CELEX: 51990PC0613
Language: en
Date: 1991-01-18
Title: PROPOSAL FOR A COUNCIL DECISION ADOPTING THE ANNUAL ECONOMIC REPORT 1990/91 ON THE ECONOMIC SITUATION IN THE COMMUNITY AND DETERMINING THE ECONOMIC POLICY ORIENTATION FOR THE COMMUNITY IN 1991

28. 2. 91                             Official Journal of the European Communities                          No C 53/1
                                                               II
                                                      (Preparatory   Acts)
                                                COMMISSION
                                           \
          Proposal for a Council Decision adopting the annual economic report 1990/91 on the economic
          situation in the Community and determining the economic policy orientation for the Community in
                                         1991 — annual economic report 1990/91
                                                     CC>M(90) 613 final
                                                        (91/C 53/01)
          THE COUNCIL OF THE EUROPEAN COMMUNITY,
          Having regard to the Treaty establishing the European Economic Community,
          Having regard to Council Decision 90/141 /EEC of 12 March 1990 on the attainment of progressive
          convergence of economic policies and performance during stage one of economic and monetary
          union, and in particular Article 4 thereof (*)>
          Having regard to the proposal from the Commission,
          Having regard to the opinion of the European Parliament,
          Having regard to the opinion of the Economic and Social Committee,
          HAS ADOPTED THIS DECISION:
                                                   f       Article 1
          The annual economic report 1990/91, annexed to the present Decision, is adopted, and the economic
          policy orientations for the Community put forward in the report are adopted.
                                                           Article 2
          This Decision is addressed to the Member States.
          (') OJ N o L 78, 24. 3. 1990, p. 24.
 ---pagebreak--- No C 53/2                              Official Journal of the European Communities                                   28. 2. 91
                                        ANNUAL ECONOMIC REPORT 1990/91
                                    THE EUROPEAN COMMUNITY IN THE 1990s:
                                 TOWARDS ECONOMIC AND MONETARY UNION
                                                         CONTENTS
                                                                                                                 Page
          Introduction                                                                                              3
           I. The short-term outlook clouded                                                                       4
              A. Community growth tapers off in 1990                                                               5
                  1.- Growth slowing down in most countries                                                        5
                  2. But strong German expansion continues                                                         6
              B. An unfavourable international environment                                                         7
                  1. Economic consequences of the oil price rise                                                    7
                  2. Slow growth in the United States of America and strong but decelerating growth in Japan ..   10
                  3. A slow-down in world trade                                                                   10
               C. The outlook for 1991 and 1992                                                                 - 11
          II. Economic policy tasks during stage one of economic and monetary union                               11
               A. Maintain stability and growth climate                                                           12
                   1. Avoid an inflation spiral                                                                   12
                  2. Safeguard the fundamental conditions for sustained and employment-generating growth          14
               B. The development of Community potential                                                          15
                   1. Complete the internal market                                                                15
                  2. Improve economic and social cohesion                                                         16
                  3. Structural adjustment and labour market flexibility                                          16
                  4. The environmental challenge                                                                  17
               C. Policies for improved convergence                                                               18
                  1. Price and cost convergence                                                                   18
                  2. Convergence of budgetary policies                                                            20
                  3. Convergence of external positions                                                            22
 ---pagebreak--- 28. 2. 91                                Official Journal of the European Communities                                 No C 53/3
                                     T H E EUROPEAN COMMUNITY IN T H E 1990s:
                                   TOWARDS ECONOMIC AND MONETARY UNION
                      INTRODUCTION                                  expanded the growth potential of the Community as a whole.
                                                                    In view of the existing gap, the catching-up process must be
                                                                    sustained by long term efforts. The countries involved will,
The Community embarked on stage one of economic and                 despite the recent improvement of structural policies, the
monetary union on 1 July 1990. The success of stage one will        doubling of the Structural Funds and the simultaneous
be crucial for the creation of EMU. T o make stage one a            strengthening of the financial instruments, remain primarily
success with less favourable short-term prospects for the           responsible for their own development. T o discharge this
Community economy requires a stronger coordination of               responsibility successfully, they must conduct their economic
                                                                    and social policies in a way that will provide the basis for
policies to support sustainable growth and greater nominal
                                                                    strong and sustainable growth of real GDP, without
and real convergence. Given the considerable adjustments
                                                                    inflationary pressure or unsustainable internal and external
needed to bring convergence at the best possible level, this
                                                                    imbalances.
process must be reinforced already now.
Facing the 1990s, the Community economy is in an                    A vital macroeconomic condition for the success of the
ambiguous situation. O n the one hand, the world economic           catching-up process and the internal market programme is
climate is clearly deteriorating and the United States of           the consolidation — and subsequent acceleration in a
America and the United Kingdom are even facing a recession.         non-inflationary manner — of growth performances in the
The Gulf crisis has added to uncertainties and inflation, and       more advanced economies. In this respect, a solid consensus
growth and investment are decelerating in many countries,           has emerged in the Community's economic policy: it centres
particularly in those which were not able to control inflation      on a supply side oriented further revitalization of
sufficiently. World trade is slowing down, and the strongly         Community growth performance in conditions of price
falling dollar reduces the competitivity of European                stability. This is to be attained by way of stringency in
Community industry. Although the less favourable growth             monetary conditions, progressive consolidation of public
prospects may bring the fall in unemployment temporarily to         finances, increased supply side flexibility, real wage
a halt, the Community can, on the other hand, have much             moderation and strengthened coordination of policies within
more confidence in the underlying strength of its economy. In       the context of multilateral surveillance of stage one.
spite of the imminent slow-down in growth, the
medium-term perspectives remain promising. There has been
significant improvement in fundamental determinants of
economic growth, and the prospects opened up by the                 Finally the recent East-West detente has important
expectation of an early completion of the internal market           consequences for the medium-term growth climate. Given
have imparted additional dynamism.                                  the intention to reincorporate the State-trading countries into
                                                                    the international division of labour, relations with them are
                                                                    now at a decisive turning-point. Although in the short run,
                                                                    the transformation of the Central and Eastern European
O n the competitive world stage, the Community is still
                                                                    command economies into market economies will add to the
constrained by the fragmentation of its markets. It is
                                                                    disruptive factors implying a short-term deterioration in
precisely in order to secure its economic future that the
                                                                    trade prospects, it should not be forgotten that Central and
Community has embarked on a programme to create a
                                                                    Eastern Europe provide in the longer term a potential market
market of continental dimensions. That programme is
                                                                    of more than 400 million consumers, right on the
already adding substantially to Community growth
                                                                    Community's doorstep. This increases the Community's
prospects. Crowning the completed internal market with a
                                                                    interest in helping these countries, but it also raises the
common currency in the near future will further bolster the
                                                                    world's need for savings.
positive mood of management. Great expectations have been
created; they must not be frustrated. Member States need to
speed up the implementation of the proposals contained in
the White Paper to keep the deadline of 1 January 1993. In          German unification is the most important immediate effect of
particular, the narrowing of differentials in indirect taxes        the liberalization of Central and Eastern Europe. It has come
is important for the successful elimination of border               about very rapidly and is of major direct importance for the
controls.                                                           Community. It will be accompanied by a strengthening of
                                                                    Germany's growth performance, shrinking — perhaps even
                                                                    eliminating — the current account surplus and transforming
The second factor adding to medium-term growth prospects            East Germany into a market economy. This will accentuate
is the acceleration of the catching-up process in the               the scarcity of capital in Europe, requiring a
less-favoured countries and regions. Above-average growth           Community-wide effort to narrow the Community's savings
in those countries and regions, apparent in recent years,           gap. The most straightforward way to achieve this is to
notably in Spain, Ireland and Portugal, has significantly           increase public saving.
 ---pagebreak--- No C 53/4                                   Official Journal of the European Communities                                       28. 2. 91
With the Community economy in better order and the                     economic circumstances prevail. In 1973 the price of oil
fundamentals for growth still in good shape, it is not very            quadrupled and in 1979 it trebled. In present conditions, it
likely that the underlying growth performance in the                   can be hoped, the extent of the price rise will become much
Community will come to an abrupt stop. Admittedly, there               smaller. Further, oil dependency in the productive sector has
are negative factors in the world environment: the                     fallen by around a third since the end of the 1970s, although
performance of the US is weak and the latest oil price hike,           sizeable differences remain among Member countries. The
limited though it may be, will further reduce growth in                increase in the oil bill is particularly important for Portugal,
activity. The falling US dollar mitigates oil-induced                  Greece and Spain. Furthermore, the general state of our
inflationary pressures in the Community and provided that              economies has greatly improved. Lastly, with stage one,
policies respond to the oil-price hike in a way which prevents         procedures for improved policy coordination are in place and
the initial boost to prices becoming embedded in a wage-price          should be fully used.
spiral, it is also not to be expected that a deceleration
of world trade going together with a US recession will
unduly weaken the confidence of the private sector.
Notwithstanding the slowing-down of the growth                         In the somewhat shorter run it will be crucial, in responding
performance in quite a number of Community countries, the              to the new oil price hike, to avoid the mistakes of the past.
underlying health of the Community's economy and the tonic             Then, oil shocks met with very divergent, but in the
provided by German unification probably imply that the                 aggregate, insufficiently restrictive policies and attitudes that
momentum of the Community growth process will carry                    facilitated the efforts to maintain high increases in real wages
through in the medium term. The same appears to be the case            in spite of the oil-induced terms of trade loss. In the last
for Japan and the South Pacific Basin, where growth                    instance that resulted in an intensified struggle over the
prospects remain largely satisfactory. A positive outcome of           distribution of income which was the main reason behind the
the Uruguay Round is essential for a resumption of world               weak Community growth performance and the increasing
trade growth. As the world's largest trading block, the                divergence of the 1970s. T o avoid a repetition of such
Community has a natural interest in its successful                     mistakes, monetary policy will have to maintain and, if
conclusion.                                                            needed, even reinforce its anti-inflationary stance: no doubt
                                                                       must be left as to the authorities' intentions not to
                                                                       accommodate inflation. Fiscal policy should remain on a
                                                                       path of medium term budget consolidation; there should be
At first sight, there might seem to be a fear that the Gulf crisis     no attempt to compensate for the unavoidable income loss
could significantly alter the picture just presented and put           related to the oil shock. Such a policy stance is also important
further progress towards EMU at risk. The two previous oil             for a successful move into stage two of EMU on 1 January
shocks did in fact result in serious damage to convergence             1994 and, ultimately, for making the attainment of economic
in the Community. But this time more favourable                        and monetary union a realistic endeavour.
                                            I. THE SHORT-TERM OUTLOOK CLOUDED
                After several years of strong expansion with growing levels of investment, rapid employment creation
                and improved convergence, the short-term outlook for the Community economy has become less
                favourable in 1990. This is partly the result of internal factors; their impact, however, has been
                strongly reinforced by external events such as the increase in the price of oil, the depreciation of the
                dollar, and the slow-down in growth in the United States of America and in world trade.
                In 1991 the outlook for the Community is for a further deceleration of growth and employment and an
                acceleration of consumer price inflation. The extent and the duration of the slow-down in growth and
                of the acceleration in inflation will depend very much on the policies pursued. With appropriate
                policies, for which stage one of EMU may provide the necessary disciplinary framework, the
                Community may already in 1992 resume more buoyant growth in a climate of decelerating
                inflation.
 ---pagebreak--- 28. 2. 91                                 Official Journal of the European Communities                                   No C 53/5
          A. Community growth tapers off i n 1990
          Already before the Gulf crisis there was some cooling-off in the Community's growth performance.
          Real growth was expected to decline from 3,8 % in 1988 to 3,3 % in 1989 and to 2,9 % in 1990. This
          was notably due to weaker than expected growth in the United Kingdom but also to lower growth in
          France, Italy and Spain. This slow-down was only partly compensated by the stronger German
          expansion resulting from unification and the tax reform (see box on particular treatment of
          Germany), which had a positive spillover effect on the Benelux countries and Denmark.
                                                                TABLE 1
                                              T h e E C economy at the turn of the decade
                                                                                              (annual percentage change)
                                           1982—1985      1986—1987    1988—1990        1989    1990         1991 (>)
          Real G D P                          + 1,8          + 2,7        + 3,3         + 3,3   + 2,9         + 2,2
          Employment                          -0,2           + 1,0        + 1,5         +1,6    + 1,7         + 0,6
          Inflation ( 2 )                     + 8,1          + 3,6        + 4,6         + 4,9   + 5,1         + 5,3
          Investment:                         + 0,4          + 4,6        + 6,5         + 6,5   + 4,4         + 2,9
             of which equipment               + 3,2          + 5,9        + 8,9         + 8,9   + 5,1         + 3,7
          Real unit labour costs              -1,3           -0,6         -0,5          -0,8    + 0,4         -0,2
          (') Forecast.
          (2) Consumption price deflator.
          Overall employment continued t o grow at a strong pace, but inflation accelerated throughout the
          Community. This reflected rapidly rising per capita wages, which are expected to rise by 7,5 % in
          nominal terms and more than 2 % in real terms, one of the highest rates of growth since the late 1970s,
          ending the continuous improvement of profitability since 1981. In the second half of the year inflation
          was given a new boost by the oil price rise.
          1. Growth slowing down in most countries
               The slowing down in the larger Community countries (with the exception of Germany) was
               particularly due to exports and gross fixed capital formation, the former reflecting less buoyant
               world trade. At the same time, however, wage costs have been rising relatively quickly in these
               countries over the last two years. Buoyant demand has so far allowed rising costs t o be reflected in
               higher prices, which may have undermined export performance and investment. The tightening of
               monetary policy and the resulting higher real interest rates have also had their effect on
               investment, particularly on construction activity.
 ---pagebreak--- No C 53/6                              Official Journal of the European Communities                                  28. 2 . 9 1
                                        STATISTICAL PROBLEMS FOR GERMANY
                All the data presented in this year's Annual Economic Report relate t o the Federal Republic of
                Germany prior t o German unification. Due t o major statistical problems it is not yet possible
                t o present reliable data for the new German State.
                These statistical problems are manifold. Basically they have their origin in the fact that the
                former GDR was a centrally planned economy. The statistical concepts used there, as in other
                centrally planned economies, were very different from the standard European National
                Accounts. The concept of net material product (NMP), unlike the familiar gross domestic
                product (GDP), excludes all 'immaterial' services (health, education, financial services). In
                addition, the values indicated in the old GDR statistics carry little economic significance since
                the whole price structure was distorted. Thus, prices bore little relation t o the relative scarcity
                of goods. Attributing proper prices t o the physical quantities of goods produced is also
                difficult since most goods would not have met the standards of the western market thus
                making it almost impossible t o estimate a realistic price.
                Under the above circumstances it is very difficult and not very meaningful t o presently
                estimate the level of GDP in East Germany before unification. N e w statistics comparable t o
                those of the other Community economies are now in the process of being built u p , but this will
                take time. In the meantime highly tentative estimates for the most important economic
                aggregates are all that can be used and these must be treated with the necessary caution.
                It is expected that the East German economy would go through a drastic adjustment process.
                A strong reduction of industrial production has taken place, mainly in the second half of
                1990, as the production of uncompetitive goods is halted. Gross domestic product in real
                terms could decline substantially. The fall in activity should bottom out in the first half of
                1991, whereafter a recovery is expected. This recovery will continue into 1992 where GDP
                growth for the whole of Germany could be higher than that for the old Federal Republic. If
                one includes such tentative estimates for East Germany in the forecasts for the Community as
                a whole, Community GDP growth would be slightly lower in 1990 and 1991 and slightly
                higher in 1992.
                Unemployment is expected t o reach 1,5 million in 1991 and 1992 in East Germany. T h e
                figure for short-time work could reach 2 million in 1991 and about 1,5 million in 1992. T h e
                unemployment rate for the whole of Germany (number of unemployed as a percentage of the
                civilian labour force) could amount t o 8 , 7 % in 1991 and 8 , 9 % in 1992, excluding
                'short-term' workers. This compares with 6,3 % in 1991 and 6 , 5 % in 1992 expected in the
                old Federal Republic. Including East Germany in the Community unemployment figures
                increases the Community unemployment rate by around 1,5 percentage points in both 1991
                and 1992.
             Despite the weakening of activity and the appreciation of their currencies, inflation as measured
             by the private consumption deflator accelerated slightly in 1990. In France, Italy and Spain the rise
             was only modest (less than V4 percentage point), but in Italy and Spain the level of inflation
             was still almost double that of France, and prices rose much more in the United Kingdom
             (by 3/4 percentage point). Nevertheless in all those countries there is a need t o further improve
             growth fundamentals, contain inflation and particularly t o keep wage developments in check n o w
             that productivity increases are slowing down.
          2. But strong German expansion continues
             German unification is o n the other hand leading t o a strengthening of Germany's growth
             performance, accompanied by important changes in the budget position and balance of payments.
             In fact, while an expansionary swing of some 5 % of G N P is expected between 1989 and 1991 in
             the budget for Germany as a whole, the balance-of-payments surplus will nearly disappear over
             the same period. The considerable current and capital transfers from Western Germany t o the five
             new Lander have partly been converted into new import demands from the latter which have in
 ---pagebreak--- 28. 2. 91                               Official Journal of the European Communities                                No C 53/7
              turn resulted in a strong growth of West German exports. This induced boost t o Western
              Germany's final demand has resulted in turn in sharply increased imports f r o m the rest of the
              world.
              At the same time, private consumption was boosted by tax cuts representing some 1 % of GDP,
              large scale immigration from the East and the growth of employment. These positive features in
              domestic demand supported a strong increase in investment, in particular in equipment. Capital
              outflows from Germany t o the rest of the world are likely t o be reduced as a result of the
              disappearance of the surplus o n the current account of the balance of payments. This is
              compensated, however, by strongly increased imports from the partner countries, which
              stimulate demand in these countries.
              Notably the Benelux countries have been benefiting from the expansion in Germany, and continue
              t o record favourable growth rates supported by a strong investment performance. But also in these
              countries inflation has accelerated, mainly driven by wage developments.
          B. An unfavourable international environment
          Since the middle of 1990 the Community outlook has been overshadowed by developments outside
          the Community: the Gulf crisis and the slow-down of growth in the United States and in world trade.
          Although these developments will not necessarily have a lasting influence o n economic conditions in
          the Community, they harm the short-term stability and growth prospects.
          1. Economic consequences of the oil price rise
              T h e Gulf crisis resulted in an immediate reduction in world supply of oil by about 7 % that has
              been compensated since by increased supplies from other countries. Uncertainties about future
              supplies led t o a sharp increase in oil prices from US $ 21 per barrel at the end of July t o around
              US $ 3 5 per barrel at the end of October. Over that period prices have been very volatile,
              exceeding at one stage US $ 4 0 per barrel.
                                                               Graph 1
                                               Oil import prices, Community of Twelve
                                  50
                                               US Dollar          Ecu
                                  40-
                                  30-
                                  2 0 -
                                   10-
                                    0 -I-1 i rili n        rH i i i—rH—i i i i—hi—i—i i I i—r-1—tH-
                                    1960      1965       1970      1975   1980      1985      1990
 ---pagebreak--- No C 53/8                          Official Journal of the European Communities                                                28. 2. 91
          For the oil-importing countries the price increases have so far been less important in relative terms
          than in the previous oil price shocks of 1973 and 1979 (graph 1). If the average price for the period
          September-October is taken, the price increase in dollar terms is about 60 % compared t o around
          3 0 0 % in 1973 and 2 0 0 % in 1979 to 1980.
                                                            TABLE 2
                                Effects of a rise in the world price of oil to US $ 2 5 per barrel
                                                                                        (deviations from baseline, in percent)
                                                                                     1990                      1991
          Industrial countries:
          — Real GDP                                                                -0,2                       -0,5
          — Inflation                                                               + 0,3                      + 0,5
          Community:
          — Real GDP                                                                -0,2                       -0,5
          — Inflation                                                               + 0,3                      + 0,5
          Non-oil less-developed countries' real GDP
          — Exporters of primary products                                           -0,4                       -0,9
          — Exporters of manufactures                                               -0,2 '                     -0,4
          — Fuel exporters                                                          + 2,0                      + 4,5
           The increase in oil prices involves a significant transfer of revenue from oil importing t o oil
           exporting coutries. Higher oil prices will raise domestic prices and lower domestic demand and
           output. With unchanged monetary policies they would also involve a rise in nominal interest rates.
           Moreover, the volatility in oil prices is injecting considerable uncertainty into the economy, which
           may negatively affect expectations.
           Simulations based on a working assumption of an oil price of US $ 25 per barrel on average in
           1991, suggest the following effects (table 2): the growth rate of real GDP would be 0,5 percentage
           point lower in 1991 in the industrial countries and in the Community than the baseline forecast,
           which assumed an oil price of US $ 17,8 per barrel and a real growth of around 3 % .
           Oil importing less developed countries would, however, be harder hit: the growth rate of
           exporters of primary products would be 0,9 percentage point lower than the baseline, while that
           of exporters of manufactures would be about 0,4 percentage point lower. Inflation would be
           higher by 0,5 percentage point in the industrial countries and in the Community.
           If, however, oil prices were to remain at the average level of September and October 1990 (around
           US $ 35 per barrel) throughout the year 1991, the abovementioned impacts could be twice as high.
           The technical assumption in the Community forecast takes an intermediate assumption: the oil
           price would stay at about this level during the first half of 1991, but would drop t o about US $ 25
           per barrel on average in the second half of the year.
           The countries of Eastern and Central Europe are subjected to a triple shock. The preferential
           arrangements that existed with the Soviet Union and provided them with petroleum products at
           below market prices will lapse at the end of 1990. The price adjustment in these countries will be
           sizeable as the loss of preferential agreements is compounded by the Gulf crisis. These elements
           and the loss of the former GDR as a trading partner will add t o the economic dislocation stemming
           from the unwinding of central planning.
           For the Community, the consequences of the Gulf crisis will be less important than after the first
           and second oil price shock.
           — First, movements in exchange rates between the dollar and the ecu have in fact resulted in a
                spreading of the assumed price increase over a three-year period (table 3).
 ---pagebreak--- 28. 2 . 91                                Official Journal of the European Communities                                                  No C 53/9
                                                                        TABLE 3
                                                                        Oil price
                                               1988                1989                       1990                    1991 (»)
                                                                        Variation                 Variation                Variation
                                               Level       Level                        Level                   Level
                                                                           (%)                       (%)                       (%)
                US $ per barrel               14,9        17,7           + 18,8      23,7          + 33,9     29,0         + 22,4
                US $/ecu                       0,847       0,907          + 7,1         0,796      -12,2       0,755         - 5,2( 2 )
                Ecu per barrel                12,6*       16,0           + 27,0       18,9         + 18,1     22,0         + 16,4
                (') Assumptions of the economic forecast.
                ( 2 ) The US dollar is supposed to remain at its value of mid-October 1990.
           — Second, the energy dependency of the Community has been greatly reduced since the previous
                oil shocks: in 1989 the volume of energy requirements per unit of GDP was about 25 % lower
                than in 1970, as a result of energy conservation measures (graph 2). The oil intensity of
                production has dropped even more, by 45 % , as a result of diversification to other sources of
                energy. Imports of oil are more than 55 % lower due to increased domestic production in the
                Community.
                                                                        Graph 2
                                Energy intensity per unit of real GDP, Community of Twelve (1972 = 100)
                                     120
                                     100
                                                                                      Energy
                                       80-
                                                                                                 Oil
                                       60-
                                                                            Oil-imports
                                       40-
                                       20-
                                         1970       1973       1976        1979       1982       1986       1988
                                              Energy/GDP                    Oil/GDP              Imports/GDP
           The overall pattern described above must, however, be qualified for individual countries. While
           overall energy intensity has been reduced to a similar degree in nine Community countries since
           1973 (by an average of some - 30 %), it increased in Spain ( + 10 %) and particularly in Greece
           ( + 2 3 , 7 % ) and Portugal ( + 2 6 % ) owing to the transition in those countries to a productive
           structure with a greater industrial content.
           — Third, the economic situation and particularly investment profitability in the Community is
                also much better than at the time of the previous shocks, when the economy was overheating
                and inflation was soaring.
           — Fourth, the Community now has the benefit of hindsight. The previous two oil shocks have
                provided valuable lessons on how to deal with such situations.
           Nevertheless, if the actual oil price increase were to remain within the limits of the above
           assumptions, this will require policy adjustments so as not to accommodate and perpetuate the
           inflationary impulse. If these policies are appropriately carried out, the Gulf crisis should not
           necessarily result in a durable deterioration of the growth and stability fundamentals in the
           Community.
 ---pagebreak--- No C 53/10                            Official Journal of the European Communities                                         28. 2. 91
           2. Slow growth in the United States of America and strong but decelerating growth in Japan
              Already before the outbreak of the Gulf crisis it became evident that the United States was
              experiencing a pronounced slow-down of growth. It is now anticipated that real GNP would grow
              less than 1,0% in 1991 and barely a quarter of a point in 1991 (table 4). In particular private
              consumption and investment will be much weaker than expected. At the same time inflationary
              pressures will be much more persistent, with inflation rising to 6 , 3 % in 1991.
                                                              TABLE 4
                                              United States, main economic indicators
                                                                                            (in percent or percent of GDP)
                            '                        1988             1989               1990                1991 (»)
              Real G N P                             +4,6             + 3,0              + 1,0                + 0,3
              Investment                             + 5,4            + 1,6              -0,4                 -i,o
              Consumer prices                        + 4,1            +4,4               + 5,1                + 6,3
              Fiscal balance                         -2,0             -2,0               -2,3                 -2,3
              Current account                        -2,4             -1,8               -1,7                 -1,8
               (') Forecast.
               Despite much weaker domestic growth, the current account of the balance of payments would
               hardly improve in 1990 and 1991, but the general government deficit, on the other hand, is
               expected to widen slightly.
               Sluggish economic activity has already led over the last year to a significant loosening of monetary,
               policy. The resulting widening of negative short-term interest rate differentials with the Japanese
               yen and the German mark and the weak outlook for the US economy have led to a continuous
               decline of the dollar over the period. The growth of imports is expected to decelerate to about
               2 , 5 % down from almost 6 % on average in the period 1980 to 1989.
               Inadequacy of domestic saving, largely as a result of the federal deficit, remains a crucial issue for
               the United States. Further fiscal consolidation is required to limit the absorption of investment
               resources, particularly in view of the huge demand for investment in Central and Eastern Europe.
               More determined action to improve the budget outlook might also contribute to the international
               adjustment process.
               In Japan, real GDP growth is expected to decelerate from 6 % in 1990 to about 4% in 1991,
               mainly as a result of monetary tightening. The continuous robust rate of growth and the more
               unfavourable international environment contribute to a further reduction in the surplus on the
               current balance. Inflation is expected to remain modest.
           3. A slow-down in world trade
               The external environment will also be marked by.the necessary transformation from Central and
               Eastern Europe from a planned to a market economy. The integration of Central and Eastern
               Europe in the international division of labour will increase significantly the demand for capital,
               adding to the existing sizeable needs of developing countries. Without increased saving, real
               interest rates will remain at high levels.
               The slow-down of growth in the United States, the increase in the price of oil and its impact on less
               developed countries together with the inevitable transformation in Central and Eastern Europe
               will create a more subdued international environment. In 1991, real GDP outside the Community
 ---pagebreak--- 28. 2 . 9 1                              Official Journal of the European Communities                                  N o C 53/11
                 should increase by less than one percentage point. As a result, world trade excluding the
                 Community is expected t o expand in 1991 by less than 4 , 5 % in real terms, down from 6,0 % in
                 1990 and 7 , 4 % in 1989. Furthermore, Community exports t o the rest of the world could be
                 negatively affected by a further appreciation of Community currencies. By end-November 1990,
                 the dollar value of the ecu was already more than 25 % above its average 1989 level. A successful
                 outcome of the Uruguay Round is essential for a resumption of world trade growth.
            C. T h e outlook for 1991 and 1992
            The rise in oil prices, slower growth in world trade, US recession and the strong appreciation of
            Community currencies against the US dollar, will contribute t o dampen growth in 1991 t o around
            2 V 4 % , down from 3 , 3 % in 1989 and 2 , 9 % in 1990. Again the general slow-down is marked by
            significant divergences within the Community: growth would be around 3 % in West Germany,
            Luxembourg and Portugal, but at 1% , or less, in Denmark, Greece and the United Kingdom,. In the
            other countries the growth rate would be close t o the average. All components of domestic demand are
            expected t o weaken, in particular investment.
            Employment growth would slow down from 1,5 % on average over the period 1987 t o 1990 t o 0 , 6 %
            in 1991 so that the steady decline in the unemployment rate, seen in most countries in the last few
            years, would be halted. The budget positions in the Community would slightly deteriorate, mainly as
            a result of the widening of the budget deficit in Germany t o close t o 5 % of GDP.
            In 1992, with investment profitability basically unaffected, the prospects are for growth t o pick u p
            again: domestic demand would expand by 3% , u p from 2,3 % in 1991, mainly as a result of a revival
            in investment.
            T h e outlook for 1991 and 1992 is subject t o considerable uncertainties in the international
            environment, mainly related t o the evolution of the oil price and of the dollar. The oil price evolution
            will be significantly affected by the outcome of the Gulf conflict.
            The second source of uncertainty relates t o developments in the United States. O n balance the
            depreciation of the dollar has so far had largely benign effects for the Community, because it has
            mainly offset the inflationary impact of higher oil prices, while the negative impact o n the already
            buoyant activity has been less a source of concern. A further, important and abrupt decline of the
            dollar, however, may have along with its beneficial effects on inflation, a more significant impact o n
            exports and investment and could test the stability of the EMS.
                                II. ECONOMIC POLICY TASKS DURING STAGE ONE OF EMU
            T o sustain economic growth and employment in the present unfavourable external environment, the
            Community will have t o rely on its own potential. A climate of stability is an essential prerequisite for
            its development. Therefore the Community will have t o maintain restrictive monetary and fiscal
            policies. These policies will at the same time help t o preserve the favourable growth fundamentals.
            The completion of the internal market and other structural policies, further improvements in
            economic and social cohesion and the environment will in turn strengthen the Community's
            potential.
            Furthermore, stage one of economic and monetary union will tighten convergence requirements in the
            fields of prices and costs, budgetary and external positions. The amount of adjustment is in some cases
            still important. Some Member States should already now present medium-term adjustment
            programmes so as t o ensure that all Member States would join the final stage of E M U .
 ---pagebreak--- N o C 53/12                                 Official Journal of t h e European Communities                                   28. 2. 91
            T h e deterioration in short-term growth prospects in t h e Community does n o t necessarily alter t h e
          , f u n d ament al positive assessment of t h e underlying potential of t h e Community economy. As a result
            of adverse internal and external factors, a certain deceleration in g r o w t h w a s inevitable. But provided
            appropriate policies are followed, profitability should remain favourable a n d investment activity
            could resume its strong growth leading t o renewed significant j o b creation.
            T o meet t h e challenges it is all t h e m o r e important t h a t policy coordination is strengthened in
            accordance with t h e decision o n multilateral surveillance f o r stage o n e .
            A . Maintain stability $nd growth climate
            Despite a significant appreciation of the ecu and a slow-down of g r o w t h , inflation remains high. T h e
            most immediate policy concern in t h e present situation is therefore inflation. T h e oil price increase
            adds n e w impetus t o a n already accelerating cost and price trend. T h e relaxation of the moderate w a g e
            behaviour of t h e 1980s m a y be understandable after a long period of economic recovery, b u t it p u t s
            t h e medium-term growth prospects a t risk: unemployment is still very high a n d m a n y m o r e years of
            strong investment a n d robust growth are needed, especially in t h e less prosperous countries a n d
            regions, t o recover a n acceptable employment situation.
            T o preserve t h e continuation of a satisfactory growth climate in t h e C o m m u n i t y , t h e inflationary
            threat posed b y rising wage costs and t h e latest oil price hike must b e immediately addressed, while a t
            the same time divergent developments must b e avoided. T h e lessons f r o m t h e previous oil shocks
            should therefore be adequately d r a w n . This also includes strengthening of measures of vocational
            training t o support t h e required adjustments.
            1.    Avoid an inflation spiral
                                                                          Graph 3
                                                       Price variability after the two oil shocks
                                                                        1st oil shock
                                         *
                                                    EUR 12                                     EUR 7
                                                                                    %
                                                                                 u
                                                                 Maximum
                                                             Average
                                                                 Minimum
                                                                                         t     I     «    I    t
                                        *i I I *n I I i 74 I tI 7« Ii I 7»I I I ml *I I I 71 I I 74 I I 74 I ! 7i I I 7» I I
                                                                       2nd oil shock
                                      M
                                              Maximum
                                                Average
                                                                 Minimum
                                                                                  o
                                        9     41        4      *     4
                                       7 I I I 71 t I 79 I I 7t I liOl I M         SII
 ---pagebreak--- 28. 2. 91                         Official Journal of the European Communities                                    No C 53/13
          The previous two oil shocks were characterized by a sharp acceleration of inflation and an
          increase in the divergences between Members' inflation rates. This was especially marked in the
          reactions to the 1973 oil price shock.
          With the benefit of hindsight, the adoption of inappropriately loose and even conflicting policies
          between Member States appears as one of the main reasons behind the very weak convergence of
          the EC during the second half of the 1970s (graph 3).
          The response to the second oil price shock of 1979/80 showed some improvement in policy
          coordination, due notably to the existence of the EMS. But since the effects of the 1973 shock were
          not yet fully absorbed, dispersion remained high. The improvement of Community internal
          cohesion required long and painful efforts throughout the 1980s.
          Since the 1979 oil shock, the consensus on economic policy and the coordination of monetary
          policy improved significantly, making a coordinated approach easier to carry out.
          The experience of the previous oil shocks argues for an economic policy stance that does not try to
          compensate for the loss of real demand and income resulting mechanically from the oil price
          increase, but that remains oriented towards overall price stability.
          In general terms therefore:
          — governments should allow the full and complete pass-through of higher oil import prices to oil
              products on the domestic market; in addition energy conservation policies will need to be
              reinforced to further reduce energy dependency,
          — monetary policy would have to pursue and, if needed, even reinforce its anti-inflationary
              stance. It must above all prevent the development of a wage-price spiral, by leaving no doubt
              as to the intention of the authorities not to accommodate inflationary developments,
          — fiscal policy should remain on the path of medium-term budget consolidation. It should not try
              to compensate for the unavoidable loss of private demand and income that any oil shock
              implies,
          — policy coordination should be strengthened within the context of stage one of EMU.
          So far, monetary policies in the Community have by and large remained on a restrictive course.
          The recent appreciation of EC currencies is helping to offset some of the inflationary pressures,
          confronting the monetary authorities with the difficult task of judging whether this is sufficient to
          stem domestically-induced wage pressures. The steepening of the yield curve as a result of rising
          long-term interest rates raises some concern as it may indicate, besides strong capital needs, rising
          inflationary expectations. Firm policy commitments are therefore needed.
          Policies effectively pursued up to now, however, have been less convergent than is desirable.
          Declining interest rates at a time of rising inflation cloud the policy message of the authorities in
          terms of their determination to fight inflationary expectations. The danger of insufficiently
          addressing the inflationary consequences of the oil price rise and of domestic wage developments,
          right from the beginning, is that policy will have to be tightened anyway at a later stage to quell
          inflationary pressure, but at a greater cost.
          The liberalization of capital movements and the increased exchange rate stability in the EMS have
          as a consequence that restrictive monetary policies, are less effective. The interest rate lever can be
          used less and less without overloading monetary policy. Hence there is a need for stronger
          economic policy coordination. The increasing symmetry of the EMS has to be accompanied by
          substantial coordination efforts by the monetary authorities to ensure overall stability.
          T o avoid overloading monetary policy, fiscal policy will have to continue pursuing its medium
          term consolidation objectives, even if the effects of 'automatic stabilizers' and rising interest rates
          lead to a temporary deterioration in public accounts. It is particularly important that the public
 ---pagebreak--- N o C 53/14                            Official Journal of the European Communities                                   28. 2. 91
               sector does not use saving to finance current expenditure. The huge investment needs in the
               Community and in Central and Eastern Europe will lead to rising real interest rates and an
               unwelcome crowding out of investment unless savings are substantially increased. Increasing
               public saving is the most straightforward way to increase national saving. In Greece and Italy in
               particular, but also in Belgium, Portugal, the Netherlands and Ireland, public dissaving is .still
               significant. The public sector should improve its contribution to national saving in these
               countries.
               The sharp increases in the German fiscal deficit resulting from unification is also a reason for
               concern because it risks placing an undue burden on monetary policy and on capita!markets, and
               may sustain and reinforce inflationary expectations stemming from the oil price rise.
            2. Safeguard the fundamental conditions for sustained and employment-generating growth
                                                                  Graph 4
                                                         Favourable growth factors
                                                               (in % or index)
                    Real compensation per employee and                             Rate of profit of fixed capital
                    productivity (3-year moving average)                170-1          (1961—1973 = 100)
                                                                        100 -
                                                                        140-
                                                                        110-
                                                     Productivity
                                              Real compensation
                                             Gross fixed capital formation (in % of GDP)
                                           10-1
                                             1960    1960    1970                1908    two
               During the 1980s the Community has brought about a considerable improvement in its growth
               fundamentals (graph 4). Appropriate monetary and budgetary policies should ensure that the loss
               of income entailed by the oil price rise is appropriately split between wages and profits, in order to
               minimize the negative impact on investment profitability. Economic policy cannot avoid a
               temporary slackening of growth, but by preventing secondary inflationary repercussions it should,
               be possible to maintain the fundamental medium-term conditions for healthy growth.
               As the experience of the previous two oil price shocks has shown the behaviour of wages will be
               crucial in preserving the growth potential of the Community.
               The specific distribution of the burden of the income loss between the state, households and
               enterprises, will depend on the particular situation in each Member State, but it must be kept in
               mind that the less investment profitability is affected, the sooner economic growth will resume its
               upward trend. Divergences in the pattern of burden sharing between countries could also
               endanger the necessary convergence of Member States' economies. The existence in
 ---pagebreak--- 28. 2 . 9 1                               Official Journal of the European Communities                                   N o C 53/15
                some countries of formal or informal wage indexation mechanisms may make wage behaviour
                unnecessarily rigid. The commitment t o monetary stability in stage one implies that the effects of
                wage rigidity should n o longer be absorbed by an increase in the general price level or by exchange
                rate adjustments. Wage developments need, therefore, t o be more flexible in adjusting t o
                developments in competing countries.
                A strong commitment t o competition and t o open markets will provide a consistent and effective
                framework for positive adjustment in reply t o market forces, as put forward in the Commission's
                communication o n industrial policy in a global environment.
            B. T h e development of Community potential
            The general policies which must be implemented t o curb the reemergence of inflationary pressures and
            inflation divergences are also those needed t o create the conditions for the realization of the great
            Community projects: economic and monetary union, completion of the internal market, economic
            and social cohesion. At the same time, these projects complement the policies being implemented at
            the national level.
            1. Complete the internal market
                T o secure its economic future, Europe has embarked o n a programme for creating a market of
                continental dimensions. One of the main constraints the Community still faces on the competitive
                world stage is the fragmented nature of its markets, which makes it difficult t o produce at
                optimum levels, holds back technological progress and impedes development of the services
                sector, where growth is particularly strong. The opening of the Community frontiers will enhance
                competition. Increased specialization and efficiency of production will greatly improve consumer
                choice.
                 T h e internal market programme is the decisive driving force in adding t o E C growth prospects and
                 prosperity. Economic operators are increasingly anticipating the highly competitive environment
                 which will prevail and the new operating conditions and opportunities which will exist by 1992.
                 An increasing number of firms have begun t o operate on greatly enlarged market horizons and are
                 actively changing their strategies. In addition t o the positive growth effects stemming from the
                 abolition of internal border controls, and the removal of technical barriers t o the free movement of
                 goods and services, particularly as regards the latter in the financial services sector, growth will
                 also be attributable t o the positive effects arising from the necessary restructuring in industrial and
                 services sectors and from positive changes in marketing strategies.
                 In the single market, an effective Community competition policy is essential since measures and
                 practices aimed at reducing or avoiding competition (such as increased subsidies or market
                 sharing agreements) would reduce these positive effects. T o crown the achievement of the internal
                 market with a common currency in the near future would — as recent business surveys show —
                 further bolster the positive mood of management.
                 T h e high expectations that have been created must not be disappointed. Therefore the deadline of
                 1 January 1993 for completing the internal market must be respected. Hence, it is essential that the
                 remaining decisions in respect of the proposals contained in the 1985 White Paper must be taken
                 as soon as possible. Significant progress has already been achieved and decisions have been taken
                 in all areas of economic activity. The Commission has already tabled all the proposals contained
                 in the White Paper, and over two thirds have been approved by the Council. T h e Commission is
                 turning its attention t o the problems of implementation (some 7 2 % of the so far required national
                 implementing measures have been taken) and t o the proper functioning of the single market.
                 Decisions have still t o be taken in important fields relating t o the complete removal of internal
                 border controls. The Council must give priority t o these areas (which include the approximation
                 of indirect taxation rates) and monitor the situation o n a regular basis t o ensure that decisions are
                 taken such that progress towards removing completely the internal borders becomes irreversible,
                 as is the case for the rest of the programme. Member States ought t o accelerate the rate of
                 implementation of decisions and t o eliminate all delays by the end of 1991.
 ---pagebreak--- No C 53/16                               Official Journal of the European Communities                                                  28. 2. 91
            2. Improve economic and social cohesion
                The improvement of economic and social cohesion will also strengthen growth prospects. Above
                average growth in the less favoured countries would contribute to expanding the growth potential
                of the Community economy as a whole.
                The strengthening of economic and social cohesion and the objective of a harmonious
                development across European regions have been reaffirmed in Article 130 of the Single Act.
                Above-average growth in those countries and regions, as has been the case in recent years in Spain,
                Portugal and Ireland, but not in Greece, has started to reduce the income gap (table 5) and has
                expanded the growth potential in the Community as a whole. The gap remains sizeable though,
                and will require a long-term effort of catching up.
                                                                      TABLES
                The catching-up process in the Community GDP (') at current market prices and purchasing parities per head
                                                        of population (EUR 1 2 = 100)
                                              Greece                    Spain                    Ireland              Portugal
                1985                           56,8                     71,8                      65,2                  52,1
                1986                           55,8                     72,2                      63,5                  52,7
                1987                           54,2                     73,9                      64,9                  53,8
                1988                           54,3                     74,7                      65,2                  54,0
               1989                            54,1                     75,9                      67,2                  55,2
               1990                            53,4                     76,7                      68,8                  56,2
               1990 to 1985                   -3,4                     + 4,9                     + 3,6                 + 4,1
               (1) Reference to GDP may overstate progress to the extent that income transfers to abroad may have outpaced nominal GDP
                   growth.
               The economically stronger countries could contribute to this process by the maintenance of a
               dynamic growth pattern and the opening of markets to trade. The doubling of the Structural
               Funds and the simultaneous strengthening of the financial instruments will make available to
               Greece, Portugal and Ireland resources equivalent to between 3 and 5 % of GDP in 1993. They
               support the considerable improvement in structural policies achieved so far. Economic and social
               policies on the national and Community level have to provide the basis for a continuous relative
               growth of real GDP, without inflationary pressure and unsustainable internal and external
               imbalances. The catching-up countries will, however, remain primarily responsible for their own
               development.
           3. Structural adjustment and labour market flexibility
               Structural policies improve the capacity of Member States' economies to adjust. They enhance
               flexibility in goods and factor markets and should lead to an improvement in the extent and speed
               of response of prices in those markets to changes in market conditions. Structural policies thereby
               reduce the potential size and duration of adjustment costs associated with disturbances.
               Beyond the internal market programme, Member countries have engaged in a number of
               structural improvements to be able to cope with increased competition on the unified market. So
               far the major initiatives fell within the liberalization of financial markets and the restructuring of
               personal and corporate taxation.
 ---pagebreak--- 28. 2 . 9 1                             Official Journal of the European Communities                                   N o C 53/17
               Governments have taken initiatives t o improve the capacity of labour markets t o cope with
               change, and policies for education and vocational training are being given high priority in many
               Member States. They are an important instrument for the absorption of the long-term
               unemployed.
               Structural policy initiatives for the labour market will need further emphasis. T h e freeing-up of
               trade in goods and services in the completed market will certainly put additional strains upon
               labour markets and particularly upon systems of wage determination. In order t o avoid as much as
               possible negative employment effects, present systems of wage determination within Member
               States should be made sufficiently flexible (for industries, occupations, regions o r firms) t o enable
               a rapid and efficient adjustment t o new market circumstances.
               Also in the public sector, structural reform has t o be carried further so as t o improve the efficiency
               of the public sector.
               Higher economic efficiency and improved resource allocation should not only be sought within
               the Community, but also in the world. The Uruguay Round is a cooperative effort t o promote
               trade and economic growth. As the world's largest trading block, the Community has a natural
               interest in a successful conclusion of the Round, It is at the same time an instrument t o provide a
               better platform for its weaker trading partners, in particular the Central and Eastern European
               and the developing countries.
            4. The environmental challenge
               Just as the previous oil shocks helped t o break the parallelism that was perceived in the 1950s and
               1960s between economic growth and energy use, there is presently a growing awareness, that was
               given added impetus through the Gulf crisis, that the link between economic growth and pollution
               needs t o be broken. Experience in Eastern European countries, which have a much higher level of
               pollution than the richer Community countries, shows, however, that the link is not
               straightforward. T h e Community's better performance is n o reason for complacency and needs t o
               be substantially improved. There does exist, though, a clearer link between the price mechanism
               and pollution. Often market prices d o not reflect the full environmental cost t o society of their
               production or use. Moreover, private economic agents are not inclined t o take into account the
               environmental effect of their activities, when taking consumption or investment decisions.
               At the centre of any comprehensive policy t o address the pollution problem (beyond the inevitable
               need for regulatory instruments), is therefore the need t o internalize these external environmental
               effects in order t o give the right signals t o market participants.
                The aim is t o transform the patterns of economic growth in such a way as t o reach a sustainable
                development path. A reinforced policy of environmental protection would not necessarily
                represent a constraint o n private business, but could offer significant market opportunities for
                those pioneering environmentally friendly products and production processes.
                There is now a broad consensus that more use of economic and fiscal instruments should be made
                in environmental policy, but that the optimal policy would still consist of a balanced mix of
                market-based and traditional regulatory instruments. The main examples of economic and fiscal
                instruments have been identified as taxes, charges or fiscal incentives, deposit refund systems,
                tradable emission permits and financial aid or subsidies. In the case of taxes and charges, the
                impact o n the competitive position of the Community and the priorities of the internal market
                ought t o be given due consideration.
                In view of the importance of the international dimension of pollution close international
                coordination is called for. Within the Community there is a need for a minimum of harmonization
                in order t o avoid policy instruments being in potential conflict with other Community objectives
                and t o ensure compatibility of instruments among Member States when the issue is
                transnational.
 ---pagebreak--- N o C 53/18                                 Official Journal of the European Communities                                      28. 2 . 9 1
            C. Policies for improved convergence
            While the Community has significantly improved its economic convergence performance since the
            beginning of the decade, serious problems remain in some countries and in some areas. Furthermore
            stage one of E M U will tighten convergence requirements. The significant progress already realized is
            testimony t o the positive effects of the discipline imposed by the exchange rate mechanism of the EMS.
            In fact, the present convergence positions of Member States are closely correlated with their degree of
            exposure t o this discipline.
            1. Price and cost convergence
                 T h e degree of price convergence is most marked among those countries which have respected the
                 narrow band of fluctuation from the outset. The average rate of inflation (private consumption
                 deflator) in this group of countries has been close t o , or below, the 3 % mark since 1986 (graph 5).
                 The dispersion in the individual rates of inflation is lower than in the 1960s and the gap between
                 the highest ( 3 , 6 % in Belgium) and the lowest ( 2 , 4 % in the Netherlands) rates of inflation for
                 1990 is just over one point (table 6). The acceleration of inflation in 1990 and 1991 in these
                 countries cannot be considered satisfactory from the point of view of stability and needs therefore
                 t o be rolled back as soon as possible.
                                                                    Graph 5
                                                 Convergence of private consumption deflators
                                        EUR 1 2                                               EUR 7
                 80                     (annual percentage change)                            (annual percentage change)
                              Maximum
                                                                                                              Maximum
                                                                                                      'EUR t
                                                          EUR 1 2
                                        Minimum                                                     Minimum
                  wei              1071             1081           1001    1861   1086   1071            1081     1086   1001
                The price convergence in these countries already broadly corresponds to what might be required
                for the transition t o the final stage of E M U . This convergence in the rate of inflation has been
                accompanied by a clear deceleration in the rates of increase in nominal and real unit labour costs
                thereby improving investment profitability. Further improvements in profitability could be
                required, however, in those countries where unemployment levels are particularly high or where,
                as in Denmark, economic growth had t o be slowed down t o fight inflation and reduce the external
                deficit.
                A second group of countries has in 1990 an inflation rate which is still double that of the first
                group. Italy, which has recently joined the narrow band, and Spain, which joined the wider band
                last year, have also made significant progress since the beginning of the 1980s, but they still show a
                much less favourable convergence position. Both countries face strong wage pressures with
                nominal unit labour costs rising by 7 % or more in 1990 against less than 4 % for the original
                participants in the narrow band. These countries should gradually improve their inflation
                performance over the next two t o three years t o the level of the narrow band countries. This will
                require that the claims on resources of the different sectors of the economy be made more
                compatible with each other. Setting more ambitious but realistic inflation targets and pursuing
                them by stability-oriented monetary and fiscal policies may help t o create a stability environment
                and may contribute t o providing a reference framework for wage developments.
 ---pagebreak--- 28. 2 . 9 1                                Official Journal of the European Communities                                                       N o C 53/19
                                                                       TABLE 6
                                 Inflation convergence in the Community in the second half of the 1980s (')
                                                           1981              1986              1989               1990            1991 ( 2 )
                                                                                                                              3
                                                                    C Duntries with 1ow and conver ging inflation              )
             Community of 7                                 9,3               1,2               3,2                3,0               3,8
             Belgium                                        8,1               0,3               3,4 .              3,6             . 4,5
             Denmark                                       12,0               3,5               5,0                2,8               3,3
             Germany                                        6,0             -0,2                3,2                2,8               3,9
             France                                        13,0               2,9               3,3                3,4               3,6
             Ireland                                       19,6               4,0               3,9                2,8               3,5
             Luxembourg                                     8,7               1,2               4,0                3,5               4,0
             Netherlands                                    6,3               0,2               2,1                2,4               2,8
                                                                                Countries with high inflation
             Italy                                         18,2               5,7               6,0                6,1               6,3
             Spain                                         14,3               8,7                6,6               6,8               6,6
             United Kingdom                                11,2               4,4                6,1               7,0               6,3
                                                                           Countries with double-digit inflation
             Portugal                                      20,2              13,8              12,8               13,2              12,6
             Greece                                        22,7              22,0              14,4               20,5              18,5
            (') Private consumption deflator.
            ( 2 ) Forecast.
            ( 3 ) Countries which registered low and converging inflation rates in the second half of the 1980s; they are the countries which
                  participated from the outset in the narrow band of the EMS.
            T h e United Kingdom, which has recently joined the wider band of the exchange rate mechanism,
            is experiencing a high rate of inflation (about 7 % in 1990 for the deflator of private consumption
            adjusted for the impact of local government taxation changes) and a large current account deficit
            (about 3 % of GDP in 1990). T h e current slow-down of the economy will bring some
            improvement o n both fronts. T h e main problem for the United Kingdom's economy is the
            excessive increase in wage costs. W h a t is even more worrying is that wage settlements are still
            running at a high rate and are,not yet showing signs of reacting t o the slowdown in the economy.
            T h e composition of the retail price index may also partly explain this development. After entry of
            the pound sterling into the E R M , expectations may be favourably affected creating a better
            prospect f o r the United Kingdom t o reduce inflation.
            Portugal still has a very high rate of inflation (about 13 % in 1990). Nominal unit labour costs are
            still growing too rapidly. A persistent effort will be needed t o reduce inflation progressively t o the
            level in the narrow-band. Such an endeavour remains possible as experience in other countries has
            shown. In 1982 and 1983, when exchange rate policy in the E M S became tighter, Ireland had rates
            of inflation comparable t o that n o w experienced by Portugal. Therefore participation in the E R M
            should be sought as soon as possible.
            T h e Greek economy is characterized by serious imbalances in many areas, which call for radical
            measures. T h e rate of inflation exceeds 2 0 % in 1990, and the budget deficit has reached
            unprecedented levels in the Community, leading t o a rapidly rising public debt t o G D P ratio. A
            serious adjustment effort is essential, and should be sustained over the medium-term. T h e recent
            Greek Government's medium-term programme is a step in the right direction.
 ---pagebreak--- N o C 53/20                                  Official Journal of t h e E u r o p e a n Communities                                        28. 2. 91
            2 . Convergence        of budgetary policies
                 Convergence must n o t only be fostered f r o m the cost and price side, b u t public authorities also
                 have t o reduce their claims o n resources, so a s t o avoid unsustainable imbalances, t o improve t h e
                 supply-side of t h e economy a n d t o create r o o m f o r manoeuvre w h e n adverse developments have t o
                 b e addressed.
                 In t h e budgetary area, progress in convergence h a s been distinctly less m a r k e d t h a n f o r prices a n d
                 costs. Its impact o n monetary a n d exchange rate stability is only felt in a n indirect w a y a n d after a
                 prolonged period of accumulated imbalances. Such progress is nonetheless essential because
                 unsustainable fiscal positions undermine over the medium and longer term t h e credibility of t h e
                 commitment t o monetary stability a n d impair the conduct of economic policy.
                 Greece a n d Italy still have excessive budget deficits. In Greece the budget deficit, a t m o r e t h a n
                *18 % of G D P in 1 9 9 0 , h a s reached levels never experienced in t h e Community. Gross public debt
                h a s rapidly increased, f r o m less t h a n 3 0 % of G D P in 1980 t o a b o u t 9 0 % in 1 9 9 0 (table 7). A wide
                ranging adjustment effort extending over several years is needed, as reflected in t h e recent
                medium-term adjustment programme.
                                                                       TABLE    7
                                                   Gross public debt in the Community countries
                                                                                                                      (in percent of GDP)
                                                             1980           1986           1989              1990             1991 (')
                                                                                                                                      t
                 Belgium                                     76,9       , 123,7           129,9             129,4              129,4
                 Italy                                      59,0            88,5            98,9            100,9              102,9
                 Ireland                                    76,8           115,7          104,7             101,4               99,4
                 Greece                                     28,8            65,3            85,1           • 89,5               94,3
                 Netherlands                                45,9            71,7            77,6             77,8               78,5
                 Portugal                                   37,1            68,4            71,5             67,8               64,7
                 Denmark                                    39,3            67,2            63,3             62,8                63,3
                 Spain                                       18,1           48,5            45,2             44,7               42,6
                 Germany                                    32,7            42,7            43,6             43,7               45,2
                 United Kingdom                             54,3            58,1            45,7             43,0               41,8
                 France                                     24,6            34,2            36,0             36,1               36,1
                 Luxembourg                                  13,8           13,8              8,8              7,8                6,8
                 Community of 1 2                           41,0            58,5            59,0             58,9               59,2
                (') Forecast.
                Italy also faces a high budget deficit (10 % of G D P in 1990), which leads t o a rising level of public
                debt as a percentage of G D P (about 100 % of G D P in 1990 against 6 6 % in 1982). T h e necessary
                reduction in the rate of inflation will have t o g o in t a n d e m with significant reductions in budget
                deficits t h a t allow first a stabilization, and then a reduction in t h e level of debt a s a percentage of
                G D P . A disinflation process n o t accompanied by a n appropriate budgetary adjustment w o u l d
                result in a n even faster rise in the public debt ratio, as w a s t h e case in Belgium in t h e early a n d
                middle 1980s. T h e adjustment efforts required would then have t o be even greater.
                Belgium, Portugal, Ireland a n d , t o a lesser extent, t h e Netherlands are still experiencing budgetary
                problems d u e t o the level of public debt. A decline in the level of debt as a percentage of G D P is
                needed in these countries t o reduce debt'servicing costs and vulnerability t o interest r a t e increases.
 ---pagebreak--- 28. 2. 91                                   Official Journal of t h e European Communities                                                     N o C 53/21
          In Belgium t h e public debt ratio is still excessively high (128 % of G D P in 1990). T h e budget deficit
          is still t o o large t o p u t t h e public debt ratio o n a d o w n w a r d p a t h , if growth slows o r interest rates
          rise. T h e double government n o r m aiming a t freezing in real terms non-interest expenditures a n d
          a t keeping constant the deficit in nominal terms should b e applied t o all levels of governments.
          O n l y its strict a n d global application will ensure t h a t the public debt ratio will b e progressively
          reduced, which is essential t o guarantee long-term stability. Ireland h a s already reduced its budget
          deficit substantially, so t h a t t h e public debt ratio is o n a clearly declining trend. T h i s trend should
          n o w b e continued. In t h e Netherlands, the public debt ratio, though n o t as high a s in t h e case of
          Belgium a n d Ireland, is still n o t fully stabilized. T h e budget position therefore w a r r a n t s close
          scrutiny. T h e budgetary situation in Portugal also needs t o b e improved in parallel with t h e
          disinflation process so a s t o maintain the progress in stabilizing t h e public debt ratio.
                                                                          TABLE    8
                                            General G o v e r n m e n t net lending ( + ) o r b o r r o w i n g ( - )
                                                                                                                           (in percent of GDP)
                                                          1983             1985           1987               1989      1990          1991 (')
           Community                                      -5,3           • "5,2            -4,2              -3,0      -3,9            -4,1
                                                                                      H i g h deficit countries
           Greece                                         -8,3            -13,8         -12,0              -18,4      -18,6          -17,1
           Italy                                        -11,8             -12,5         -11,2              -10,2      -10,0            -9,4
                                                                                       H i g h debt countries
           Belgium                                      -11,2               -8,5           -7,1              -6,6      -5,6            -5,9
           Ireland                                      -11,8             -11,3            -9,1              -3,2      -3,3.           -3,5
           Netherlands                                     -6,4             -4,8           -6,5              -5,3      -5,4            -4,7
           Portugal                                        -9,0           -10,1            -6,8              -3,8      -6,0            -5,6
                                                                                           Other countries
           Denmark                                         -7,2             -2,2           + 2,2             -0,8      -1,4            -1,6
           Germany                                         -2,5             -1,1           -1,9               + 0,2    -3,2            -4,8
           Spain                                           -4,8             -7,0           -3,2               -2,7     -3,0            -1,8
           France                                          -3,2             -2,9           -2,0               -1,5     -1,2            -1,1
           Luxembourg                                      + 2,0            + 5,3          + 1,3              + 3,4     + 3,3          + 1,1
           United Kingdom                                  -3,3             -2,7           -1,3               + 0,9     -0,2           -0,7
          (') Forecast.
           In unified G e r m a n y , the fiscal stance is also a matter f o r concern, because of t h e expansionary
           effect of t h e budgetary costs of unification. T h o u g h a higher public deficit t o finance investment
           during t h e transition is economically justified, the size of t h e present borrowing exerts u n d u e
           pressure o n interest rates. Furthermore, the strong d e m a n d f r o m t h e f o r m e r G D R m a y strain
           production capacity in West Germany, putting pressure o n inflation a n d appreciating t h e
           exchange rate in real terms. T o guard against these dangers a n d t o avoid a n overburdening of
           m o n e t a r y policy, a tightening of the fiscal stance would be expedient.T o t h e extent t h a t t h e strong
           d e m a n d is m e t b y increased imports f r o m other M e m b e r States, this will diminish t h e strains o n
           G e r m a n production capacity a n d stimulate activity in the other countries.
           In a last g r o u p of countries — including D e n m a r k , Spain, France, Luxembourg a n d t h e United
           Kingdom — t h e budgetary position in terms of net lending o r borrowing a n d public debt seems t o
           b e u n d e r control a n d does n o t present the Community with a convergence problem. T h e increase
           in budget deficits in D e n m a r k a n d in the United Kingdom calls nevertheless f o r attention. T h e
           general assessment does n o t detract, however, f r o m t h e need, also valid f o r t h e other countries, t o
           improve t h e structural features of their public finance t o benefit t h e supply side of t h e economy, t o
 ---pagebreak--- N o C 53/22                                  Official Journal of the European Communities                                             28. 2. 91
               prepare f o r the single market of 1 9 9 2 a n d t o increase budgetary flexibility a s required b y a better
               policy m i x . This will particularly involve improving the structure of expenditure a n d receipts,
               winding d o w n in some cases the share of expenditure in G D P a n d lessening t h e t a x b u r d e n .
               Moreover, a f e w of these countries continue t o suffer f r o m strong inflationary pressures a n d large
               external deficits, such as the United Kingdom a n d Spain, o r f r o m high foreign d e b t , such a s
               D e n m a r k . Hence, there is a need t o maintain a cautious budgetary policy in these countries.
            3. Convergence of external positions
               In a n integrating economy with fully liberalized capital movements a n d increasing exchange rate
               fixity, convergence of current account balances is t o be judged in a different context a n d t h e
               appropriateness of current account imbalances h a s t o be individually assessed.
               Spaih is confronted with a high and rising current account deficit (more t h a n three a n d a half
               points of G D P in 1990). A current account deficit per se would n o t b e worrying in t h e Spanish case
               as long as it corresponded t o capital imports financing rapid growth in productive investment.
               W h a t gives cause f o r concern, however, especially if high oil prices w e r e t o persist in t h e m o n t h s t o
               c ome, is the rapidity of the deterioration of the current account position which w a s still in
               equilibrium in 1 9 8 7 . However, the deficit is expected t o stabilize in 1 9 9 1 . If exchange r a t e
               stability is t o be maintained, the rate of growth of unit labour costs in Spain m u s t soon be b r o u g h t
               below t h a t of its m a i n trading partners so as t o improve its competitive position. T h i s w o u l d also
               create t h e conditions f o r the continued strong growth needed b o t h t o reduce t h e persistently high
               levels of unemployment and t o allow the catching-up process t o continue. These considerations
               also apply t o Greece where t h e external position h a s deteriorated sharply in recent years.
               In Italy t h e external position, while n o t yet giving cause f o r concern, nevertheless calls f o r a critical
               look a t external competitiveness. In the United Kingdom some improvement is expected in t h e
               external position, still cost developments will need t o be monitored carefully.
               T h e current account positions of the initial n a r r o w b a n d countries appear broadly sustainable.
               T h e G e r m a n surplus, which h a d given cause f o r concern in the recent p a s t , is being greatly reduced
               a s a consequence of t h e redirection of trade resulting f r o m the unification process. Considerable
               progress has been m a d e in D e n m a r k , where f o r t h e first time since t h e early 1960s the current
               account would t u r n into a surplus. T h i s has been achieved, however, a t a considerable cost in
               terms of g r o w t h . A furt her improvement in the competitive position might help t o consolidate this
               improvement, a t higher levels of activity a n d employment.
               W i t h appropriate monetary, budgetary and structural policies, t h e impact of t h e oil price hike a n d
               internal inflationary pressures can be absorbed, thus preserving t h e positive f u n d a m e n t a l g r o w t h
               conditions of t h e Community. T h e development of the Community potential will improve t h e
               supply side of the economy a n d contribute t o resuming its medium-term growth t r e n d . Such policy
               m i x fulfills a t t h e same time the requirements f o r a successful move t o w a r d s economic a n d
               monetary union.
 ---pagebreak---  28. 2. 91                                   Official Journal of the European Communities                                           N o C 53/23
                                             MAIN ECONOMIC INDICATORS 1988 T O 1992
                                      COMMUNITY, UNITED STATES OF AMERICA A N D JAPAN
 (a) GDP at constant prices                                             (b) Domestic demand at constant prices
      (% change on previous year ('))                                       (% change on previous year)
                 1988        1989   1990 (»)  1991 (•)    1992 (*)                     1988       1989      1990 n        1991 n        1992 (*)
 B                4,3         4,0      '3,5     2%          2%          B                4,3       5,0           4,0          2%           2%
 DK              "0,4         1,3       0,9     1           1V4         DK            -2,2         0,8        -0,8           -v   4        1
 D                3,7         3,3   .   4,3     3V4         2           D                3,8'      2,7           3,7          3%           2%
 GR               4,0         2,6       1,2     1           iv2         GR             . 5,6       4,2           2,1          1            iv2
 E                5,0         4,9       3,5     2V2         3V4         E                7,3       7,7           5,3          3            33/4
                                                              3
 F              . 3,3         3,6       2,5     2 V2"       2 /4        F                3,5       3,1           2,9          2V4          3
 IRL           • 3,7          5,9       4,5     2%       . 3%           IRL              0,2       6,1           6,4            %          4V4
 I                3,9         3,2       2,6     2%          2%          I                4,6       3,3           2,9          2%           3V4
 L                4,3         6,1       3,2     3           3V4         L                2,7       5,3           5,2          4V2          4
NL                2,7         4,0       3,4     2           2V2         NL               2,0       4,3           3,9          I3/4         2
P                 3,9         5,4       4,2     3%          3%          P                7,4       4,1           5,0          3V2          4%
                                                  3
 UK               4,1         2,2       1,5         U       2 V2        UK               7,3       3,1           0,9            v2         2%
EC                3,8      •  3,3       2,9     2%          2 V2        EC               4,8       3,6           3,0          2%           3
USA               4,6         2,5       1,1       v4        1%          USA              3,2       1,9           0,6         - %             V4
JAP               5,7         4,9       6,0     4%          4           JAP              7,5       5,9           6,0          4%           4%
(c) Deflator of private consumption                                    (d) Balance o n current transactions
     (% change on previous year)                                            (as a % of GDP ('))
                 1988        1989   1990 (*)  1991 n      1992 ("•)                    1988       1989      1 9 9 0 (*)   1991 (»)      1992 n
B                 1,8         3,4       3,6     4V2         3V2         B                1,0       1,0           0,3    . -     v4          0
DK                4,9         5,0      2,8      3V4         2           DK            -1,8       -1,3               0           v4          1V4
D                 1,3         3,2      2,8      4           3V2         D                4,1       4,7           2,6            3
                                                                                                                                 A
GR               14,0        14,4     20,5     18V2        15           GR            -1,7      .-4,8        -5,1          - 5           -4V2
E                 5,1         6,6      6,8      63/4        5V2         E             -1,1       -2,9        -3,8          - 4           - 4
F                 3,0         3,3      3,4      3V2         3           F             -0,4       -0,2        -0,3          -    v2       -     %
IRL               2,5         3,9      2,8      3V2         2 V2        IRL              1,8       1,6           1,2            v2       -     v4
I                 4,8         6,0      6,1      6%          5V2         I             -0,6       -1,3        -1,3          -l3/4         -1%
L                 2,6         4,0      3,5      4           3V2         L              34,3       31,5        27,3           24           2 2 V2
NL                0,7         2,1      2,4      23/4        2V2         NL               2,4       3,6           3,3          3V2           3V2
P                10,0        12,8     13,2     12V2        11           P             -4,4       -1,2        -1,2          -l3/4         -IV4
UK                5,0         6,1      7,0      6%          4%          UK            -4,1       -3,7        -2,8          - 2           - 2
EC                3,7         4,9      5,1      5V4         4V2         EC               0,2       0,2       -0,3          -    %        -      V4
USA               4,1         4,4      5,1      6V4         5V2         USA           -2,4       -1,9        -1,7          -VU           -l'/2
JAP               0           1,7      2,5      2V4         2%         JAP               2,8       2,2           1,6          1V2           l 3 /4
(*) Forecast October 1990.
(') GDP for USA and Japan from 1989 onward.
 ---pagebreak--- N o C 53/24                                           Official Journal of the European Communities                                       2 8 . 2 . 91
(e) N u m b e r of unemployed as % of the civilian labour force-                (f) General government lending and borrowing
                                                                                      (as a % of G D P )
                   1988          1989        1990 (*)     1991 (*)     1992 (•)                  1988       1989   1990 (*)    1991 (•)    1992 (•)
B                  10,0            8,5          7,8          7%           7V2     B              -6,6       — 6,6    -5,8       - 6        - 5V2
DK                  6,5            7,7          8,2          83/4         83/4    DK               0,2      -0,7     -1,4       -iv2       - 1
D                   6,1            5,5          6,0          6V4          6V2     D              -2,1         0,2    -3,2       - 43/4     - 3 V2
GR                  7,7            7,8          8,1          9%           9V2     GR           -15,6     -18,4     -18,4       -17         -14 3 / 4
E                  19,3          17,0          15,8        15V2         15        E              -3,2       -2,7     -3,1       -IV,       - 1
F                   9,9            9,4          8,9    '     8%           8V2     F          ' -1,7         -1,5     -1,2       - 1        - 1
IRL                17,6          17,0          16,5        16V2         16V2      IRL            -5,2       -3,4     -3,4       - 3V2       - 3V2
I                 .10,8          10,8          10,2        10'/4        10V4      I            -10,9     -10,2     -10,1        -9V2        -9V 4
L                    2,1           1,8          1,7          v/2          1V2     L                2,1 .      3,2      3,3         1V4         1
NL                   9,3           8,7          7,4 .        7V4          7       NL             -5,2       -5,2     -5,4       - 43/4      -4V 2
P                    5,6           5,0          4,4          5     •      5       P              -5,4       -3,8     -6,0       - 5V2       -4%
UK                   8,5           7,0          6,4        7%             8       UK                1,1       0,9    -0,2         - %         -v2
                                                                             3                                       -4,0       - 4         -3V 2
EC                   9,7           8,9          8,5          8%           8 /4    EC             -3,7       -3,0
USA                  5,5           5,3          5,4          6            63/4     USA           -3,6       -2,0     -2,3       -2%         - 2
JAP                  2,5           2,3          2,2     '     2V4         2'/ 4   JAP              2,1         1,8     2,7         2V2         2%
(g) Total employment                                                              (H) Real compensation of employees per head
       (annual percentage change)                                                     (annual % change ('))
                   1988          1989        1990 (*)     1991 n       1992 (*)                  1988       1989   1990 (*)    1991 (*)    1992 (*)
B                    1,5            1,3         0,9            V4          V4      B            -0,1         0,5      2,6         2 V2         2 V2
DK                -0,6          -0,5          -0,2          0              v2      DK           -0,4       -1,3       0,4        - ' V         1
D                    0,6            1,4         2,4          1V2         1         D               1,9     -0,3       1,9         1%           "3/4
GR                   1,6            0,4         0,7         -V2          0         GR              2,8       3,9    -2,1        -iv   2     -iv   2
                                       1                                                                                            3          1
 E                   2,9            4,   .      2,7          1V2         1%        E               1,3     -0,8       1,3            A
                                                               3                                   1,0        1,5     2,0         1            1V2
 F                   0,6            1,2         1,2            /4    •     3
                                                                            /4     F
                                                                           3                                          1,5           3
 IRL                 0,4            1,1         1,6            3
                                                               A           /4      IRL          • 1,6      -1,5                   1A           1V4
 I                   1,4            0,2         0,9            V4          V2      I               3,8        3,0     2,6     •   2V2          2V4
 L                   3,1            3,7         2,4          i3/4        L'/2      L               0,5     -0,2       2,6         IV 4 '       2V4
                                                               3         1         NL              0,7     -1,5       2,2         1V2          l'/2
NL                   1,3            1,6         1,7              U
P                    0,1            1,8         0,7            v4          V4      P               3,1        0,2     3,3         23/4         2V2
 UK                  3,2            2,8         2,0         -V2          0         UK              2,1        2,5     3,2         2V4          1%
EC                   1,5            1,6         1,7            V2          3
                                                                           A       EC              1,8        1,1     2,2         IV2          iv2
                                                               3           3                                                      ~ v4           3
 USA                 2,9            2,0         0,9            /4             U    USA             0,9     -0,7       0                            U
JAP                  1,6            1,9         1,6          1V4         1        JAP              3,7        2,2     3,0         3            2%
 (*) Forecast October 1 9 9 0 .
 ( ' ) Deflated by the deflator o f private consumption.
 ---pagebreak--- 28. 2. 91                                    Official Journal o f t h e E u r o p e a n C o m m u n i t i e s                        N o C 53/25
(i) Investment in construction at constant prices                              (j) Investment in equipment at constant prices
    (% change on previous year)                                                     (% change on previous year)      •
                1988        1989    1990 (»)   1991 N      1992 (*)                              1988          1989   1990 (*) 1991 (*)  1992 (*)
B               15,0          9,6      4,7       -v 4        3%                B                  17,7          19,0    10,0      8    '   8%
DK             -3,1        -4,2      -6,1       -2%         -v4                DK                -7,5            5,5      1,8     2 V2     3V2
D                4,7          5,1      5,2        2          2%                D                   7,7           9,7    11,4      7        6
GR               7,6          2,0      2,0        2          3V2               GR                 10,8          17,3      4       4        6
E               12,6        13,3      11,5        6          7                 E                  16,5          14,1      5,4     4        5V4
F                6,2          4,5      3,0        2          3V2               F                   8,9           6,9      4,5     4        5%
IRL            -0,7           9,8 .   10,6        63/4   -   63/4              IRL                 5,6          14,1      9,8     6V4      6V2
I                3,7          3,6      2,5        2 V2       2V2               I                   6,4           6,3      3,4     4        5V4
L                9,9          8,8      8,2        5          4 V2              L                 -5,4           14,9    12,0      6V4      5%
NL              11,8          2,6      0,8    .-iv 2         2 V2              NL                  6,8           5,5      5,5     3V2      2%
P               10,1          7,5      7,0        4V£-       5 V2              P                  23,2           9,0    11,0      8        8V2
UK               6,1       -0,4      -2,2        ~*U         I3/4              UK                 17,7          10,0   -0,3     -2% '      3V4
EC               6,4          4,7      3,6        2          3V«               EC                 10,4         . 9,1      5,3     33/4     5V4
(k) Total investment at constant prices                                        (1) GDP per head
     (% change on previous year)                                                    (EC = 100) at current prices and current PPS
                1988        1989    1990 (*)   1991 (*)    1992 (*)                              1960          1973     1986   1991 H    1992 (*
B               16,0        13,6       7,0         3V2       5V2               B                  95,4        101,3    101,0    103,3 ^   104,0
DK             -6,5        -0,1      -2,6          0         IV2               DK               118,4         113,2    116,7    104,2     103,9
D                5,9          7,1      8,0         4V2       4                 D                118,0         111,3    114,3    112,5     110,9
GR               9,0          8,6      2,9         3         4%                GR                 38,7          56,9     55,8    52,8      52,4
E               14,0.       13,6       8,9         5%        6V4               E                  59,6          78,1     72,2    77,1      77,8
F                7,5          5,9      3,8         3V4       4V2               F                105,9         110,6    110,1    108,9     109,3
IRL              0,3        12,1     -10,2         6V2       6%'               IRL                60,8          59,0     63,5    69,2      70,4
I                4,9         "5,1      3,0         3%        4                 I                  86,6          93,4   103,2    104,4     104,9
L                3,2        11,5      10,0         5iU       5V4               L                158,4         142,3    124,2    125,4     127,4
                                                     3
NL               9,8          3,9      2,9           /4      2V2   *           NL               118,7         113,2    106,3    103,6     103,6
P               15,0          8,3      9,1         6V4       7                 P                  38,8          56,4     52,7    56,9      57,7
UK              13,1          4,8    -1,2       -IV    2     2V2               UK               128,7         108,5    105,1    104,0     104,1
EC               8,4          6,8      4,4         3         4V4               EC               100,0         100,0    100,0    100,0     100,0
USA              5,4          1,8      0,6        -lU        3                 USA              190,0         162,0    155,8    147,4     144,9
JAP             13,4        10,9       9,9         5         6                JAP                 55,9          96,4   111,0    122,5     125,4
(*) Forecast October 1990.
Source: Commission services.