_ _numbers_ _of_ _returning_ _emigrants_ _and the_ _large_ _natural_ _Increase_ _In_ _the_
_labour_ _force._

_Ireland_ _appreciates_ _the_ _desirabiIity_ _of providing_ _a stimulus_ _to the_ _economies_
_of_ _the_ _Community_ _and_ _particularly_ _of_ _Improving_ _the employment_ _situation_ _in_
_the Community._ _Accordingly,_ _we welcome the European_ _Council's_ _initiative_ _for_
_economic_ _recovery_ _and in support_ _of_ _It_ _we are taking_ _the_ _actions_ _described_ _in_
_the_ _following_ _paragraphs._

```
I. BUDGETARY MEASURES: PUBLIC INVESTMENT

1. Growth Expectations for 1993

   Ireland's expectation is for GDP growth of 2,5% in 1993. This will
   again be well above the Community average.

2. Overall Budgetary policy

   Severe difficulties surrounded the framing of the 1993 Budget. These
   arose from the international recessionary conditions, necessary Single
   Market tax changes, currency turbulence and the related high interest
   rates. Nevertheless, Ireland is maintaining firm budgetary discipline,
   demonstrating our determination to adhere to the Maastricht criterion
   for the General Government Deficit and to secure early resumption of the
   trend decline in the overall debt-to-GDP ratio which was adversely
   affected by the devaluation of the IRL at end-January 1993. This policy
   is aimed at easing interest rate pressures and producing a positive
   effect in the markets, thereby assisting growth through improved

   investment and consumer confidence.

   Accordingly, the General Governemnt Deficit target for 1993 is 3,4%.
   This compares with an outturn of 2,5% for 1992. The increase reflects
   higher unemployment-related spending and the use for employment purposes
   of the available budgetary room for manoeuvre, through Increased Public
   Capital Programme expenditure. The GGD figure remains well in line with

```

```
                                                                   IRELAND

   the average level in other Member States in the narrow band of the

   Exchange Rate Mechanism.

3. Public Capital Programme

   A key feature of the Edinburgh Council's initiative is the call to
   switch public expenditure priorities towards infrastructure and other
   capital investment expenditures. Ireland has responded to this call by
   increasing our Public Capital Programme by nearly IR£ 500m to IR£ 2340m,
   or 27% more than 1992, helped by significant aid from the EC Structural
   and Cohesion Funds. This extra IR£ 500m will be spent mainly on roads,
   public water and sanitary services, and local authority housing
   (IR£ 149m); provision of a gas interconnector and improvement of gas
   network (IR£ 143m); refurbishment of electricity generation plant and
   improvement of transmission networks (IR£ 73m); improvement of rail
   lines and bus transport (IR£ 64m); and improvement of telecommunications
   networks (IR£ 41m).

4. Construction Content of Capital Expenditure

   A total of IR£ 1367m out of the Public Capital Programme expenditure of
   IR£ 2340m relates to the construction sector. This represents an
   increase of IR£ 251m, or over 22%, on 1992. This Increased expenditure
   is expected to generate up to 3500 direct and indirect jobs in

   construction in 1993.

5. Hous i no

   Expenditure on local authority and social housing will increase by
   IR£ 31m, or over 40%, to IR£ 107m. This will provide for 3500 local
   authority housing starts, compared with 1500 in 1992.

   Two taxation measures announced in the Budget will also help housing.
   First, the ceilings on mortgage interest relief are being increased by
   25%, and the percentage Iimit applying to the relief is being increased
   from 80% to 90% for the 1993/94 tax year; this figure will be 100% for
   first-time buyers in the first three years of their mortgage. Secondly,
   the level of stamp duty on larger new houses is being reduced. Taken
   together, these measures will cost over IR£ 18m in 1993, and should
   provide a further significant boost for the housing sector.

6. EC Cohesion Fund

   The extra IR£ 500m capital expenditure includes IR£ 148m in projects
   proposed for aid under the EC Cohesion Fund. About IR£ 126m of the
   IR£ 148m total is expected to be reimbursed from the Cohesion Fund. The
   concrete investments to be financed by the Cohesion Fund will result
   from the negotiations with the Community. A full breakdown of how the
   Irish authorities are proposing to spend IR£ 148m is attached.

7. County Enterprise Partnership Boards

   The 1993 Budget provides IR£ 25m for these proposed Boards. Their
   mandate will be to support local initiatives through small business

   start-ups.

8. Jobs Fund

   The Programme for a Partnership Government contains a commitment to

                     B - 29

```

```
                                                                    IRELAND

   promote recovery and job creation through the creation of a Jobs Fund.
   This commitment is being met by the Cohesion Fund-related expenditure,
   the expenditure on the proposed County Enterprise Partnership Boards and
   the increase in the Exchequer element of the Public Capital Programme in

   1993.

   National Development Plan

   A National Development Plan Is being prepared which will set out the
   Government's proposals for the use of EC Structural Fund and Cohesion
   Fund aid for Ireland 1994-1999. The central objective of the Plan will
   be to increase the sustainable growth rate of the economy and expand
   self-sustaining employment within the context of respecting the economic
   and financial criteria for participation in moves towards EMU.

   BUDGETARY MEASURES: PROMOTION OF PRIVATE FUND

10. Financial Institutions' Enterprise Fund

   The Government has been seeking a greater contribution from financial
   firms to economic development In the State. Already the banks and life
   assurers have agreed to establish a fund of IR£ 100m to promote
   enterprise in the State.

11. Development Capital from Pension Funds

   The 1993 Budget announced that urgent discussions will be opened with
   the pension funds in the State to seek a corresponding initiative by

   them in this area.

   BUDGETARY MEASURES: TAX FACILITIES FOR ENTERPRISES

12. Business Expansion Scheme

   The BES, due to expire in April 1993, is being extended to 1996. The
   lifetime cap of IR£ 75,000 on individual investors is being abolished.
   The annual investment generated by the BES is estimated at up to

   IR£ 30m.

13. Special Investment Accounts

   These accounts, introduced from 1 February 1993, are designed to
   encourage collective investment in Irish companies and direct personal
   investment in quoted companies. They are taxed at 10% on all income and
   capital gains. A small but increasing percentage must be held in
   smaller companies. There is an extra incentive, of complete exemption
   from income tax and CGT, for investment in venture capital companies.

14. VAT on certain labour-intensive Services

   The Budget reduced the rate on these (garage services, repair and
   maintenance services and various personal services) from 16% to 12,5%.

15. Car-hire

   A scheme of partial repayment of Vehicle Registration Tax is being
   introduced for cars In the short-term car hire sector, to underpin
   capacity for growth in tourism.

                     B - 30

```

```
                                                                    IRELAND

I I. STRUCTURAL MEASURES : LABOUR MARKET

1. Tax Reform In recent years

   Taxation of income has been significantly reformed in recent years,
   essentially by widening the tax base, reducing tax rates and extending
   the standard band. Budgetary constraints meant that the process of
   income tax reform had to be Interrupted this year. However, despite the
   severe financial pressures and the necessity to maintain fiscal
   discipline, the Government in framing the 1993 Budget were careful to
   limit the taxation of income and instead mainly concentrated on taxation
   of expenditure, while making special provision for the low-paid via the
   income tax exemption limits.

2. Taxation of Disability Benefit (DB)

   DB, a short-term Social Welfare benefit not taxed up to now, will be
   treated as income for tax purposes from the 1993-94 tax year. This will
   improve work incentives, broaden the tax base and improve equity of

   treatment as between different sources of income.

3. Family Income Supplement

   This scheme will be further improved in order to secure its
   effectiveness in maintaining the incentive to work, at a cost of over
   iR£ 5 million in a full year.

4. Occupational Pension Schemes

   New regulations, effective from 1 January 1993, improve the provisions
   relating to preservation and transfer of pension entitlements when
   employment is terminated or interrupted.

5. Work Incentives

   Improvements in Replacement Ratios over a wide range of incomes and
   family circumstances, arising from the 1993 Budget changes in Tax and
   Social Welfare, have improved the incentives for the takeup of
   employment.

6. "Standards Reached" Apprenticeship Scheme

   The details of and funding for a new "Standards Reached" apprenticeship
   scheme are being put in place. The new scheme will replace the existing
   "Time Served" scheme. It will require apprentices to complete set
   curricula and attend "off the job" training for up to 40 weeks over the
   apprenticeship period. The training will lead to a national craft
   certificate, internationally recognised.

7. National Training Scheme

   A "National Training Scheme" is also proposed, under which structured
   training will be provided which will incorporate work experience on
   employer's premises and will lead to national certification.

   These two schemes are intended to bring about a more structured and
   employment-1 inked training framework.

                     B - 31

```

```
                                                                   IRELAND

   STRUCTURAL MEASURES: ASSET SALES

8. Asset Sales

   The 1993 Budget arithmetic includes receipts of IR£ 150 million in
   respect of proposed sales of State assets. In carrying through these
   sales, the Government will be guided by the principles set out in the
   recently concluded Programme for a Partnership Government.

   STRUCTURAL MEASURES: COMPETITION POLICY

9. Competition Act. 1991

   The Competition Act, 1991 applies competition rules to the domestic
   market on the lines of Articles 85 and 86 of the EC Treaty. It covers

   all sectors of the economy.

   The coming into operation of the Act is expected to yield significant
   benefits in the drive to produce a more competitive and efficient

   economy.

10. Competition In the Financial Services Area

   A stream of legislation in the past five years has opened up the banking
   and financial markets to new forms of competition. In addition, 1
   January 1993 saw the implementation of the EC Second Banking Directive.

   Further, the regulation of financial services has been streamlined by
   making the Central Bank the principal regulator for all financial
   services, except insurance.

   This approach of liberalisation and efficient regulation will be
   continued in forthcoming legislation on the Stock Exchange, Investment

   Services and Financial intermediaries.

11. Third Banking Force

   The Programme for Government envisages the creation of a third banking
   force by merging the State Banks to give them the critical mass to
   compete with the four main retail banks which dominate the Irish market.
   In this proposed merger, the Government does not rule out the
   involvement of a major International banking group to add strength and
   expertise to the new structure.

   OTHER STRUCTURAL MEASURES

12. Taxât Ion

   Recent years have seen very substantial reforms of taxation in Ireland,
   with the objective of Improving the structure of the tax system while
   contributing to the overriding task of budgetary correction, supporting
   the achievement of wage moderation and facilitating Ireland's full
   participation in the Single Market. These reforms will continue to
   underpin Ireland's economic and budgetary performance over the years to

   come.

                     B - 32

```

```
                                                                   IRELAND

13. Tax Reform for the Future

   Tax reform - Including widening the standard tax band, removing the low   paid from the tax net altogether and making the tax system more
   supportive of enterprise and employment - will continue to be a priority
   for the Government. Integration of the tax and Social Welfare systems

   wi11 be studied.

14. Exchange Controls

   A phased programme of reducing reliance on exchange controls over recent
   years culminated in the complete abolition of exchange controls at end
    1992.

15. IndustrIal Pol Icy Review Group Report

   A major Report on Industrial Policy was published in 1992. It set out a
   wide range of recommendations for reform of industrial policy and for
   reforms in other areas affecting Ireland's economic performance. The
   Government will be following up vigorously the recommendations of the
   Report of the Industrial Policy Review Group and the Task Force Report
   on its implementation. A special committee of Ministers has commenced
   work on the timetable and priorities for implementation of the many
   recommendations in the Report.

16. Regional Authorities

   New regional authorities are planned to be established in 1993.

17. Food Industry

   A development programme for the food Industry will be implemented
   following consideration early In 1993 of a report from a Expert Group on
   the industry.

III. WAGE MODERATION

1• Pub IIc Sector

   No provision Is being made for improvements in pay or conditions - apart
   from those already fully committed - of public servants this year. In
   addition, the Government intend to discuss with the public sector trade
   unions a radical change In the public sector pay determination process,
   to provide for greater transparency, less frequent recourse to
   adjudication, more weight on budgetary considerations and greater
   efficiency and effectiveness in the public sector.

2. Private Sector

   Wage developments In the private sector In 1993 will be determined by
   the provisions of the three-year Programme for Economic and Social
   Progress which expires this year. The Programme provides for a basic
   increase in 1993 of 3,75% which is in line with expected inflation. It
   also allows for the possibility of local bargaining, subject to defined
   limits. Both the basic increase and the local bargaining element are
   subject under the Agreement to employers' ability to pay.

                     B - 33

```

```
Measures

```

```
          IRELAND

Proposed Cohesion Fund Expenditure 1993

      Exchequer Non Exchequer Total

       £ m £ m

               Internal External

```

```
National Roads

Improvements to Include

Northern Cross, Co Dublin
SIigo/Co Ilooney, Co Sllgo
Lucan/KII cock, Co Kildare
and Drumsna/Jamestown,

Co Leitr I m

PubI le Water Supply and
Sanitary Services
Improvements to include
Cork City, Dub I In and
Galway main drainage

Environmental Services

Mainly for waste management
facility in the Dublin area

Investment in Key

Commercial Ports

Including developments at
Cork, Dublin and Waterford

```

```
40.000 40.000

42.400 42.400

              7.000 7.000

        1.514 11.586 13.100

```

```
Improvement works at

Ross I are Harbour 4.800 4.600

```

```
Raliways

Main line Rail Track Renewal

Aer Rianta Airport
Investment in freight related
facilities at Dublin Airport

Pord Gals Ejreann
Environmental improvement
related spending in respect

of decontamination

developments at certain

Bord Gals sites

EJSB add it ional allocation

for Energy related Cohesion
funded projects

0PW Heritage Protects

Additional IR£ 0.400 mi 11 ion

allocation in respect of

National Parks and Wildlife

Service environment

protection developments.

```

```
             29.300 29.300

             2.900 2.900

             5.800 5.800

             2.300 2.300

0.400 0.400

```

```
TOTAL 82.800 1.514 63.686 148.000 *

```

```
About IR£ 126m

Cohesion Fund.

```

```
of this IR£ 148m Is expected to be reimbursed from the

```

```
            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                      ITALY

```

_The_ _International_ _economic_ _outlook_ _has progressively_ _become less_ _optimistic_
_with respect_ _to the_ _expectatIons_ _prevalIIng_ _in the first_ _months of last_ _year._

_Growth estimates_ _have been revised_ _downwards,_ _specially_ _In_ _Europe,_ _where_
_structural_ _problems affect_ _to a greater_ _extent_ _the prospects_ _of_ _recovery._
_These_ _negative_ _trends have been accompanied by increased_ _uncertainties_ _about_
_the working of the_ _ERM_ _and the_ _difficult_ _les of the Uruguay round._

_The economic_ _policy_ _response to the weak cycle_ _has been_ _characterized_ _by_
_insufficient_ _coordlnation_ _among_ _member_ _countries_ _and inward looking_ _measures,_
_aiming at the_ _solution_ _of the most important_ _national_ _problems._

_In_ _Italy,_ _the crucial_ _area of_ _the government actions_ _has been the_ _public_
_finance._ _Following_ _the currency_ _turmoil_ _of_ _last_ _September,_ _which made the_
_economic_ _picture_ _even more_ _difficult,_ _the Government adopted a programme to_
_correct_ _the major_ _disequiIIbrla_ _of the economy, in_ _particular_ _the_ _persisting_
_imbalances_ _In public_ _sector_ _finances._ _Beside_ _the_ _fiscal_ _adjustment_ _,_ _the_
_policy_ _package included_ _structural_ _measures affecting_ _the main_ _areas_ _of_
_expenditures_ _and_ _revenues,_ _that_ _is pensions,_ _health_ _care,_ _public_ _sector wages_
_and_ _local_ _finances._

_Since the_ _first_ _months of the current_ _year have_ _confIrmed_ _the weak trend of_
_output_ _and internal_ _demand, the Government is now trying_ _to deal_ _with_ _the_
_mounting concern about rising_ _unemployment._ _The_ _enterprises_ _have coped_ _with_
_these_ _difficult_ _les by reducing_ _the employment levels._ _For the first_ _time_
_since_ _1988 there has been a substant ial_ _reduction_ _in employment figures,_ _in_
_particular_ _In_ _major_ _enterprises,_ _which have cut_ _their_ _personnel by 6 per cent_
_In the last_ _twelve months._

_Taking into account the_ _constraints_ _in_ _public_ _finances,_ _the Government_ _policy_
_to promote employment has been based on the_ _following_ _main_ _lines_ _of_ _action._

```
I. BUDGETARY MEASURES

In February the Government decided by decree to broaden the category of
workers who are eligible for the wage supplementation fund (cassa
integrazione guadagni). The budgetary impact of this measure in 1993 will be
very Iimited.

Since the Government is committed to respect the public finance targets
indicated in the consolidation program connected with the Council decision
granting the loan to Italy, any stimulus to growth through public investment
expenditure is submitted to precise limits. The most significant measure
adopted by the Government in this field is the speeding up of arrear payments
to enterprises and of budgeted investment in the public sector, including

ENEL and Ferrovie dello Stato.

The new procedure which will speed up the investment expenditure requires: a)
identification of "risk areas"; b) programs specifying the objectives, the
modalities and the timing of investments; c) financing by the budget of the

```

```
                                                                      ITALY

public institutions concerned and by structural funds of the European

Commun!ty.

Moreover the Italian authorities are making all the steps necessary to speed
up the access to the Edinburgh facility for the following Investment projects
in the fields of transports, energy, telecommunications:

   Enlargement of Caselle - Torino airport and strengthening of related

   services.

   Construction of the section Mazara del Vallo-OrIcola of the Algeria    Italy gas pi peline.

   Extension and improvement of SIP telephone network, specially for the
   major urban areas.

   Installation of automatic toll machines on the Italian motorways.

I I . STRUCTURAL MEASURES

The second line of action is related to structural measures concerning the
labour market, privatisation and reforms of pensions, health care, local
finances and public employment In order to rationalize the working of these
sectors and to reduce public expenditure in the medium term.

As concerns the labour market, the Government is negotiating with the Unions
and Confindustria a package of measures to increase the flexibility of the
market and stimulate the enterprises to hire young workers. The aim is to
achieve an "overall social pact" consistent with last summer's labour cost
agreement, that Is the permanent end of wage indexation. So far the agreement
abolishing the "sea I a mobile", signed last July, has been implemented,
notwithstanding the subsequent sizeable depreciation of the exchange rate of

the lira.

In the public sector wages have been frozen for 1993 and in the private
sector the rate of increase of contractual wages has continued to decelerate

in the course of 1992 and is now below the CPI Inflation rate.

III. PUBLIC EXPENDITURE

As concerns the reforms of public expenditure, the Government has already
adopted all the decrees implementing the enabling law approved by Parliament
last year.

The pension system has been reformed in the following direction:

a) the retirement age for the standard old age pension will be gradually
   raised to 65 years for men and 60 for women;

b) the minimum contribution period requirement (old age pension) will be
   gradually raised from 15 to 20 years;

c) the reference period for pensionable salary will be gradually lengthened
   from 5 to 10 years.

                      B - 36

```

```
                                                                      ITALY

The Parliament is also examining a recent government decree on the setting up
of pensions funds. This reform is to be considered as long term contribution
to alleviate the public financial burden for pensions.

The health system has been reformed according to the following guidelines.

a) local health units and major hospitals will be converted into public

   corporations;

b) local authorities responsible for health services (Regions) will take
   full responsibility for funding any expenditure above a minimum level.

In order to make local authorities more responsible for their public
finances, a municipal tax on buildings has been introduced at rates that the
municipalities will be allowed to set in the range from 4 to 6 per thousands.

Finally, public employment has been reformed in order to make the control of
spending on staff more effective and to improve efficiency. The key
provisions are the application of private law to public sector employment
relationship and a larger role for the mobility procedure for filling

vacancies.

IV. PRIVATISATION

The privatisation program is an essential element of the structural policy.
The legal framework has already been completed with the setting up by decree
law of a new Ministry for Privatisation. The ratification of the decree by
the Senate is under way.

Before the end of the month a program will be approved by the Council of
Ministers for the quotation on the stock exchange of some ENI related
companies. Negotiations are under way to conclude as soon as possible the
privatisation of Credito Italiano, S.M.E., Nuovo Pignone, Istituto National
Assicurazioni, ENEL (Ente Nazionale Energia Elettrica).

                       B - 37

```

```
            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                    LUXEMBURG

   PUBLIC FINANCES (1993 BUDGET)

   automatic stabilizers to be allowed free play, except In the case of
   Indirect taxation influenced by Community obligations (motor fuel
   excise-duty level higher than the Luxembourg minimum);

   maintenance of the high level of public investment.

II. LABOUR MARKET FLEXIBILITY

   tripartite assessment of competitiveness, including the wage-adjustment
   mechanism (February/March 1993);

   measures to assist the occupational rehabilitation of handicapped people
   (aid for firms) and to speed up the integration of migrant workers-,

   further steps to combat illegal employment (March 1993).

III. STRUCTURAL MEASURES

   reform of the sickness funds: limitation of the Government's financial

   contribution (January);

   adjustment of the early retirement arrangements;

   setting-up of a high-level finance council on general government funding

   needs (first half of 1993).

IV. HOUSING

   extension of the duration of the selective interest-rate subsidies

   (social aspect), the general interest-rate subsidies (family aspect) and
   the increased tax deductions (January 1993).

   SMEs

   1993 budget: extension of the duration of:

   - the early reinvestment of capital gains on fixed assets;
   - the increased relief for parent companies and subsidiaries;
   - the reduction in the general tax rate to 33%;
   - the abolition of the additions to the municipal trade tax in respect
     of third-party funds;
   - the abolition of the subscription tax.

```

```
                                                             LUXEMBURG

New measures: first half of 1993

  increase in the operational resources of the Société Nationale de
  Crédits et d'Investissements;

- extension of the favourable venture capital tax arrangements to new
  technologies;

  increased interest-rate subsidy for new investment;

- elimination of the economic double taxation of investment income

  (dividends).

                  B - 39

```

```
            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                   THE NETHERLANDS

```

_**Cyclical**_ _**conditions**_ _**in**_ _**Europe,**_ _**and**_ _**notably**_ _**in**_ _**Germany,**_ _**have**_ _**worsened**_
_**considerably**_ _**in**_ _**the**_ _**second**_ _**half**_ _**of**_ _**1992.**_ _**This**_ _**of**_ _**course**_ _**has**_ _**not**_ _**left**_
_**unaffected**_ _**the very open economy of the**_ _**Netherlands.**_

_**Dutch economic growth**_ _**is**_ _**projected**_ _**to decelerate,**_ _**from**_ _**1**_ _**3/4X**_ _**in**_ _**1992**_ _**to**_
_**approximately**_ _**1/2X**_ _**In**_ _**1993,**_ _**with**_ _**adverse**_ _**consequences**_ _**for**_ _**employment**_
_**perspectives**_ _**and the development**_ _**of**_ _**unemployment**_ **`.`** _**In**_ _**view of the rather**_ _**low**_
_**rate**_ _**of**_ _**labour**_ _**participation**_ _**this**_ _**outlook**_ _**for**_ _**the**_ _**labour**_ _**market**_ _**Is**_ _**all**_ _**the**_
_**more**_ _**worrying.**_

_**Public**_ _**finances**_ _**also are**_ _**negatively**_ _**affected**_ _**by the current**_ _**weak stage of**_ _**the**_
_**business**_ _**cycle,**_ _**putting**_ _**further**_ _**deficit**_ _**reduction**_ _**under severe**_ _**pressure**_ _**and**_
_**raising**_ _**questions**_ _**as to the budgetary**_ _**objectives**_ _**for**_ _**1993 and 1994. set**_ _**out**_
_**in the 1989**_ _**coalition**_ _**accord.**_

_**Moreover,**_ _**there**_ _**is a risk**_ _**that**_ _**the process of strengthening**_ _**the structure**_ _**of**_
_**the Dutch economy comes to**_ _**a (temporary)**_ _**halt**_ _**In**_ _**times**_ _**of**_ _**weak economic**_
_**growth.**_ _**Conditions**_ _**for**_ _**private**_ _**and**_ _**public**_ _**Investment**_ _**should**_ _**be**_ _**further**_
_**Improved so**_ _**that**_ _**employment**_ _**opportunities**_ _**can**_ _**Increase**_ _**in**_ _**the**_ _**short**_ _**and**_
_**medium**_ _**term.**_

_**It**_ _**is necessary**_ _**to**_ _**continue**_ _**to break down structural**_ _**Impediments,**_ _**hampering**_ _**a**_
_**good performance**_ _**of**_ _**I**_ _**.a.**_ _**the labour**_ _**market,**_ _**and to improve the dynamics and**_
_**functioning**_ _**of**_ _**(product-)markets**_ _**through more**_ _**competition.**_

```
I. GOVERNMENT POLICY 1993-1994 UNDER CONSIDERATION

It is against this background that the government Is currently engaged in a
decision making process concerning economic and budgetary policies for 1993
and 1994, in a medium-term framework.

The focus is primarily on policies to reverse the worrying trend - also in
the medium term, given the substantial growth of labour supply - of
increasing unemployment. A crucial element here is a moderate development of
wage costs in order to prevent further erosion of profits, promote investment
and employment opportunities, and to protect and enhance international
competitiveness of the Dutch economy.

To support a moderation of inflation and wage claims in 1993 the general VATrate was lowered in October 1992. In addition employers, trade unions and the
Government agreed In November 1992 to a wage pause until March 1993. During
that period no wage bargaining has taken place in order to give social
partners more time to consider their positions In view of the deteriorated
economic and employment outlook. To support wage moderation the Government
adopted, in addition, a policy of income moderation for civil servants and
social benefits recipients.

Additional support of wage moderation through reduction of income-tax rates
and/or social security contributions may be considered in the period ahead.

```

```
                                                              THE NETHERLANDS

As to funding of tax relief measures a very important question relates to the
availability of room for manoeuvre given the need for further deficit
reduction. Within the limits of the budgetary constraints a lowering of tax
rates and a shift in the structure of taxes in favour of a reduction of taxes

on labour may be considered.

Necessary expenditure cuts in the social security area could provide for
another source of financing a reduction, or at least preventing a rise, in
social premiums.

Infrastructural investment is crucial to employment growth as well, both on
the short and medium term. Infrastructural expenditure in the budget will
therefore be protected as much as possible. In addition, the scope of
accelerating projects in 1993 and 1994 is currently being investigated. This
may be supplemented by investment programmes for the years 1994-1998
- totalling up to at least 7 to 10 bn gld (1 1/2% to 2% GDP) -, to be
financed by extra natural gas revenues and the sales of government assets.
Even though the allocation of funds has not yet been decided upon, procedures
have already been started to select investment projects. Once finances will
be made available, the implementation of projects can start immediately.

As to budgetary objectives for 1993 and 1994, the budget deficit will
continue to be a downward track. Current insights indicate that the deficit
target for 1993 - as set out in the 1989 coalition accord : 3 3/4% of Net
National Income (NNI) - w i l l be met, provided that additional deficit
reduction measures will be taken. Though the government will maintain its
policy of budget deficit reduction, some relaxation of the target for 1994
(3 1/4% NNI) may be proposed. The budget proposals for 1994 will likely
result in a deficit level of 3 1/2% NNI, which complies with the relevant
EMU-criter ion of 3% GDP for general government net borrowing.

Furthermore, last November a policy approach has been adopted to take account
of the fragile cyclical situation, also in the design of adjustment measures
needed to keep public finances within the above-mentioned budgetary
constraints. This approach - in addition to the above mentioned special
emphasis on investment - consists of the general line of taking, in the
immediate future, half of the necessary measures In the form of "incidental
measures" (e.g. asset sales) rather than structural expenditure cuts. As a
consequence, in the medium term structural expenditure cut backs will
gradually have to increase.

With the policy approach as described above a further reduction of the

deficit can be achieved in 1994, to a level of 3% GDP. This approach aims
- even in the current, cyclically weak period - at reinforcing the basis for
more employment and a strengthening of the economic structure, by i.a.
allocating a substantial part of additional revenue resources to a
significant multi-annual Investment impulse. A solid budgetary policy can
thus go hand in hand with a 1994 budget aimed at employment and economic
vitali ty in the future.

 II. MEASURES AND INITIATIVES ALREADY DECIDED UPON

Below a number of measures and initiatives are listed, on which decisionmaking has already taken place.

                     B - 41

```

```
                                                          THE NETHERLANDS

1. Promotion of private investment

   A public/private partnership fund (named "industrial facility") is
   foreseen to be operational by the end of 1993. This revolving fund,
   which will raise resources to an amount of 0,9 bn gld, will provide
   loans on market terms to basically viable firms (including medium-sized
   firms).

2. Increase of public investment

   A so called natural gas fund has been established in January 1993. The
   fund will contribute to infrastructural projects with significant impact
   on Dutch economic performance. The fund's finances will be raised by an
   increasingly large share of natural gas revenues and some other sources

   of revenues. This fund will become effective from 1995.

3. Structural measures in the labour market

   Recently the sickness and disability system has been reformed with a
   view to better containing volumes and costs in the sickness and
   disability area. A bonus/ma I us incentive system for firms has been
   implemented. The disability scheme has been adjusted resulting in
   significantly lower levels of benefits and more restrictive entitlement

   rules for new entrants.

   Legislation is considered which should relax to some degree the strict
   regulation concerning lay-offs; in particular abolition of the
   preventive check on firing requests by employers is contemplated.

4. Pr ivatizat ion

   Decisions have been made to sell government shares of PTT.

5. Competit Ion polley

   Competition policy (and its enforcement) has recently been significantly
   upgraded. Streamlining of the business establishment law is currently
   being prepared.

                     B - 42

```

```
            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                    PORTUGAL

```

_The current_ _bleak_ _outlook_ _for the Community economy strengthens_ _the need for_
_effective_ _coordination_ _of_ _national_ _economic_ _policies,_ _and_ _particularly_
_structural_ _policies._ _The difficulties_ _in_ _giving_ _these_ _policies_ _concrete_
_expression_ _require_ _to show greater_ _déterminât_ _ion and_ _persistence._

_The_ _deteriorat_ _ion_ _in the world_ _economy Is also_ _having_ _adverse effects_ _on_
_Portugal._ _To minimize these adverse_ _repercussions_ _and with a view to speeding_
_up_ _recovery_ _and_ _restoring_ _confidence_ _in_ _European_ _integration,_ _the_
_Portuguese Government_ _is taking_ _an approach of:_ _(I)_ _speeding_ _up_ _structural_
_reforms;_ _while,_ _(ii)_ _safeguarding_ _the_ _other_ _two_ _objectives,_ _namely_
_macroeconomic stabiIity_ _and_ _social_ _consensus._

_The_ _political_ _stability_ _that Portugal_ _has enjoyed since_ _1986 has enabled_ _it_
_to pursue a strategy_ _of gradual adjustment_ _that_ _will_ _make possible_ _the_ _timely_
_achievement of convergence with the best European standards_ _of_ _performance._
_**This strategy**_ _**is underpinned by: (i)**_ _**macroeconomic**_ _**stability;**_ _**(ii)**_ _**structural**_
_**reforms; and (Hi)**_ _**social**_ _**consensus.**_

_For the case of_ _Portugal,_ _It_ _would be inappropriate_ _to adopt_ _counter-cyctleal_
_policies._ _Yielding_ _to the_ _temptation_ _of pursuing_ _such_ _policies_ _would_ _run_
_counter_ _to_ _the_ _objective_ _of_ _convergence_ _and would quickly_ _give_ _rise_ _to_
_persistent_ _imbalances in_ _the economy._

```
As far as structural reforms are concerned, two lines of action should be
highlighted:

(I) implementation at national level of measures in the framework of the
   Edinburgh growth initiative: this Community initiative will hasten
   structural reforms which, by improving efficiency, will help minimize
   the adverse effects of current economic conditions;

(ii) continuation of the structural reforms already under way: the many
   structural reforms in progress - privatizations, measures to make the

   labour market more flexible and financial Iiberalization - wi11 be

   continued and intensified.

On April, 5th, the measures aiming at structural reform have been presented
to and debated with social partners in the Economic and Social Council.

I . STRUCTURAL MEASURES FOR 1993

These comprise the following:

   Infrastructure (physical infrastructure and human capital);

   Support for the restructuring and internationalization of enterprises;

   Housing sector initiatives;

```

```
                                                                   PORTUGAL

   Tax incentives to promote investment;

   Support for conversion of the agricultural sector;

   Incentives for Industry and foreign trade;

   New credit lines for tourism industry.

These structural measures will imply additional spending in 1993 amounting to
almost 1 % of GDP. The Cohesion Fund is the principal source of financing for
the new spending.

1. Infrastructure development

   - Physical infrastructure

     The 1993 budget includes a considerable increase in Investment in
     large-scale projects to modernize the rail and telecommunications

     networks and the main harbour installations.

     Investment in the modernization of the rail network and rolling stock
     will be some 50% higher than last year, while investment in harbour
     facilities should Increase by about 70%.

     This investment effort will in large part be funded from the

     Cohesion Fund.

     The preliminary list of projects that could qualify for assistance

     from the Cohesion Fund will cost around ESC 537 billion for the

     period 1993-98. For 1993, planned expenditure on these projects
     amounts to ESC 78.5 billion, or 0.6% of GDP, a 14.7% increase in

     budgeted public investment. Of this year's total, it is proposed that
     some 85% be allocated to road and other communications improvements
     and the remainder to environmental projects.

   - Human capital: support for in-service vocational training and
     investment in research and development.

     Vocational training support measures entered In the 1993 budget
     Involve expenditure of ESC 106 billion, with assistance from the
     European Social Fund, representing an increase of around 18% on last
     year and around 45% on 1991.

2. Funds for the Restructuring and Internationalization of Enterprises
   (FRIES)

   The FRIEs are a new financial instrument whose main aim is to support
   companies or their foreign subsidiaries wishing to implement
   restructuring or internationalization plans by acquiring holdings in
   their capital.

   The Government has launched two FRIEs, with initial capital of
   ESC 11 billion, of which 50% is subscribed directly by the Government
   and the remainder by the different creditor banks of the enterprises
   being restructured. One is to be managed by Norpedip and the other by
   Sulpedip.

   A third FRIE, endowed with ESC 9 billion, has already been set up by the

   Banco de Fomento Exterior, and a fourth one Is about to be launched on

                     B - 44

```

```
                                                                  PORTUGAL

   the initiative of the Grupo Caixa Gérai de Depôsitos/Banco Nacional

   Ultramar ino.

   A number of private financial institutions have also expressed an
   interest in participating in these Funds.

3. Financial and tax Incentives for Investment In housing

   a) Incentives have been created to help people buy or rent residential
     property. Measures relate to financing (subsidized loans geared to
     the gross annual income of the family unit) and taxation (tax

     concessions).

     As regards the rules on helping families to buy their own homes, the
     eligibility conditions have been updated and the level of assistance
     to young people buying their first home has been raised. The main
     legislative measures adopted in 1992 and to be maintained in force in
     1993 have introduced financial incentives for rent ting accommodation
     to the young and have made it easier for housing cooperatives to
     finance property for rental to the same age group.

   b) On 9 March 1993 the Government announced a package of measures to
     support the housing construction aimed at clearing slum housing in
     the metropolitan areas of Lisbon and Oporto and supporting private
     schemes for housing low-Income families.

     Under the slum clearance part of this programme, 25 000 housing units
     are to be built between now and 1999, involving total investment of
     some ESC 150 billion, at 1993 prices. The programme of low-cost
     housing and housing development contracts envisages total investment
     of some ESC 120 billion over the next six years.

     The whole package will generate total investment in housing of some
     ESC 270 billion, which, on an annual average basis, is equivalent to
     around 1.5% of gross fixed capital formation.

4. Investment Incentives: negotiated tax concessions for investments made
    UP to 1995 (amendment of Article 49a of the Rules on Tax Concessions)

   The tax incentives are targeted at enterprises located in regions
   affected by the economic and social repercussions of the restructuring
   of certain designated sectors. These incentives, for which only projects
   carried out up to 1995 are eligible, will be established on a
   contractual basis according to the merits of each project. Following a
   decision by the Council of Ministers designating the textile and
   clothing industries as sectors undergoing restructuring, enterprises in
   these two sectors are eligible for the tax incentives.

5. Programme of support for the marketing and processing of agricultural
   produce

   This programme provides direct support for farmers and farming
   organizations and brings in measures to assist the recovery of viable
   enterprises and the implementation of new business initiatives for
    improving the marketing of domestic production in the agri-food sector.

   The seven measures that make up this programme include a venture capital
   fund, a subsidized line of credit for marketing, a fund for promotional
   activities, and finance to support the setting-up and operation of

                      B - 45

```

```
                                                                  PORTUGAL

   producer groups, as well as measures to promote quality control and more
   professional management of cooperatives.

   The package of measures involves total investment of some
   ESC 220 billion over a five-year period (1993-97), of which
   ESC 20 billion is to be spent on the immediate launching of the

   programme.

   Promotion of foreign trade and the internationaiization of Portuguese
   Industry

   Announced on 24 March 1993, the package of measures for industry, and
   SMEs in particular, comprises ten support programmes to promote the

   strengthening of trade relations and investment, particularly in new

   markets.

   With a view to helping firms boost their exports to non-traditional
   markets, financial packages totalling some ESC 220 billion and backed by
   Government guarantees have been put together to assist exports to 13 new

   markets.

   Support for trade missions and the development of business cooperation
   is also available; a credit scheme has been set up for investment
   projects, and tax and financial incentives have been created, including
   through participatory bonds, for investment in internationalization
   projects. Lastly, the finance earmarked for promotional campaigns in the
   main traditional export markets has been increased.

   It is estimated that these support measures, in the form of
   non-repayable aid, will cost over ESC 5-bill Ion in 1993.

   Tourism Industry

   A programme Including several new credit lines totalling ESC 5 billion
   for the tourism industry has been announced on April, 5th. The financial
   measures are intended to stimulate investment in the following areas: i)
   energy savings; il) computer systems; ill) common networks; and iv)
   secur i ty systems.

II. CONTINUATION OF STRUCTURAL REFORMS

The continuation of structural reforms already under way, will complement the
measures at the national level in the framework of the Community growth

initiative.

The extension of structural reforms has the following scope:

1. Improvement of market efficiency

   a) Privatization: the weight of the public enterprise sector ahs
     declined from 16 p.c. of GDP in 1991, to 12 p.c. in 1992.

     In the next three years, it is projected to decrease further to
     9 p.c.

   b) New bankrupcy law.

                     B - 46

```

**PORTUGAL**

2. F i n a n c i a l l i b e r a l i z a t i o n

```
   a) Elimination of all remaining restrictions on capital flows 
     16 December 1992.

   b) New banking law - 31 December 1992.

   c) Cancelation of the overdraft facility of the Treasury at the Banco de

     Portugal - 31 December 1992.

   d) New legal framework for the Insurance sector - In preparation.

3. Improvement of labour market flexibility

   a) Legislation aimed at fostering mobility in the public sector.

   b) Professional training.

   c) Lay offs: harmonization with EC legislation.

   d) New legislation on cancelation and interruption of individual labour

     contracts.

   e) Improvement of the monitoring of absenteeism.

4. Improvement of the efficiency In the public sector

   a) Measures to strengthen expenditure control.

   b) Participation of the private sector in the National Health Service.

   c) Reduction of over staffing in the public sector.

   d) Reform of the Public Accounting system.

   e) Centralization of debt management.

5. Wage and financial moderation

   a) Wage increases of 5-5 1/2 p.c. for civil servants, approximately half
     the increase given in 1992.

   b) Guidelines on similar wage moderation for public enterprises.

   c) PSBR (including revenue from privatization) reduced to the equivalent
     to 3.3 p.c. of GDP, as compared with 4.8 p.c. in 1992.

   d) Issuance of long term fixed rate public debt instruments.

   e) Resumption of access to external financing.

   f) Legislation aimed at Improving transparency in banking competition.

                     B - 47

```

**PORTUGAL**

**PRELIMINARY LIST OF PROJECTS WHICH COULD BE**

**ELIGIBLE** **FOR THE** **COHESION** **FUND IN 1993**

**(Escudos** **billion,** **1993 prices)**

```
TOTAL

COST

442.2

387.4

 10.8

 7.0

 1.8

 7.4

 1.7

 32.8

 2.0

 4.9

 15.0

 2.4

 6.0

 1.5

 1.5

 3.0

 3.0

 10.7

 3.3

 2.0

 2.5

 3.5

 3.5

 0.5

 0.9

 1.0

 2.9

 3.0

 1.2

 2.5

 7.3

 19.6

 3.9

 2.4

 26.4

 6.0

160.0

```

**TRANSPORT** **INFRASTRUCTURES**

**HIGHWAYS**

```
  Usboo-Porto-Valenco-Vioo

  IP1/Crui-6raga
  IP1/3rd track Alverca-V.F. XIra
  IP1/3rd trock V.F. XIro-Carregado
  IP1/3rd trock Vila Feiro-Carvalhos
  IP1/3rd trock Carvalhos St* Ovfdio
  IP1/Braga-VaIenca
  IC23/Int«rnal Ring-Porto
  IPI/Frelxo Bridge
  IP1/Frelxo Bridge approaches

  FIoueIro do Foz-Choves-Vertn

  IP3/Flgueira da Fox-Sta. Eulâlia
```

**IP3/VH° Real-Lamego**
**IP3Aall-Tond«la**

```
  IP3/TondeIa-Gestosa
  IP3/RaIva-Gestosa
  IP3/Fall/IP5

  Pp r 19-6 rqggnçg-Bonqyon t o-Zgrno rg
  IP4/PenafleI-Amarante
  IP4/EN4-Aguas Santas
  IP4/Golfelras-Pontoo de Lamas
  IP4/Franco-Golfel ras
  IP4/Vila Real-Vila Verde
  IP4/VHa Verde-Franco
  IP4/Corgo River Bridge
  IP4/Tlnhela River Bridge

  Ave I ro-V Mar Fo rmoso-Sa I amonco

  IP5/Plrâmides-Barra cross-roads

```

**Tgrrw Noygr-Cqatglp Brqncg**
```
  -Seouro-Ptqzé'nclo
  IP6/AIcaneno-Ata I aIa
  IP6/AtaIaIo-Abrantes
  IP6/Atalaia Stream Bridge
  IP6/Abrantes-MourI seas

```

**LIaboq-Etvq«-Mé>tda**
```
  IP7/Pa I me I o-Marateca
```

**I P7Ala ra t eca-Mon t eroo** **r**
**IP7/3rd** **track Almada-foguetelro**
```
  IP7/Elvas-Caia

```

**Uabgg-Y.R.S.** **Antfrilp-tiuttLYfl**
**IPI/Marateco-Grândola**
**IP1/V. Gula-Faro**
**IP1/New** **Tagus Bridge**

**COMPLETION**

**TERM**

```
 1993/95
 1993/95
 1993/95
 1993/95
 1993/95
 1993/98
 1993/94
 1993/95
 1993/96

 1993/94
 1993/97
 1993/95
 1993/96
 1993/97
 1993/97

 1993/97
 1993/96
 1993/93
 1993/95
 1993/95
 1993/95
 1993/94
 1993/94

 1993/94

 1993/94
 1993/95
 1993/95
 1993/95

 1993/95
 1993/96
 1993/95
  1993/96

  1993/97
  1993/93
  1994/97

```

```
 EXPECTED

EXPENDITURE

  1993

  67.1

  56.7

  17.1

  8.9

  4.0

  0.4

  0.1

  0.5

  1.0

  1.0

  0.7

  0.5

  3.8

  2.1

  0.4

  0.7

  0.2

  0.2

  0.2

  7.2

  1.2

  1.2

  2.0

  0.8

  0.8

  0.5

  0.4

  0.3

  0.3

  0.3

  3.9

  2.3

  1.0

  0.3

  0.3

  9.7

  5.8

  2.7

   1.1

  0.1

  6.7

  0.7

  6.0

  0.0

```

```
FnmqMcgq (IP1Ï-V.P. Aquinr
-Chqves-Vertn
IC5/Fama11cSo-RIo Ave
IC5/Fafe branch

Guordq fIP5ï-C. Brqnco flPfiï
IP2/Alpedrlnha-Castelo Branco
IP2/Fundào-Alpedrlnha
IP2/Gardunha Tunnel

Eatrwioz (IP7)-fqrg (IP1)
```

**IP2/Albernoa-Castro Verde**

```
RAILWAYS

North Line - Modernization

BeIra Line - Modernization

Llsboa/Algarve Line - Cargo It in.

PORTS

Leixoes - Recovery of south wharf
Leixoes - Equipement for contain.
Leixoes - Embankment recovery

Aveiro — Terminal

Sines — Coal Terminal

AIRPORTS

```

```
 6.9

 3.4

 3.5

 4.0

 4.0

 1.7

38.7

21.6

10.1

 7.0

12.3

 2.0

 4.0

 1.7

 4.0

 0.6

```

**3.8**

**3.8**

**94.5**

**10.0**

**3.5**

**17.0**

**8.0**

**42.0**

**20.0**

**17.0**

**5.0**

**14.0**

**14.0**

```
1993/96
1993/96

1993/96
1993/96
1993/96

1993/95

1993/96
1993/96
1993/97

1993/96
1993/96
1993/96
1993/94
1993/94

```

**`Ponta Delgada`** **1993/96**

**ENVIRONvENT**

**WATER-ENVIROMCNTAL** **DIMENSION**

```
Sabugal Dam

Minutos Dam

Odelouca Dam

Water supply to Barlavento

```

**WATER-OAJALITY**

```
Water supply to Oporto Region
Dispollution of Trancao River
Western pipeline to Sotavento

SOLID WASTE

Incineration station In Oporto

```

```
1993/97
1993/96
1993/97
1993/98

1993/98
1993/97
1993/94

```

**1993/96**

```
 6.6

 6.4

 0.2

 0.9

 0.4

 0.1

 0.4

 0.5

 0.5

 8.5

 5.8

 1.6

 1.1

 1.2

 0.1

 0.5

 0.1

 0.2

0.3

```

**0.7**

**0.7**

**11.4**

**3.2**

**0.7**
**0.5**
**1.0**
**1.0**

**5.2**

**2.5**

**1.2**

**1.5**

**3.0**

**3.0**

**TOTAL (TRANSPORT** **INFR.** **+** **ENVIRONyBJT)** **78.5** **536.7**

```
            PROMOTING ECONOMIC RECOVERY IN EUROPE

             (The Edinburgh Growth Initiative)

                   UNITED KINGDOM

Measures taken In the UK consistent with the Edinburgh European Council
Declaration on economic recovery are set out below corresponding to each of
the objectives agreed for action by Member States. These measures include
principally those of the Autumn Statement of 12 November 1992 and the Budget
of 16 March 1993 <*).

I. OBJECTIVE 1

```

_Take every_ _opportunity,_ _according_ _to_ _their_ _national_ _circumstances,_ _to_ _exploit_
_the_ _limited_ _margins of manoeuvre_ _available_ _as concerns budgetary_ _policy._

```
1. The Autumn Statement sets out the Government's expenditure plans for

   1993-94 to 1995-96. The Chancellor took action to reaffirm the

   Government's control over public spending, in order to maintain sound
   public finances. Changes to the system of public expenditure control
   were introduced, to ensure that the Government meets its medium-term

   objective of reducing, over time, the share of national income taken by
   public spending. Despite the constraints imposed by the budgetary
   position, the Chancellor was nevertheless able to announce some specific
   and time-limited measures to boost confidence, growth and Jobs. These

   are described further below.

2. The Budget set out a programme for raising revenue over the medium term,
   to reduce the budget deficit and thereby help to ensure that the
   recovery is sustainable. Little net change is proposed in 1993-94 in
   taxes as the priority is to cement recovery. The Budget measures
   provide further help for business and the unemployed in the early stages
   of recovery, building on the substantial reduction in interest rates and

   the measures announced in the Autumn Statement.

II. OBJECTIVE 2

```

_Switch,_ _to the extent_ _possible,_ _their_ _public_ _expenditure_ _priorities_ _towards_
_Infrastructure_ _and_ _other_ _capital_ _investment_ _and_ _growth_ _supporting_
_expenditures_ _which earn a_ _worthwhile_ _return._

```
1. The Government altered the rules governing the use of capital receipts
   by local authorities, so that all new receipts obtained between 13
   November 1992 and December 1993 could be used to fund capital
   expenditure (previously, local authorities were required to set aside a
   substantial proportion of the receipts from asset sales for debt

(*) The Autumn Statement 1992 document and the Financial Statement and
    Budget Report 1993-94 give further details.

```

```
                                                              UNITED KINGDOM

   redemption). This change is expected to increase local authorities'

   capital expenditure by about £ 1.75 billion.

2. The Government believes that these measures will have given a boost to
   increase general government (central government plus local authorities)

   asset creation In 1992-93 and 1993-94.

3. The Government also made important changes to the arrangements for
   privately raised finance, in order to find new ways of mobilising the
   private sector to meet needs which have traditionally been met by the
   pub I ic sector.

4. The changes in the arrangements for privately raised finance announced
   in the Autumn Statement led to announcements in the Budget that :

   (a) the Channel Tunnel Rail Link would proceed as a joint venture
        between the public and private sectors, an increase in

        infrastructure investment of £ 2.3 billion;

   (b) a joint venture had been agreed between British Rail and BAA pic
        to construct an express rail link between Heathrow Airport and

        central London-,

   (c) a review would be conducted of Crossrail, a new rail link across

        London, so that the private sector can become involved to the
        greatest possible extent.

   Other Infrastructure measures

   On 4 February the Government announced the 41 new national road schemes
   that will start in 1993-94 and a feasibility study into a privately
   financed second Forth road bridge. Following the Budget, Lord James
   Douglas Hamilton announced the appointment of advisers on involving the
   private sector in a package of measures around the Firth of Forth,
   including the new road bridge, and also in the Central Scotland
   Fasti ink, which will connect the north east of Scotland to main routes

   to the south.

III. OBJECTIVE 3

```

_Implement_ _measures_ _to encourage_ _private_ _Investment,_ _especially_ _by_ _small_ _and_
_medium sized_ _enterprises._

```
1. The Budget set in hand a programme of tax reform, simplification and
   deregulation to stimulate business activity, particularly among small
   and medium-sized enterprises. This includes a new entrepreneurs'
   relief from capital gains tax where the gains from the sale of a
   person's own business are reinvested in other unquoted trading
   companies; changes to the Loan Guarantees Scheme to cut the cost and
   improve the availability of bank finance for small business; a
   substantial easing in the penalty regime of VAT; and consultation on
   easing audit requirements for very small firms.

2. The President of the Board of Trade announced on 3 December a trial of

   15 "One Stop Shops". The aim is to bring together organisations which
   support small firms, so as to improve access by SMEs to high quality
   business advisory services. The Government has implemented several

                     B - 51

```

```
                                                               UNITED KINGDOM

   measures announced in the 1992 Budget to deal with the problem of late
   payment of bills. Changes have been announced to the Small Firms Loan
   Guarantee Scheme to enhance its operations in inner city areas and (in
   the Budget) to make the scheme more attractive to SMEs. outside inner
   city areas, especially established businesses seeking to expand.

IV. OBJECTIVE 4

```

_**Act to Improve further**_ _**the**_ _**efficiency**_ _**of their**_ _**economies,**_ _**for example**_ _**through**_
_**action**_ _**to reduce**_ _**subsidies**_ _**and measures to enhance**_ _**competition**_ _**and market**_
_**flexibility.**_

```
   Labour ma.rk.et flexibility

1. The Autumn Statement provided for an Increase in the proportion of
   school leavers in youth training programmes; the introduction of a new
   adult training and work experience programme; and a substantial increase
   in measures to help the unemployed find jobs.

2. The Budget contained a further major package worth £ 230 million to
   improve the labour market, particularly focused on the needs of the
   long-term unemployed. Taken together these measures will provide
   100,000 new opportunities for work in the Community, vocational
   education, and business start-up. New Employment Service measures had
   previously been announced to help an extra 500,000 people presently
   unemployed find and prepare for work, mainly through the new Job Plan
   Workshops to provide individually centred assessment and guidance for
   those reaching 12 months unemployment. Taken together, the Budget and
   Autumn Statement plans mean that there have been 600,000 new
   opportunities announced for 1993-94, bringing the total to 1.6 million    over 50 per cent of the total - being helped.

3. The Government has launched a substantial programme of structural reform
   which will affect labour market flexibility. Measures inciude :

   - The Investors in People standard will be developed to encourage
     larger employers to invest in developing their training strategies so
     that the skills of the workforce are improved. The aim is to have
     9,000 companies committed to the Investors in People standard by

     1995-96.

   - The Citizen's Charter encourages action in greater pay delegation in
     the public sector. The Citizen's Charter has also encouraged
     delivery of services more efficiently and effectively by encouraging
     a regular and direct link between pay and performance.

   - A new, more flexible adult training and work experience programme,
     Training for Work", will provide places for more than 300,000
     entrants in 1993-94. Priority is to be given to those more than 12
     months unemployed. Training and Enterprise Councils will be able to
     decide the balance of training/work experience required in the light

     of local labour market needs.

   - A new Childcare initiative to provide out-of-school and holiday

     chiIdcare.

   - A Government guaranteed training place to all 16 and 17 year olds not

     in work or full time education.

                      B - 52

```

```
                                                          UNITED KINGDOM

- Career Development Loans aval table to trainees who want to invest in
  their own training. The scheme encourages individuals to take
  responsibility for their training.

- A two-year pi lot programme of Assessment Credits. Individuals can

  use vouchers to "buy" assessment and guidance services.

- National Vocational Qualifications - a national framework of

  standards-based vocational qualifications.

- The Business Start-up programme provides an allowance and
  introductory briefing for unemployed people who wish to become self  employed or start up a business.

- The number of employees covered by Profit Related Pay (PRP) schemes
  eligible for tax relief has risen to nearly 1 million. The scheme
  facilitates relating part of pay to profits of the business in which
  the employee works.

- The "Rent a Room" scheme introduced in April 1992 provides tax
  exemption for the first £ 3,250 of rental income from lodgers. It
  encourages the supply of flexible low-cost accommodation to
  facilitate geographical labour mobility.

In addition, the measures designed to assist the housing market would
also be expected to have a beneficial effect on labour market
f lexibiIity.

Tax reform

In addition to the tax reform measures to benefit small businesses,

referred to in paragraph 9, the Government has announced a number of
further reforms to simplify and broaden the base of the tax system, to
remove subsidies, and to improve both the environment and the allocation
of resources within the economy. Principal measures include :

- from April 1994 tax relief on mortgage interest will be limited to 20
  per cent instead of 25% and tax relief given by the married couple's
  allowance, and other linked allowances, will also be limited to 20

  per cent instead of applying at the taxpayer's marginal rate;

- the rate of petroleum revenue tax rate will be reduced from 75 per
  cent to 50 per cent from July 1993, and abolished altogether for new

  fields;

- VAT will be charged oh domestic fuel and power at 8 per cent from 1
  April 1994 and 17 1/2 per cent from 1 April 1995;

- the Chancellor announced that duty on petrol and other road fuels
  will be raised on average by at least 3 per cent in real terms in
  future Budgets following the rise of 10 per cent proposed in this
  Budget.

In the Autumn Statement, first year capital allowances for investment in
plant and machinery were increased from 25 per cent to 40 per cent from

1 November 1992 until the end of October 1993. This and other measures

will provide additional reliefs of £ 200m In 1993-94 and £ 500m in 199495. The 5 per cent special tax on cars was abolished on 12 November

                  B - 53

```

```
                                                              UNITED KINGDOM

   1992. The cost Is to be recovered from other motoring taxes in 1993-94
   and future years. This measure is expected to increase activity in the
   car market, and hence investment by manufacturers.

   In addition, further progress was made in cutting the marginal rate of
   income tax, to improve work incentives. The 20p band for income tax is
   widened by £ 500 to £ 2,500, cutting the marginal rate of tax for 1
   million people by 5 per cent; it will be widened by a further £ 500 in

   1994-95.

   The Government has also introduced the following measures to improve the

   housing market, help business and promote recovery :

   - The Autumn Statement made an extra £ 750 million available in 1992-93

     to promote activity in the housing market. This was expected to
     encourage investment by the private sector. In the Budget, the stamp
     duty threshold for houses, land and property will be doubled to
     £ 60,000. This should give a boost of £ 220m to promote activity in
     the housing market and as a result improve labour mobility;

     the Budget contained further business rate relief for the UK worth

     £ 370 million. In 1993-94 no business will see a real increase in

     rates;

   - the Budget contained a number of measures to ease the problem of
     surplus advance corporation tax (ACT). The rate of ACT will be
     reduced from 25 per cent by 1994-95 in two steps. This will give
     dividend-paying companies a £ 2 billion cash flow boost over the next
     two years. A scheme is also proposed for companies to reclaim
     surplus ACT arising from dividends paid out of foreign income.

   OTHER STRUCTURAL REFORM MEASURES

   Competition and deregulation

9. The Government's Green Paper on competition law, especially regarding
   abuse of market power, was published at the end of November 1992. This
   canvasses among other options a prohibition on abuse of market power by
   companies in the United Kingdom, along the lines of equivalent
   provisions in the Treaty of Rome.

10. The Government Is committed to a reinforced deregulation initiative.
   Legislation should not be put forward to Parliament without providing at
   the same time an assessment of the compliance cost for businesses. The
   aim is to encourage cost-effective regulation.

   Trade

11. The DTI will launch "Business In Europe", pulling together work on
   promoting the Single Market with previously separate provision of export
   services to the European market. This is to ensure that the internal
   market works to the benefit of all Community citizens and enterprises,
   an objective endorsed at Edinburgh. The initiative will include pursuit
   of complaints by business against competitors (and their governments)
   within the Single Market.

                       B - 54

```

```
                                                                     UNITED KINGDOM

   Pr ivat isat ion

12. In the Citizen's Charter, the Government committed itself to reduce the

   level of the letters monopoly from £ 1 to a level closer to the price of
   a 1st class stamp. The Post Office's parcel service is to be
   privatized. Further progress is in hand on BR privatisation to transfer
   BR's freight and passenger services to the private sector, and to create
   a new right of access for Independent operations on the rail network.
   The Government is committed to the privatisation of British Coal. The
   Financial Secretary has announced that he will be examining the scope
   for privatisation of central government functions.

V. OBJECTIVE 5

```

_Make efforts_ _to_ _achieve_ _restraint_ _in wage_ _settlements_ _within_ _the_ _public_
_sector._

```
1. In the Autumn Statement, the Chancellor announced that public sector pay
   settlements in the year from 12 November 1992 would be restricted to
   between 0 and 1 1/2 per cent. Thereafter, public sector pay policy will
   be designed to avoid catching up settlements, and the Government will
   pursue its long-term objective of increasing flexibility of the public
   sector pay systems and strengthening the link between performance and

   pay.

                     B - 55

```

**ISSN 0254-1475**

### **COM (93) 164 final**

# **DOCUMENTS**

## **EN 10** **Catalogue number : CB-CO-93-195-EN-C** **ISBN 92-77-55042-2**

###### **Office for Official Publications of the European Coimnuaities** **L-2985 Luxembourg**