CELEX: 51995DC0228
Language: sv
Date: 1995-05-31 00:00:00
Title: Commission' s Recommendation for the Broad Guidelines of the Economic Policies of the Member States and the Community

EUROPEISKA GEMENSKAPERNAS KOMMISSION

                      Bryssel den 31.05.1995
                      KOM(95) 228 slutlig

 Kommissionens rekommendation
  om övergripande riktlinjer för
medlemsstaternas och gemenskapens
       ekonomiska politik
 ---pagebreak---  ---pagebreak---                                               -1-
 it
      fc* it
               it
                         EUROPEISKA KOMMISSIONEN
it              it

                      Kommissionens rekommendation
                       om övergripande riktlinjer för
                     medlemsstaternas och gemenskapens
                            ekonomiska politik

                              utarbetad i enlighet med artikel 103.2
                     i Fördraget om upprättandet av Europeiska gemenskapen
 ---pagebreak---                                -    y) ex -

                              Innehållsförteckning

      ÖVERGRIPANDE RIKTLINJER FÖR GEMENSKAPENS OCH
      MEDLEMSSTATERNAS EKONOMISKA POLITIK

      1.   Inledning                                               1

      2.   Riktlinjer för den ekonomiska politiken                 2
                 Pris- och växelkursstabilitet                     2
                 Sunda statsfinanser                               4
                 Konkurrenskraft                                   6
                 Sysselsättning och arbetsmarknad                  7

II.   FÖRKLARINGAR                                                10

      1.   Inledning                                              10

      2.   Nuvarande ekonomiska situation och framtidsutsikter    11

            2.1 Tillväxtutsikter                                  11
            2.2 Sysselsättningens utveckling                      12
            2.3 Inflationens utveckling och budgetär konvergens   14

      3.   Politiska målsättningar och risker                     21

      4.   Politiken på olika områden                             24

            4.1 Makroekonomisk politik                            24
            4.2 Konkurrenspolitik                                 27
            4.3 Sysselsättnings- och arbetsmarknadspolitik        29
 ---pagebreak---                                   A \r

   I. Övergripande riktlinjer för medlemsstaternas och
           gemenskapens ekonomiska politik

1. inledning

Sedan sommaren 1994 då de förra övergripande ekonomiska riktlinjerna antogs har den
ekonomiska tillväxten fått ordentligt fäste i gemenskapen. Såsom nyligen framgick av
oroligheterna på valutamarknaden till följd av dollarfallet, kvarstår dock fortfarande
betydande risker och viktiga politiska problem att lösa. För att se till att
tillväxtmöjligheterna utnyttjas fullt ut för att öka sysselsättningen och förbättra
konvergensen, måste den ekonomiska politiken på olika områden bemöta de utmaningar
och ta vara på de möjligheter som den framväxande ekonomiska expansionen medför.

Föreliggande politiska riktlinjer som utarbetats och antagits i enlighet med artikel 103.2 i
Fördraget om upprättandet av Europeiska gemenskapen, kommer att bilda en referensram
för den ekonomiska politiken i gemenskapen och i medlemsstaterna. De bekräftar såväl de
mål som ställts upp i de tidigare versionerna som Europeiska rådets slutsatser om
bekämpning av arbetslösheten, särskilt slutsatserna från Essen-mötet som
rekommenderade ökade insatser inom fem olika områden. Genom att tillämpa dessa
riktlinjer fullt ut blir det möjligt att förbättra konvergensen och förverkliga de gynnsamma
tillväxt- och sysselsättningsutsikterna och på så sätt uppnå en betydande minskning av
arbetslösheten.

Det finns i dagsläget två politiska problem som borde prioriteras. Först finns det risk för
att den ekonomiska tillväxtens gynnsamma effekter leder till "anpassningsnonchalans". En
sådan kan yttra sig som ett svagare intresse - beroende på den cykliska förbättringen av
budgetunderskottet - för att på ett varaktigt sätt lösa den strukturella finanspolitiska
obalansen eller, när sysselsättningen börjar ta fart, som en viss motvilja mot att starta och
genomföra de åtgärder som behövs för att avhjälpa bristerna på arbetsmarknaden. Det är
viktigt att bestämt motarbeta dessa båda former av "anpassningsnonchalans".

För det andra har de nyligen ändrade växelkurserna medfört större risker inte bara för
inflationsspridning utan även för en splittring av den inre marknaden, samt ett ökat hot
mot de fördelar som uppnåtts tack vare den ekonomiska integrationen.
 ---pagebreak--- Jämviktsrubbningar i växelkurserna kommer att ha skadliga effekter för samtliga
medlemsstater. Det är uppenbart att om man vill minimera risken för att den typen av
händelser inträffar måste en av huvudprioriteterna för den ekonomiska politiken vara att
skapa förutsättningar för växelkursstabilitet inom gemenskapen.

Föreliggande riktlinjer bekräftar på nytt de politiska målsättningar som fastställdes i
riktlinjerna från december 1993 och juli 1994, nämligen att det är mycket viktigt att
gemenskapen och medlemsstaterna omvandlar den nuvarande återhämtningen till en stark,
bärkraftig, icke-inflationistisk medelfristig tillväxt- och sysselsättningsskapande process, så
att arbetslösheten minskar på ett markant sätt och den grad av konvergens kan uppnås
som är nödvändig för att underlätta övergången till fas två i den ekonomiska och
monetära unionen (EMU). För att uppnå dessa mål krävs en stabil, investeringsfrämjande
ekonomisk ram på kort och medellång sikt som kännetecknas av

    en penningpolitik som syftar till stabilitet och som inte motverkas av en olämplig
    budget- och löneutveckling,

    fortlöpande ansträngningar som syftar till att stärka statsfinanserna i de flesta
    medlemsstaterna och som är förenliga med de mål som satts upp i
    konvergensprogrammen,

     en nominell löneutveckling som är förenlig med målet om prisstabilitet och som
     samtidigt tar hänsyn till behovet av att öka lönsamheten för de
     sysselsättningsskapande investeringarna.

En väsentlig komplettering till denna ram utgörs av strukturreformerna avsedda att främja
medlemsstaternas ekonomiska konkurrenskraft och att fa deras arbetsmarknader att
fungera bättre. De olika politiska åtgärder som behövs för att upprätthålla en långsiktig
tillväxt, öka sysselsättningen och förbättra konvergensen skall vara förenliga med
varandra.

2. Riktlinjer för den ekonomiska politiken

Pris- och växelkursstabilitet

Sedan början av nittiotalet har viktiga framsteg gjorts i gemenskapen och i
medlemsstaterna för att minska inflationen. Det finns för närvarande nio medlemsstater
(B, DK, D, F, IRL, L, NL, A, UK) som förväntas få en inflation mellan 2 och 3 procent år
1996, vilket stämmer överens med målsättningen i 1993 och 1994 års riktlinjer. Finland
 ---pagebreak---                                             -3

och Sverige förväntas få en inflationstakt nästa år som ligger precis över detta intervall. I
Spanien, Italien och Portugal förväntas däremot en inflation på ungefär 4,5 procent medan
den i Grekland förväntas minska till 9 procent.

Ytterligare framsteg behöver göras i riktning mot prisstabilitet. Detta innebär framförallt
att den grupp av medlemsstater som kan anses ha ett tillfredsställande inflationsresultat
måste utvidgas betydligt. De medlemsstater som för närvarande förväntas ha
inflationstakter på mellan 2 och 3 procentenheter bör fortsätta med en politik som syftar
till att förhindra att inflationstrycket kommer tillbaka och försöka nå intervallets nedre
gräns. Andra länder borde göra betydligt större ansträngningar.

De växelkursförändringar som inträffade nyligen har stor betydelse för
inflationskonvergensen. Hos medlemsstater vars valutor apprecierats i nominella termer
förväntas därför en starkare inflationskonvergens och inflationen beräknas stanna under 3
procent i år och nästa år. I dessa länder förväntas även löneutvecklingen i stort sett ligga i
linje med målet om prisstabilitet. Det kommer dock att bli nödvändigt att säkerställa att
löneutvecklingen inte leder till minskad lönsamhet för investeringarna, särskilt i de            \
                                                                                                     """X
                                                                                                        \
exportinriktade sektorerna. I medlemsstaterna med valutadeprecieringar däremot är
prisstabiliteten mer osäker och risken för stegrad inflation överhängande. Dessa länder
måste vara mycket försiktiga. Inom ramen för en stark ekonomisk tillväxt kommer det att
vara särskilt viktigt att undvika att ökade importpriser ger upphov till en pris- och
lönespiral. I annat fall kommer den vunna trovärdigheten av att en stabiliseringspolitik
håller på att utveckla sig snabbt att gå till spillo.

Deprecieringen av dollarn kombinerad med osäkra inflations- och finanspolitiska utsikter i
vissa medlemsstater har givit upphov till en betydande växelkursinstabilitet inom
gemenskapen. De växelkursförändringar som ägt rum är större än vad som hade kunnat
motiveras av skillnader i inflationstakt och har lett till försämrad konkurrenskraft i de
länder som har hållit sig till en sund politik och till större inflationstryck i de länder där
valutan har deprecierats. Växelkursernas bristande stabilitet är till skada för alla
medlemsstater. I de stater där valutans värde har ökat försämras de kortsiktiga
tillväxtperspektiven och i de stater där valutans värde har minskat försämras
inflationsutsikterna och äventyras den medelfristiga stabiliseringspolitiken. Dessutom
äventyras den inre marknadens regelrätta funktion. Risken är inte bara att vissa
 ---pagebreak--- investeringsbeslut fattas för att utnyttja de konkurrensfördelar som uppstått genom
kursförändringen, utan det är även möjligt att särintressen som stödjer en
devalveringspolitik uppmuntras.

Därför måste alla medlemsstater driva en politik som främjar stabila växelkurser inom
gemenskapen. Växelkursstabilitet kommer att bidra dels till att fördelarna med den inre
marknaden helt kommer till sin rätt och att resursallokeringen inom gemenskapen
förbättras, dels till att prisstabiliteten kan förbättras. I detta sammanhang kommer
budgetpolitiken och trovärdigheten av åtaganden om finanspolitisk konsolidering att spela
en nyckelroll.

Sunda offentliga finanser
Trots att den ekonomiska tillväxten konsoliderats är utsikterna för att lösa den
finanspolitiska obalansen osäkra och finanspolitisk konvergens är fortsatt svår att uppnå.
Enligt     aktuella   beräkningar    förväntas      nettoupplåningen    i procent       av
bruttonationalprodukten att minska med c:a 1,5 procentenheter mellan 1994 och 1996,
varav hälften beror på de automatiska stabilisatorernas inverkan på budgetsaldot.

Genom att större framsteg uteblir när det gäller budgetkonsolidering upprätthålls i många
fall en situation där finanspolitiken är hårt begränsad av höga och stigande ränteskulder.
Detta undergräver dessutom pris- och växelkursstabiliteten, ökar osäkerheten om vilken
finanspolitik som skall föras och undergräver de olika politiska åtgärdernas trovärdighet,
bidrar till sinsemellan dåligt överensstämmande politiska åtgärder och undergräver den
monetära politiken. På medellång sikt kommer en kontinuerlig finanspolitisk obalans att ha
negativa effekter på den ekonomiska tillväxten och på skapandet av nya arbetstillfällen. En
sund finanspolitisk situation påverkar utbudssidan positivt eftersom det öppnar vägen för
skatteminskningar och för en ökning av produktiva offentliga investeringar. De argument
för en konsolidering av budgeten som grundas på tillväxt och sysselsättning är verkligen
minst lika viktiga som de argument söm baseras på behovet av att förbättra skuldkvoten
och uppnå nominell konvergens. Om budgetunderskotten inte kan minskas på ett
bestående sätt nu i en period av relativ stark tillväxt, när skall de då minskas?

Den tydliga uppgift som nästan alla medlemsstater står inför, är att se till att dra nytta av
tillväxtmöjligheterna för att förbättra budgetsaldot genom en minskning av de strukturella
underskotten. Medlemsstaterna skall ha målsättningen att snarast möjligt minska
budgetunderskottet till mindre än 3 procent av bruttonationalprodukten, som ett första
 ---pagebreak--- steg mot målet på medellång sikt att reducera underskottet till mellan 0 och 1 procent av
bruttonationalprodukten, vilket är särskilt viktigt under fas tre enligt vad som angavs i
1993 års övergripande riktlinjer. Med en sådan politik skulle det vara möjligt att fa ner det
genomsnittliga budgetunderskottet i gemenskapen till under 3 procent av BNP till 1997.

Enligt de senaste beräkningarna borde alla medlemsstater, inbegripet de som har ett
förväntat budgetunderskott för i år som är lägre än 3 procent (Danmark, Tyskland, Irland
och Luxemburg), utnyttja allt utrymme som ges av en ekonomisk tillväxt utöver
budgetplanen eller av en räntesänkning, för att påskynda konsolideringen av budgeten.
Om oroligheterna på valutamarknaden skulle leda till att årets ekonomiska tillväxt avtar,
bör dock ansträngningarna för att uppnå målen i konvergensprogrammen inte minska.

Prognosen för 1996 visar att de finanspolitiska målen inte kommer att uppnås på ett
enhetligt sätt, om man utgår ifrån de anpassningsåtgärder som hittills på ett tydligt sätt har
angivits av de medlemsstater som har finanspolitiska målsättningar i sina
konvergensprogram. För att fa ner underskotten till de nivåer som satts som mål i
konvergensprogrammen behövs anpassningar, om än i olika omfattning, i Belgien,
Tyskland, Grekland, Spanien, Frankrike och Portugal. I samtliga dessa fall är det
förväntade bugdetunderskottet större än det som anges i konvergensprogrammet.
Däremot förväntas Danmark, Irland, Nederländerna och Förenade kungariket uppfylla
underskottsmålen nästa år.

I många länder bör en begränsning av ökningen av de offentliga utgifterna ges företräde
eftersom, bortsett från sysselsättningseffekterna, det utan tvekan finns gränser för högre
beskattning och sociala avgifter. Men även en rationellare användning av de offentliga
utgifterna och effektivare skattesystem kan bidra till ekonomisk tillväxt och till skapandet
av nya arbetstillfällen. Såsom redan föreslagits i 1994 års riktlinjer bör i synnerhet
skattesystemet anpassas på ett sätt som är förenligt med främjande av sysselsättning
medan de offentliga utgifterna bör omfördelas från konsumtion till produktivitetshöj ande
åtgärder. I det senare fallet bör företräde ges till ökade offentliga investeringar och till
ökade immateriella investeringar i humankapital. Även i detta sammanhang bör
beskattningen av arbetskraften minskas, särskilt i nedre delen av löne- och
produktivitetsskalan. Det är dock viktigt att den nödvändiga minskningen av
budgetunderskottet inte äventyras och därför bör dessa utgifter uppvägas av extra
inkomster.

Finanspolitiska problem fortsätter att känneteckna flera medlemsstaters offentliga finanser.
I Grekland och Italien fortsätter den ihållande finanspolitiska obalansen att ha
 ---pagebreak---                                              6-

konsekvenser på andra områden, genom att undergräva pris- och växelkursstabiliteten, ge
upphov till höga riskpremier på räntesatserna och genom att hindra utvecklingen mot
konvergens. Det krävs bestämda åtgärder inom ramen för ett flerårigt program för att
återställa förtroendet för den ekonomiska politiken. När det gäller Sverige som står inför
liknade problem har ett flerårigt finanspolitiskt anpassningsprogram redan annonserats.
Det är nödvändigt att hålla fast vid denna kurs. I Belgien kräver den höga skuldsättningen
att den finanspolitiska delen av den övergripande planen genomförs fullt ut och att
ytterligare framsteg görs för att minska budgetunderskottet till mindre än 3 procent av
BNP, så att även skuldkvoten sjunker på ett mera markant sätt.

I Spanien och Portugal krävs större insatser och mer ambitiösa målsättningar i fråga om
finanspolitisk konsolidering; mer ambitiösa finanspolitiska målsättningar är även
nödvändiga i Österrike och Frankrike. I Österrike och Sverige behövs även ytterligare
insatser för att åstadkomma en nedåtgående trend för skuldkvoten. Slutligen, även om
Finland ännu inte har utarbetat ett konvergensprogram pekar prognoserna på långtgående
finanspolitiska målsättningar. Ansträngningarna att uppnå dessa mål bör fortsätta.

Utvecklingen och utsikterna på detfinanspolitiskaområdet i Irland och Luxemburg tyder
på att dessa länder även fortsättningsvis inte kommer att ha något överdrivet stort
budgetunderskott. I det förstnämnda landet förväntas skuldkvoten att fortsätta avta i god
takt, medan tillståndet för de offentliga finanserna i det senare landet fortsätter att vara
starkt.

Konkurrenskraft
I enlighet med förslagen i vitboken om "Tillväxt, konkurrenskraft och sysselsättning" är
medlemsstaterna i färd med att genomföra reformer i syfte att stärka de krafter som bidrar
till den inhemskt genererade tillväxten och till att främja dynamiken och konkurrenskraften
i gemenskapens olika ekonomier.

För att helt kunna dra nytta av de möjligheter som den inre marknaden erbjuder har 92.4
procent av gemenskapsdirektiven nu införlivats i nationell lag, med en spridning som
varierar mellan 86.3 och 98.6 procent. Ytterligare framsteg krävs dock på områden som
försäkringar, immaterialrätt, offentlig upphandling, nya teknologier och tjänster och den
fria rörligheten. Vidare har framstegen varit måttliga när det gäller att utvidga den inre
marknaden till telekommunikations- och energiområdet, samtidigt som den inre
marknaden på transportområdet förblir ofullständig. Dessutom är ytterligare framsteg
 ---pagebreak--- nödvändiga vad gäller att stärka konkurrensreglerna, minska statliga stöd och minska den
offentliga sektorns roll. Genom privatiseringar, så långt medlemsstaterna bedömer att det
är förenligt med deras mål, kan de framsteg som redan gjorts i denna riktning främjas.

         Genomförande av åtgärderna i vitboken om den inre marknaden
                           (situation per medlemsstat, i procent, 17.5.1995

  DK                          NL             UK              B                IRL     I     GR

 98.6     95.9      95.4     95.0    92.7   92.2    90.9    90.4    90.0      89.5   89.0   86.3

                                            EG-12: 92.4

 Källa: Europeiska kommissionen

Olika initiativ har tagits på gemenskapsnivå. Som en följd av rådets rekommendation i
Essen har en rådgivande grupp i konkurrensfrågor upprättats, som planerar att utarbeta en
rapport till rådsmötet i Cannes om situationen för gemenskapens konkurrenskraft och
närbesläktade frågor. Vidare har en grupp för förenkling av lagstiftning och administration
upprättats. I syfte att främja den allmänna konkurrenskraften har flera frågor tagits upp till
granskning på gemenskapsnivå, inbegripet finansieringen av små och medelstora företag,
ökad flexibilitet på arbetsmarknaden och förbättrad yrkesutbildning.

Det är av väsentlig betydelse för dynamiken i gemenskapens olika ekonomier att öka de
materiella och immateriella investeringarna. Detta gäller särskilt investeringar i utbildning
och i gemenskapens infrastruktur som måste utvecklas för att möta nästa århundradets
utmaningar. De transeuropeiska näten bör genomföras och likaså handlingsplanen för
informationssamhället. Dessutom är det väsentligt med en bättre samordning av
medlemsstaternas verksamheter när det gäller att aktivt främja initiativen inom forskning
och utveckling. Parallellt löpande och samordnade ansträngningar på gemenskapsnivå och
på medlemsstatsnivå är en väsentlig byggsten för att förverkliga möjligheterna att skapa
nya arbetstillfällen och tillväxt.

Sysselsättning och arbetsmarknad
Om den ekonomiska återhämtningen fortsätter som förväntat, kommer den att absorbera
den cykliska delen av arbetslösheten senast 1997. För att arbetslösheten skall fortsätta att
minska i en betydande och tilltagande takt behövs en hög ekonomisk tillväxttakt under
många år och en ökad tillväxtkapacitet genom övergripande, integrerade och samordnade
ansträngningar    för    att    åstadkomma      strukturförändringar     i    fråga     om
 ---pagebreak---                                             -8

utbildningssystem, arbetsrätt, anställningskontrakt, system med avtalsförhandlingar och
socialaförsäkringssystemför att generellt förbättra arbetsmarknadens funktionssätt.

Inom ramen för vitboken har rådsmötet i Essen, bland de många åtgärder som verkar i den
riktning som skisserats här, valt att prioritera följande fem:

•      Förbättra arbetstagarnas möjligheter att få arbete genom att främja investeringar i
       yrkesutbildning.

•       Öka tillväxtens arbetsintensitet.

•       Minska den del av arbetskraftskostnaden som inte utgör lön.

•       Förbättra arbetsmarknadspolitikens effektivitet.
•       Förbättra åtgärderna för att hjälpa de grupper som drabbats särskilt hårt av
        arbetslösheten.

Medlemsstaterna har anmodats att genomföra de åtgärder som är anpassade till deras egen
situation och att utarbeta fleråriga program som anger deras politiska intentioner. Ett antal
åtgärder har redan vidtagits, men större och mer beslutsamma insatser behövs.

En aktiv och mer effektiv arbetsmarknadspolitik bidrar till att uppnå målet att öka
sysselsättningen genom huvudsakligen följande tre kanaler:

i)   Den förbättrar arbetstagarnas möjligheter till arbete genom att främja investeringar i
     yrkesutbildning, särskilt i små och medelstora företag, och på så sätt öka
     arbetskraftens kvalitet, vilket gagnar konkurrenskraften, den potentiella produktionen
     och arbetskraftens flexibilitet och möjligheter.

ii) den öka tillväxtens arbetsintensitet utan att påverka själva tillväxttakten negativt
    genom att

     - parterna på arbetsmarknaden på lämplig nivå undersöker om sysselsättningen kan
       främjas utan att äventyra konkurrenskraften, genom att produktivitetsvinsterna
       investeras i innovativa former av arbetsorganisation, exempelvis förkortad
       arbetsdag och nya sätt att förlägga arbetstiden, och nya kombinationer av arbete
       och fritid
 ---pagebreak---          öka anställningsincitamenten genom att minska den del av arbetskraftskostnaden
         som inte utgör lön, särskilt på den nedre delen av löne- och produktivitetsskalan,
         utan att andra delar av arbetsmarknaden påverkas negativt. Från en
         makroekonomisk utgångspunkt måste detta åstadkommas utan att minskningen
         av budgetunderskotten eller företagens konkurrensförmåga äventyras. Därför
         krävs reformer, som vid behov även omfattar alternativa finansieringskällor för
         de sociala skyddssystemen.

         uppmuntra utvecklingen av nya arbetstillfällen och verksamheter, t.ex. sådana
         som är relaterade till tjänstesamhället och till en miljömässigt hållbar utveckling,

iii) Den främjar möjligheten att anställa arbetskraft när nya arbetstillfällen uppstår genom
     att

         öka arbetsmarknadspolitikens effektivitet genom ökad yrkesmässig och
         geografisk rörlighet (särskilt för de arbetstagare som kan anställas omedelbart),

         förbättra åtgärderna för att hjälpa de grupper som drabbats särskilt hårt av
         arbetslösheten, genom särskilda utbildningsprogram som fokuseras på
         målgrupper som drabbats av utslagning.

En arbetsmarknadspolitik som utnyttjar dessa tre kanaler utgör inte endast ett oumbärligt
komplement till den makroekonomiska politiken och strukturpolitiken på
konkurrensområdet, utan bidrar även till att bibehålla och förstärka sammanhållningen och
det sociala samförståndet inom unionen under den långa och svåra processen att råda bot
på arbetslösheten.

För att höja effektiviteten av de insatser som görs för närvarande och för att generellt öka
det inbördes sammanhanget mellan de olika politiska åtgärderna, överlämnade
kommissionen den 8 mars 1995 ett meddelande till rådet i vilket den föreslår, inom ramen
för artikel 103 i fördraget, att ett förfarande för övervakning av sysselsättningstendenserna
och de sysselsättningspolitiska åtgärderna införs.

Det är viktigt att medlemsstaterna snabbt antar sina fleråriga program vilka kommer att
vara ett riktmärke för den fortlöpande övervakningen av deras sysselsättningsskapande
åtgärder. Vart och ett av dessa program bör vara förenligt med den makroekonomiska
ram som definieras i de övergripande riktlinjerna för den ekonomiska politiken.
 ---pagebreak---                                                                                       l
                                            - y/a -
                             II. Explanatory document

This explanatory document reviews the economic situation and outlook, the progress
made in implementing the previous Broad Guidelines and the current stance of
economic policy. In accordance with what was announced in the Communication to
the Council on the Follow-up to the Essen European Council on Employment1,
employment trends and policies are given greater prominence.

On the basis of the analysis outlined in this explanatory document, the Commission is
recommending a new set of guidelines for the economic policies of the Member States
and of the Community which are firmly oriented towards achieving economic
convergence and fostering job creation. These guidelines confirm the thrust of those
adopted in December 1993 and July 1994, but take into account the fact that the
economies of the Community are now at a much more advanced stage of the recovery
and that a number of risks are appearing on the way to transforming the current
recovery into strong medium-term growth.

1. Introduction
The economic outlook for the Community continues to be favourable. The recovery,
which had just become visible a year ago when the 1994 Broad Guidelines were
adopted, has gathered strength and its pattern - exports and investment continue to be
the most dynamic components - remains conducive to sustained medium-term growth.
Notwithstanding the negative effects of the recent foreign exchange turmoil, growth is
expected to remain satisfactory also in 1996. The recent episode of exchange rate
instability has certainly affected business confidence negatively, but the fundamental
factors determining growth remain favourable.

Progress has taken place in achieving the degree of nominal convergence necessary for
the transition to EMU. But more needs to be done and, in certain cases, progress has
been disappointing relative to what could have been achieved in the current favourable
economic environment. The recent instability of foreign exchange markets, even if its
origin lays to a great extent outside the Community, highlights the lack of convergence
which still characterises the economic performance of several Member States, and
especially the lack of credibility of their budgetary consolidation plans.

    "Follow-up to the Essen European Council on Employment" Com (95) 74 final of 8 March 1995
 ---pagebreak---                                           11

Given that employment always responds with a lag to a recovery in economic activity,
the improvement in the economic situation is not yet contemporaneously reflected in a
similar upturn in labour market conditions, even though the reduction of
unemployment in this cycle is expected to be much more pronounced than that seen in
the early 1980s. Employment, which declined again in 1994, is now projected to
increase this year and in 1996 by about one per cent a year, with the rate of
unemployment also starting to decline.

Under these circumstances, economic policy must be resolutely oriented towards the
twin objectives achieving economic convergence and fostering job creation. This
means achieving strong, non-inflationary and more employment-creating rates of
growth.

2. The economic situation and outlook

2.1 Growth prospects
Economic growth in the Community is projected to average 3.1 per cent in 1995 and
2.9 "per cent in 1996, up from an estimated 2.7 per cent last year. Thus, the recovery
which commenced towards the second half of 1993, is now being transformed into
robust economic growth so that, by 1996, real output in the Community will be almost
10 per cent above the 1991 level.

The economic expansion has been, and is expected to continue to be, sustained by
strong exports, investment spending and, to a lesser extent, private consumption
growth. Buoyant world trade conditions are expected to sustain Community exports
which should increase, in real terms, by 7.5 and 6.5 per cent, respectively, during this
year and next. Investment spending, which is estimated to have grown by 2.4 per cent
in 1994, is projected to increase by 6.3 per cent this year and by just below 6 per cent
in 1996. Finally, private consumption, is projected to expand by 2.1 per cent this year
and by 2.5 per cent in 1996. This pattern of growth - with investment growing at a
brisk pace - corresponds closely to what is necessary to create the conditions for a
long period of strong growth.

The recent weakening of the dollar in the foreign exchange markets and the substantial
depreciations experienced by some European currencies are having a twofold effect on
 ---pagebreak---                                                  12

Community growth prospects.        On the one               Table 1

hand, overall growth is slowed down as                           Economic growth in the Community
                                                                    (percentage change in real GDP)
Community exports become, on average, more                              1993    1994    1995    1996
expensive on world markets and as business                  B           -1.7    2.3      2.7     2.6
confidence is negatively affected by the                    DK           1.5    4.4      3.3     2.9
                                                            D           -1.1    2.9      3.0     2.6
uncertainty induced by exchange rate instability.
                                                            GR          -0.5    1.2      1.6     1.8
On the other hand, the exchange rate                        E           -1.1    2.0      3.1     3.4
                                                            F           -1.5    2.7      3.1     2.9
movements within the Community may result in
                                                            IRL         4.0     6.3     6.9      5.5
short-term differential effects on the growth               I           -0.7    2.2     3.3      3.4
                                                            L           2.1     3.0     3.3      2.9
prospects of countries whose currencies have
                                                            NL           0.3    2.5     3.2      2.8
depreciated compared with those which                       A           -0.1    2.7     2.7      2.5
appreciated.                                                P           -1.2    1.1     3.0      3.2

                                                            FIN         -1.6    3.9     5.3      4.2
                                                            S           -2.6    2.2     2.8      3.0
The fundamental factors which shape economic                UK          2.0     3.8     3.1      2.8

growth in the Community, however, remain EC                     -0.5        2.7       3.1       .2.9

favourable.      World trade is expected to         Source: Commission Spring 1995 economic forecasts

continue expanding strongly while labour
productivity and investment profitability trends within the Community are
encouraging. As a result, most Member States are expected to show satisfactory
rates" of economic growth (see Table 1), with Ireland projected to post remarkably fast
rates of output and employment growth throughout the period.

2.2 Employment trends
Following three years of net job losses, employment in the Community is projected to
expand again in 1995 and 1996. Employment in the Community declined by a
cumulative 3.9 percentage points over the period 1992-1994: 5.8 million jobs were
lost. 1995-96 should see an increase in employment of about one per cent a year
which implies the net creation, over the two years, of about 3 million jobs. Given that
in 1995-96 the active population will increase by about 1.4 million persons, the
expected job creation will allow a net reduction of unemployment by approximately
1.6 million.

This year and next employment is expected to rise in all the Member States, with
particularly strong rates of increase in Denmark, Spain, the Netherlands, Sweden, the
United Kingdom, and especially so in Luxembourg, Finland and Ireland (see table 2).
 ---pagebreak---                                                                       13-

In recent years, labour productivity growth evolved in a way similar to that of all
previous cyclical episodes: it decelerated substantially during the recession (see
table 3) and accelerated at the beginning of the recovery (3.2 per cent in 1994). For
1995 and 1996, however, the forecasts suggest a return to the trend of the last twenty
years (about 2 per cent). In the present forecast the Community economy is therefore
expected to show an employment content of growth which is not inferior, but also not
greater, than that of the last twenty years.

Table 2
                                       Employment and Unemployment
                                             (percentage change and per cent of the labour force)

                                          Employment growth                                         Unemployment rates
                                  1994               1995               1996                1994           1995          1996
          B                        -0.7                0.7                1.0               10.0            9.6           9.1
          DK                       -0.1                2.3                1.1               10.2            8.6           8.0
          D                        -0.9                0.7                0.9                8.4            7.8           7.3
          GR                        1.3                1.0                1.0                9.6            9.6           9.5
          E                        -0.9                1.5                2.0               24.1           23.7          22.8
          F                         0.1                1.1                1.0               12.5           12.1          11.5
          IRL                      2.6                 2.7                2.6               15.1           14.1          13.1
          1                       -1.6                 0.3                0.8               11.4           11.4          10.9
          L                        2.6                 2.8                2.7                3.5            3.6           3.4
         NL                       -0.0                 1.3                1.9                7.7            7.6           7.2
         A,                        0.2                 0.5                0.4                4.0            3.9           3.8
         P                        -0.1                 0.4                0.7                6.9            6.7           6.3
         FIN                      -0.8                 3.0                2.5               18.5           16.3          14.6
         S                        -0.9                 2.0                1.8                7.8            7.2           6.5
         UK                        0.3                 1.2                1.1                9.4            8.3           7.8
         EC                       -0.5                 1.0                1.1               11.2           10.7          10.1
Source. Commission Spring 1995 economic forecasts
N.B. At the beginning of 1995 Eurostat has significantly revised its unemployment figures

Employment in the manufacturing sector, where productivity increases are particularly
strong, declined by about 2.5 per cent last year, but is now expected to recover to a
projected growth of 0.5 per cent in 1995 and 1.1 per cent in 1996. The expansion in
employment in this sector as well suggests that the recovery has given way to a
sustained growth process.

The projected increases in employment will produce a decline in the unemployment
rate from a peak of 11.2 per cent of the labour force in 1994 to 10.1 per cent in 1996.
Large declines in unemployment in the period 1994-1996 are projected to take place in
Finland (3.9 percentage points), Denmark (2.2 points) and Ireland (2 points).
 ---pagebreak---                                                                      - 14

High unemployment, however, is projected to continue to mark the labour market
experience of Spain, Ireland, Finland; in Italy and France unemployment is expected
to remain between 10.5 and 11.5 per cent in 1996; in Belgium and Greece
unemployment is projected to remain between 9 an 9 14 per cent; finally, with regard
to the remaining eight Member States, the rate of unemployment is expected to range
from a low of 3 V* per cent in the case of Luxembourg to a high of 8 per cent in the
case of Denmark.

Table 3
                                             Labour Productivity Growth
                                                       (annual percentage changes)
                     1961-73          1974-90            '91       •92       '93                  '94     •95   •96   1991-96

    B                    4.3              2.0            2.1           2.3         -0.3           3.1     1.9   1.6     1.8
    DK                   3.2              1.4            2.9           1.2          2.2           4.5     1.0   1.8     2.2
    D*                   4.0              1.9            2.5           3.9          0.7           3.8     2.3   1.8     1.7
    GR                   8.1              1.4            5.6          -0.6         -1.5          -0.1     0.6   0.7     0.8
    E                    6.5              2.7            1.8           1.9          3.3           2.9     1.6   1.4     2.1
    F                    4.7              2.2            0.7           2.2         -0.3           2.6     1.9   1.8     1.5
    IRL                  4.3              3.8            2.9           4.5          3.3           3.6     4.1   2.9     3.6
    1                    5.5              2.0            0.4           1.8          2.2           3.8     3.0   2.6     2.3
    L                    3.0              1.3           -1.0           0.0          0.0           0.4     0.4   0.1       0
    NL                   3.9               1.7            0.9          0.4           0.5          2.5     1.9   0.9     1.2
    A                    5.0               1.5            0.9          0.0           0.4          2.5     2.2   2.1     1.4
  - p                    6.6               3.4            1.3          1.7           0.8          1.3     2.5   2.5     2.8
    FIN                  4.5              2.6           -2.0           3.7           5.0          4.7     2.3   1.6     2.5
    S                    3.5              1.1            0.4           3.2           3.2          3.1     0.9   1.2     2.0
    UK                   2.9              1.6            1.1           1.6           3.7          3.4     1.8   1.7     2.2

     EC*                 4.4              2.0             1.5          2.3           1.5          3.2     2.1   1.8     2.1
Source Commission Spring 1995 economic forecasts   ' For the averages until 1991 Germany = West Germany

While employment trends and the pace of the reduction of unemployment correspond
closely to expectations, unemployment continues to be a major policy concern.
Current and projected trends suggest the need to ensure that the rate of economic
growth remains strong over many more years so as to make possible the recovery of
the ground lost during the recession and to set in train reductions in unemployment
below the level achieved at the peak of the previous cycle.

2.3 The Outlook for Inflation and Budgetary Convergence
Of all areas of convergence in the Community, most progress has taken place with
regard to inflation. Measured by the private consumption deflator, the Community
average rate of inflation declined to 3.2 per cent in 1994, from a peak of 5.6 per cent
 ---pagebreak---                                             15

in 1991, and is expected to remain at its 1994 level during this year and in 1996. The
guidelines goal of the Community achieving a rate of inflation of between 2 and 3 per
cent by 1996, as a first step towards price stability, will therefore not be fully met.

In 1994, ten Member States had inflation at or below 3 per cent while the remaining
had inflation in excess of 3 per cent. Changes in the country composition of these
groups are projected to take place in 1995 and in 1996, with Ireland's and Austria's
inflation falling below 3 per cent this year and easing to 2.7 per cent in 1996 in Ireland
while stabilising at somewhat below 3 per cent in Austria; Sweden's and Finland's
inflation accelerating to around 3.3 per cent next year; and the UK's staying flat at 3
per cent this year and next.

                                                     Table 4
Price convergence appears secure in the group                            Inflation
                                                                     (percentage change,
of Member States which are seeing effective                     private consumption deflator)
exchange rate appreciations. Inflation in eight                 1993       1994       1995       1996

Member States (Belgium, Denmark, Germany,            B             2.6         2.4        1.9       2.4
                                                     DK            1.0         1.7        2.3       2.7
France, Ireland, Luxembourg, the Netherlands,
                                                     D             3.8         2.7        2.3       2.5
Austria) is expected to be below 3 per cent this     GR           13.6       10.9         9.6       8.9
year and next.                                       E             5.6        5.1         4.9       4.5
                                                     F             2.2        1.8         1.9       2.1

                                                     IRL           1.6         3.0        2.9       2.7
In Portugal and Finland, which have also seen        1             5.1         4.7        5.2       4.5
                                                     L             3.6         2.2        2.3       2.5
recently effective exchange appreciations,
                                                     NL            2.1         2.2        1.8       2.2
inflation prospects are less encouraging. In         A             3.5         3.3        2.8       2.9
                                                     P             7.9         5.1        4.5       4.5
Portugal, after a significant decline from the
                                                     FIN           3.9         1.6        1.7       3.3
level of 1993 and a smaller one from last year,      S             5.8         3.0        3.2       3.2
inflation is expected to stabilise at 4.5 per cent   UK            3.4         2.5        3.0       3.0

this year and next. In Finland, on the other         EC            4.0         3.2         3.2      3.2

hand, inflation is forecast to accelerate            Source: Commission services Spring 1995 forecasts

markedly next year.

The inflation outlook remains uncertain in the Member States which have experienced
currency depreciations in recent months (Italy, Greece, Sweden, Spain and the UK).
While, it may be argued, the inflationary consequences of the depreciation would not
emerge until actual output rises above potential, uncertainty about the exact level of
the output gap, and the possibility that potential output may have declined during the
recession, would suggest that the risk for an acceleration of inflation dominates the
outlook.
 ---pagebreak---                                                                          - 16-

Greece, Spain, Italy and Portugal are recording and are expected to record, a less
satisfying, albeit to different degrees, price convergence in the Community, and
Sweden's inflation is not expected to post any deceleration over the forecast period.

Inflation in the UK is projected to remain stable at 3 per cent in 1995 and 1996.
However, there is considerable uncertainty about the inflation outlook in view of the
fact that, in addition to recent exchange rate developments, the UK will have had four
years of strong economic growth by 1996 and the level of excess capacity will have
narrowed substantially. In the UK, but also in Finland and Sweden where monetary
policy pursues an inflation target, vigilance is an essential ingredient of the policy
stance.

Table 5
                                Nominal effective exchange rate changes
                                                        (relative to 19 industrial partners)

           Annual percentage changes                                                      Cumulative changes since 1991

                1992             1993            1994            1995*                             1992             1993    1994    1995*
 B                   2.3              0.8              1.6             5.3         B                 2.3             3.1     4.8    10.3
 DK                  2.8              2.1              0.1             5.3         DK                2.8             4.9     5.0    10.5
 D                   3.3              2.7              0.1             6.8         D                 3.3             6.1     6.3    1.3.4
  GR                -7.7            -9.6             -7.1             -3.3         GR               -7.7            -16.6   -22.5   -25.0
  E                 -1.8           -13.1             -6.7             -2.1         E                -1.8            -14.7   -20.4   -22.1
  F                  3.6             1.9              0.6              4.0         F                 3.6              5.5     6.1    10.4
 1RL                 2.8            -5.9              0.3            -0.4          IRL               2.8             -3.3      -3    -3.5
 1                  -2.7           -16.9             -4.6           -14.3          I                -2,7            -19.2   -22.9   -33.9
 NL                  2.4              3.0             0.4              5.2         NL                2.4              5.5     6.0   11.4
 A                   2.6              2.4             0.0              4.9         A                 2.6              5.1     5.0   10.1
 P                   3.6             -7.6            -4.7              2.8         P                 3.6             -4.3    -8.7   -6.2
 FIN               -12.7           -14.8              7.5              9.3         FIN            -12.7             -25.7   -20.1   -12.6
 S                   1.3           -19.3             -1.2             -4:7         S                1.3             -18.2   -19.1   -22.8
 UK                 -3.6            -9.0              0.2             -4.0         UK              -3.6             -12.3   -12.1   -15.6

  EC                  2.2          -13.1             -2.2              1.4         EC                2.2            -11.2   -13.2   -12.0
Source: Gommission Services   * on the assumption that exchange rates w t reman constant at their Apnl 1995 level

A notable feature of the inflation performance since 1993 is that, despite the severity
of the recession, the average rate of inflation in the Community has remained at over 3
per cent.      Certainly a large number of countries are currently experiencing a
satisfactory price performance, but in about a third of the Member States, inflation still
gives cause for concern. In addition, no further progress in lowering inflation is
projected for this year and next.
 ---pagebreak---                                               17

The apparent stickiness of inflation could reflect the influence of several, reinforcing,
factors.     On the one hand, the amount of spare capacity created during the recession
may be smaller than currently estimated.        This could be the result of measurement
errors or of an acceleration in the scrapping of obsolete capacities.         On the other
hand, the credibility of announced monetary and, above all, fiscal policies may still be
too low and unable to affect significantly expectations about future inflation.          In
addition, in some Member States currency depreciations have contributed to sustaining
inflation.    Finally, it is possible that non-competitive conditions continue to prevail in
several Community countries despite the efforts to implement the internal market.

An implication of these considerations is that further reductions in inflation will require
measures which foster the credibility of policies, which improve the adaptability of
workers in a changing economic environment, and which also foster competition.           In
particular, it is important to strengthen the credibility of the low inflation targets, so
that they can be incorporated into pay trends, and of the budgetary consolidation
programmes.

Budgetary convergence in the Community continues to be elusive. Table 6 shows
that, for the Community as a whole, the net borrowing of the general government,
which peaked at 6.3 per cent of GDP in the recession year 1993, is currently estimated
to decline gradually to 4.5 per cent of GDP in 1995 and to 3.9 per cent by 1996.

Between 1994 and 1996, the largest reduction in the deficit is projected to take place
in Finland and Sweden (4.6 and 4.5 percentage points in terms of GDP, respectively),
followed by the UK (4 points), Denmark (2.8 points), and Greece (2.3 points).            In
addition to these five countries, five more, Belgium, Spain, France, Italy and Portugal,
are expected to register deficit reductions ranging between one and two percentage
points of GDP, with Spain and France envisaged to make the greatest degree of
progress amongst this group. No significant change is expected in relation to the five
remaining Member States which, with the Netherlands and Austria, includes the three
countries which were below the reference value of 3 per cent of GDP in 1994, namely
Germany, Ireland and Luxembourg.            On the basis of the present forecasts seven
Member States will have a general government deficit at or below the reference value
of 3 per cent of GDP by 1996.

The forecasts are based on the assumption of unchanged policies;          however, not all
Member States have announced their concrete budgetary intentions for 1996.              An
implication of this assumption for the projected fiscal adjustment is provided by the
 ---pagebreak---                                                               -18-

decomposition of the change in net borrowing into a cyclical and a discretionary part.
Table 7 shows that over a three-year period of strong economic growth (1994-96)
only small reductions in the structural deficits are expected to take place.                   The 1.6
point in terms of GDP cumulative decline in Community net borrowing between 1994
and 1996 reflects only 0.8 of one per cent of GDP discretionary deficit reduction.

Table 6
                                         General government deficit
                                                        (per cent of GDP)

                                   1993                        1994          1995           1996

         B                            6.6                        5.3          4.2             3.9
         DK                           4.5                        4.0          1.9             1.2
         D                            3.3                        2.5          2.1             2.4
         GR                         13.2                       12.5          11.3            10.2
         E                           7.5                        6.6           6.0             4.8
         F                           6.1                        6.0           4.9             3.9
         IRL                          2.4                        2.3          2.8              2.6
         1                            9.6                        9.0          7.9             -8.1
         L                           -2.1                       -2.3         -1.4            -1.5
         NL                           3.3                        3.1          3.2             2.5
         A                            4.1                        4.0          4.6             3.9
         P                            7.0                        5.8          5.6             4.7
         FIN                         7.8                        5.6           5.0             1.1
-"       s                          13.4                       10.4           9.1             5.8
         UK                          7.8                        6.9           4.8             2.9

         EC                           6.3                        55           4.5             3.9
Source; Commission Spring 1995 economic forecasts; (-) indicates a surplus

The persistence of fiscal disequilibrium has contributed significantly to the growth in
the general government indebtedness in the Community.                          At the beginning of the
present decade the ratio of general government debt to GDP in the Community was
55.8 per cent; as can be seen in table 8, it grew to 66.2 per cent in 1993, and it is
currently expected to grow to 70.4 per cent of GDP by 1996. In 1996, four Member
States (Germany, France, Luxembourg, and the UK) are projected to have a debt ratio
below the 60 per cent of GDP mark. Of the remaining Member States, the debt ratio
is projected to increase in six (Greece, Spain, Austria, Portugal, Finland, Sweden),
while in another five (Belgium, Denmark, Ireland, Italy, the Netherlands) it is
projected to decline. Despite the good growth prospects, these trends suggest that
substantially more ambitious fiscal plans than those currently contemplated are
necessary in order, in several cases, to stabilise the debt ratio and to place it
unambiguously on a downward path.
 ---pagebreak---                                                                   - 19

From a medium-term perspective, covering the period 1993-1996, in four Member
States (Belgium, Denmark, Ireland, the Netherlands) the debt ratio is projected to
decline, with the largest decline projected to take place in Ireland (16.2 percentage
points in terms of GDP), followed by Belgium and Denmark (4.9 points) and by the
Netherlands (4.3 points).

Table 7
      Changes in the actual and cyclically adjusted general government deficit
                                                        (per cent of GDP)

                        Changes in the actual deficit                    Changes in the cyclically-adjusted deficit

                1993          1994          1995          1996           1993         1994          1995          1996

 B               -0.1          -1.3          -1.1          -0.3           -2.4         -1.0          -0.8           0.1          B
 DK               1.6          -0.5          -2.1          -0.7            1.2          0.8          -1.3          -0.4          DK
 D .              0.4          -0.8          -0.4           0.3           -1.4         -0.7          -0.3           0.3          D

 GR               0.9          -0.7          -1.2          -1.1           0.2          -0.8          -1.1          -0.9          GR
 E                3.3          -0.9          -0.6          -1.2           0.9          -1.3          -0.2          -0.7          E
 F                2.2          -0.1          -1.1          -1.0           0.5           0.1          -0.7          -0.5          F

 IRL              0.0          -0.1           0.5          -0.2           -0.8          0.5           1.2          -0.2          IRL
 1                0.1          -0.6          -1.1           0.2           -1.2         -0.4          -0.6           0.8          1
 L*              -1.3          -0.2           0.9          -0.1           -2.0         -0.4           11           -0.3          L

 NL              -0.6          -0.2           0.1          -0.7           -2.2         -0.2           0.7          -0.4          NL
 A                2.1          -0.1           0.6          -0.7            0.9          0.1           0.7          -0.6          A
 P                3.7          -1.2          -0.2          -0.9            2.1         -1.7           0.1          -0.4          P
 FIN              1.9          -2.2          -0.6          -3.9           0.1          -0.6           1.9          -2.4          FIN
 S                5.6          -3.0          -1.3          -3.3           2.4          -2.0           0.0          -1.9          S
 UK               1.7          -0.9          -2.1          -1.9           1.4          -0.1          -1.6          -1.6          UK

  EC             1.2          -0.8          -1.0          -0.6           -0.4         -0.5          -0.5          -0.3           EC
Source: Commission Spring 1995 economic forecasts; (-) indicates a reduction, (+) indicates an increase in the respective deficits
* Luxembourg has a surplus, thus a (-) indicates an increase, (+) a reduction in its surplus.

In France the debt ratio is projected to increase to 52.8 per cent of GDP by 1996,
while in the UK it is projected to stabilise at 51.5 per cent of GDP this year and next.
In Germany, the sharp rise in the debt ratio this year is a reflection of the take-over by
the general government of off-budget liabilities related to unification.

In Greece and Italy a rise in the debt ratio by 1 and 5 points, respectively, is projected
between the period 1993-1996. In Italy the debt ratio is expected to have peaked in
1994 and relative to this mark a modest adjustment is projected for this year and next.
In Greece, where the debt ratio is also already very high, debt convergence will be
worsening this year and next.
 ---pagebreak---                                                                 -20

Finally, worsening convergence on the basis of the debt criterion is also expected to
take place in Spain and Portugal, where the debt ratio is projected to rise by 5.3 and by
4.1 points, respectively, between 1993 and 1996 and to reach 65.2 and 70.7 per cent
of GDP, respectively, in 1996.

Table 8
                                      General government gross debt
                                                          (per cent of GDP)

                                    1993                        1994                        1995                        1996

         B                           137.2                       136.1                       134.3                       132.3
         DK1)                         80.3                        75.6                        76.1                        75.4
         D                            48.2                        50.1                        58.2                        58.1
         GR                          115.2                       114.1                       115.3                       116.2
         E                            59.9                        62.3                        64.6                        65.2
         F                            45.8                        48.5                        51.2                        52.8
         IRL                          97.0                        89.8                        84.6                        80.8
         1                           119.4                       125.4                       124.9                       124.4
         L                             6.9                         7.2                         7.6                          7. a
         NL                            81.4                       78.1                        78.1                        77.1
         A                             62.8                       64.5                        66.2                        67r4
         P                             66.6                       69.2                        70.5                        70.7
         FIN                           57.1                       60.1                        64.4                        64.6
         S                             76.2                        79.1                       84.6                        85.7
         UK                            48.5                        50.1                       51.5                        51.5

         EC                            66.2                       68.1                        70.3                        70.4
Source: Commission Spring 1995 economic forecasts
1) Government deposits with the central bank, government holdings of non-governmental bonds and public enterprises related debt amounted
to 23.4% of GDP in 1994
2) The sharp increase in the German debt ratio in 1995 is mainly caused by the take-over by the government of off-budget unification-related
liabilities, the most important of which is the debt of the "Treuhandanstalt"

Worrying trends have also emerged in the debt ratio in the three new Member States.
While the large increases occurring over the period 1993-1996 reflect to a
considerable extent the impact of the recession, it is also clear that adjustment plans of
greater ambition are necessary in order to halt the rise, and to ultimately reverse
direction, in the path of the debt ratio. In May 1995 Austria presented a convergence
programme and Sweden is expected to do so in June.

It is possible that the persistence of fiscal imbalances in the Community countries, and
the failure to decisively advance fiscal consolidation in periods of strong economic
growth, reflect also the importance of budget institutions and procedures in the
determination of fiscal deficits as well as the nature of political discourse. In several
Community countries the rules according to which budgetary policy is approved and
 ---pagebreak---                                              21

amendments to budget plans are admissible, play a key role in fiscal outcomes.        It is
also possible that the form the commitment to fiscal consolidation takes may not be
conducive to fiscal discipline; for example, it may be appropriate to combine improved
budget procedures with numerical fiscal targets in order to enhance the probability that
fiscal programmes are actually implemented as planned.

The importance of these considerations has now become more pronounced, both
because it is necessary to explore all avenues to strengthen fiscal discipline in the
Member States and in order to increase the probability that fiscal convergence criteria
are met by the largest possible group of countries prior to the move to stage III of
EMU.

The forecast for 1996 indicates that, on the basis of the adjustment measures which
have been clearly specified so far among those Member States which have set fiscal
targets in their convergence programmes, the fiscal objectives will not be uniformly
respected. Adjustment to achieve the deficit target of the convergence programme is
required, albeit of different magnitude, in the cases of Belgium, Germany, Greece,
Spain, France, and Portugal; in all these cases, the projected deficit is larger than that
set in the convergence programme.          On the other hand, Denmark, Ireland, the
Netherlands, and the UK are expected to meet the deficit objectives by next year. Of
the new Member States, Austria has recently submitted a convergence programme and
Sweden is expected to do so in June. In both cases more ambitious targets would be
required to ensure that fiscal convergence is secure.         Finally, in Finland where a
substantial fiscal consolidation effort is under way, policies should ensure that the
projected reduction of the deficit in 1996 is in fact realised.

3. The policy objectives and risks
The Broad Guidelines of December 1993 and July 1994 have laid out the broad thrust
of the policies needed to achieve economic convergence and to foster job creation.
The 1995 Broad Guidelines should confirm these objectives.               In addition, the
recommended policies should take account of the risks and concerns characterising the
current economic outlook.

The Community economy is still broadly expanding at the pace forecast a few months
ago, even if growth prospects have become somewhat less favourable.                   The
improvement in the consumer and business confidence indicators stalled at the
beginning of this year, even before the recent period of exchange rate instability.     In
 ---pagebreak---                                            -22

addition, a new period of weakness of the US dollar vis-à-vis the European currencies
would create an atmosphere of greater uncertainty that might jeopardise the projected
positive growth.    On the other hand, it should be stressed that, as already noted, the
main factors affecting growth prospects - notably world trade and investment
profitability - remain good and that a rate of growth stronger than the one now
projected cannot be ruled out.          Economic policy must therefore act to prevent
developments that might jeopardise the continuation of the growth process.

The first risk to be considered is that of a renewed resurgence of inflation.    As regards
the consequences of the recent currency movements for inflation two different groups
of countries may be identified: on the one hand the countries whose currencies
appreciated in effective terms and who are therefore likely to "import" price stability
and on the other hand the ones whose currencies devalued (especially Italy) and whose
inflation, all other things held equal, will tend to increase.    Overall, this risks making
inflation performances more divergent than prior to the recent exchange market
episodes.

Inflationary pressures may appear due to the fact that the economy's actual rate of
growth may approach to or exceed the potential rate of growth, especially in 1996,
whîch would cause capacity constraints leading to inflationary tensions. This risk will
be less apparent if business investment in the Community increases significantly over
the next few years. Furthermore, there may be a danger that wage settlements will be
higher than currently forecast and put upward pressure on prices and/or lead to
reduced investment profitability.       This danger could also arise from a desire to
compensate, too rapidly and at the expense of growth and employment, for the low
increases or, in some cases, actual declines in real wages during the 1993-94 period of
sluggish economic growth and of rising unemployment.             Some countries are already
expected to record inappropriately high wage increases in 1995-96.

The second, and more worrying, concern is that budgetary positions in several
Member States remain unsatisfactory.        Increased consolidation efforts are therefore
necessary and the elimination of structural budgetary deficits must be tackled now,
during the recovery, when the Member States can also take advantage of the
functioning of automatic stabilisers.     In addition, with the still high levels of public
debt, several Member States continue to be very vulnerable to interest rate shocks that
are possibly associated with uncertainties about fiscal, exchange rate and price
 ---pagebreak---                                           -23-

developments and could in those countries effectively eliminate the budgetary gains
likely to occur during the recovery.

Finally, as already put forward in the Commission's 1995 Annual Economic Report,
the favourable economic conditions created by the recovery may give rise to
 "adjustment neglect". This could take the form of a less determined commitment by
the public authorities to tackle the structural causes of the high budget deficits as the
recovery makes a positive cyclical contribution to tax receipts and to the budget
balance. Furthermore, the efforts aimed at the removal of labour market rigidities
may seem less urgent in the short term when employment is starting to rise again and
unemployment is falling. Such a relaxation in consolidation and reform efforts would
 seriously put at risk the successful transformation of the recovery into a sustained and
job-creating growth process, would contribute to an unbalanced policy mix and would
increase the risk of a new recession.

Strengthening convergence and sustaining economic growth will require that the
opportunities emerging in the present recovery are wisely taken advantage of. It is
clear that an important contribution to inflation convergence will be made by wage
developments.

If nominal wage increases begin to accelerate with the consolidation of economic
growth, especially before unemployment declines substantially, also giving rise to an
acceleration of inflation, the Member States may have to undergo another deflationary
cycle; at current levels of unemployment, such an episode they can ill afford.
Moderate wage growth will also contribute to fostering investment. The recent
recovery of private investment is a reflection of the propitious economic prospects and
of a wage growth inferior to labour productivity increases. The strength of investment
expenditure, if sustained, will contribute to raising potential output and to fostering job
creation.

A wise use of the recovery will require that the Member States, first and foremost,
consolidate their public finances.      Sustainable fiscal positions are a necessary
condition to support economic growth and durable employment creation. It is evident
that the policies which are required to sustain long-term economic growth, foster job
creation and reduce unemployment, and strengthen convergence are mutually
consistent.
 ---pagebreak---                                            24

Recent developments in the foreign exchanges indicate how important stability of
exchange rates within the Community is for furthering economic integration and
completing the single market.         Exchange rate changes can lead to resource
misallocation when investment decisions, made on the expectation of depreciation-
induced competitiveness gains, prove ultimately obsolete when competitiveness is
eroded either as a result of nominal exchange appreciation or because of higher
inflation. Furthermore, the possibility of exchange depreciation undermines wage and
price discipline since losses in competitiveness can be, temporarily at least, recovered
through exchange devaluations; as a result, reductions in inflation and price stability
become difficult to achieve. Finally, as devaluations offer a prospect of temporarily
improving competitiveness, they raise the possibility of practising beggar-thy-neighbor
policies, which are not compatible with the completion of the internal market.

4. The Policies
The principal task of economic policy at this stage of the cycle is to ensure that the on-
going recovery translates into non-inflationary, employment-creating, growth. In view
of the risks impinging upon the economic outlook, and the progress yet to be
accomplished in convergence, macroeconomic and structural policies should be
directed towards securing price stability, fostering fiscal consolidation, and
strengthening the dynamism and competitiveness of the Community.

4.1 Macroeconomic policies
The main task of macro-economic policies will be to maintain a stable framework
which will prevent the appearance of the tensions which have contributed to the
recession of 1992-93 and which will foster a continued steady increase in potential
output. As the previous sections have underlined, key developments give cause for
concern on both counts. At the same time, with the consolidation of economic
growth and the approach to stage III of EMU, the challenges confronting the Member
States have become more pronounced, while the diverging trends which have emerged
as a result of exchange rate changes have also raised important questions about the
appropriate economic policies.

Securing and furthering the progress made on inflation, and sustaining economic
growth is a crucial challenge for monetary and exchange rate policy in the current
cycle. A necessary contribution to the task of defending price stability in this context
will have to be provided by fiscal consolidation policies. While in virtually all Member
 ---pagebreak---                                            -25

States such policies are required, these are especially urgent in those Member States
where fiscal deficits and rising debt burdens, and the associated inflation and exchange
market developments, place the greatest burdens on the conduct of monetary policy
and where the risks of a substantial acceleration of inflation are greatest.        Equally
necessary will be policies encouraging non-inflationary wage developments and, over a
longer-term horizon, increased competition in product markets.

Stability of exchange rates within the Community is essential for the proper
functioning of the internal market.        In Member States where fiscal positions are
diverging and which have experienced exchange depreciations (Greece, Spain, Italy,
and Sweden) it is essential that a bold and credible efforts are undertaken to foster
fiscal consolidation.    More generally, credible fiscal consolidation measures will
contribute to reducing exchange rate instability.       This will contribute not only to
resolving concerns about competitive disruptions of the internal market, but it will also
create the conditions for reductions in interest rates, and it will ultimately facilitate the
implementation of the fiscal adjustment programme.

Budgetary policy directed towards consolidation will play a crucial role in reducing
the risks of an acceleration of inflation, of exchange rate instability, and of further
worsening fiscal imbalances.

Fiscal consolidation is necessary not only in order to foster stable inflationary
expectations but also to sustain the progress made in reducing inflation.            This is
particularly important in Member States with persistent fiscal imbalances and persistent
inflation (Greece, Italy, Spain). Failure to make decisive progress in redressing the
fiscal imbalances, especially in an environment of strong economic growth, will
increase uncertainty about the intentions of the fiscal authority. This uncertainty has
been contributing to raising real interest rates and to, in turn, making fiscal
consolidation more difficult to achieve in several Member States.

Incomplete credibility of the fiscal consolidation plans may. also be reflected in
exchange rate instability, higher real interest rates and increases in interest rate
differentials vis-à-vis other countries.   Domestic and international investors holding
government debt require an increase in the rate of return, or a strong exchange rate, to
compensate for the increased risk, a combination of circumstances which is inimical to
both economic growth and to fiscal adjustment.              The instability characterising
 ---pagebreak---                                             -26-

exchange rates in Greece, Spain, Italy and Sweden is partly a reflection of the
continuing lack of resolution of the fiscal difficulties.

Over the medium term, fiscal consolidation will contribute to raising the level of
national saving and will, through this channel, contribute to increasing the level of
potential output.

Respecting the fiscal convergence criteria remains an area where sustained efforts will
have to be expended. According to the Spring 1995 forecast, seven Member States
are expected to have deficits below the 3 per cent of GDP mark in 1996 (Denmark,
Germany, Ireland, the Netherlands, Finland, and the UK; Luxembourg is expected to
have a surplus). In these Member States the efforts to consolidate the public finances
must be pursued with determination. In Belgium, France, and Austria, attaining the
reference value for the deficit in 1996 would be within reach, provided that the
adjustment effort gains renewed momentum. While no forecasts exist for the outer
years, it is clear that for the remaining Member States the objective to respect the
fiscal convergence criteria by 1999 must, even more than today, become a principal
policy objective.

The policy mix required in the individual Member States reflects the uneven
distribution of policy risks.   The Member States whose currencies have experienced
depreciations over the recent months will likely see an increase in the inflationary
pressures while the interest rate implications of the exchange rate instability will
undoubtedly make budgetary consolidation more difficult.       In general, these countries
had already unsatisfactory starting positions.      The depreciations will lead to higher
import costs and, through the effects on export growth and economic activity in
general, will contribute to narrowing the output gap.

In these Member States the policy mix must be resolutely oriented towards containing
the inflation risks and towards stepping up the efforts to consolidate budgetary
positions.   In these countries it will be particularly important to prevent, through the
instruments available in each country, that the increase in imports costs may lead to a
price and wage inflation spiral.

In the Member States whose currencies have experienced appreciations, inflationary
risks will be generally contained.    However, given that the success of these countries
in containing inflation owes much to the external constraint, it will be important to
 ---pagebreak---                                           -27-

make sure that pay trends do not lead to reductions in investment profitability.   There
are indications that this may be happening in Germany.

Investment profitability must still increase substantially in most countries if investment
is to expand to the extent necessary to ensure sustained growth in the medium term.
In some cases, the stability of exchange rates could only be maintained at the cost of
increases in the interest rate differentials with Germany.   This suggests that markets
still perceive some risks in the budgetary positions of these countries.     Determined
corrective action could bring substantial benefits through the reduction, or the total
elimination, of these differentials.

4.2.       Policies for greater competitiveness
Structural measures aimed at promoting the competitiveness, dynamism and overall
productivity of the Member States' economies are essential to the achievement of the
Community's twin policy objectives of strong, employment-creating growth" and
enhanced nominal convergence.          Such measures are particularly important at the
present time to strengthen economic growth, but also given the renewed anxiety about
inflation especially in those Member States which have witnessed substantial
depreciations of their currencies.

The 1993 White Paper advocated reforms directed towards increasing the endogenous
growth forces of the Community's economy as the means to securing the basis for its
long-term prosperity.      A variety of proposals aimed at making the Community
economies more dynamic were subsequently incorporated in the 1993 and 1994
Guidelines exercises.     Such proposals, which were to be carried out at both the
Community and individual Member State levels, were essential to the quest to promote
the productivity and competitiveness necessary to underpin stronger growth and
employment creation.

Efforts at enhancing productivity and employment growth can only be successful if
carried out in the context of a flexibly functioning economy which is capable of
exploiting the opportunities generated by a rapidly changing technological and social
environment. In this regard efforts are being undertaken to:

       exploit the opportunities associated with the internal market, an open world
       trading system and to safeguard the Community's competitiveness;

       accelerate the realisation of the Trans-European networks;
 ---pagebreak---                                                      28

    push through rapidly the Action Plan concerning the development of the
    information society;
    exploit the growth and employment potential offered by SMEs;
    and actively promote Community initiatives in Research and Development
    (R & D) and call for a greater degree of co-ordination of Member States' R & D
    policies.

In relation to the internal market, strong efforts have been undertaken to transpose the
relevant directives into Member States' legislation. However, transposition has been
slow in the key sectors of insurance, company law, intellectual and industrial property,
public procurement, new technologies and services, financial services, and freedom of
movement.

The Essen European Council stressed the intention of the Council to pay particular
attention in the future to the competitiveness of the European economy. In this
connection the Commission has established a high-level group to deal with
competitiveness and to submit appropriate reports on these matters2. This the
Commission duly followed through on with the formation of the Competitiveness
Advisory Group at the beginning of 1995. The high-level Legislative Administrative
Simplification Group ("Deregulation Group") has begun its work. It has stressed the
need to monitor Community and national law for over-regulation and it requested the
"Deregulation Group" to submit a report by June 1995.

Initiatives in the area of the Trans-European networks in the transport, energy and
environmental spheres have also been receiving a lot of attention. The Group of
Personal Representatives of Heads of State or Government (the Christophersen group)
submitted their report to the December 1994 European Council. It confirmed that the
eleven priority projects decided upon at the Corfu European Council in June 1994 and
the three new projects concerning the Nordic Member States and Ireland had already
been started or were in a position to commence shortly.

In relation to the establishment of the information society, this has been the object of
an Action Plan adopted by the Commission in July 1994, which encompassed all

    See also "An Industrial Competitiveness Policy for the European Union", Communication from the Commission to
    the Council, COM(94) 319 final, September 14, 1994 and two companion documents: "Report on the
    Implementation of the Council Resolutions and Conclusions on Industrial Policy", SEC(95) 437 final, March 224
    1995 and "Action Programme and Timetable for Implementation of the Action Announced in the Communication on
    an Industrial Competitiveness Policy for the European Union", COM(95) 87 final, March 30,1995.
 ---pagebreak---                                            29

aspects addressed in the report of the Bangemann group.          In its November 1994
meeting this Council discussed the Commission's liberalisation timetable.          The
December European Council emphasised that the Commission's Action Plan and the
conclusions of the Ministers for Industry and Telecommunications had set the agenda
for the development of an information society. With regard to developments in 1995,
as a follow-up to the G-7 ministerial meeting of February 1995, the Group of
Commissioners on the Information Society was established.

Raising the productivity of the Community's economy using these initiatives has the
potential to contribute to strengthening employment creation.     There is no necessary
contradiction between productivity growth and employment creation.

However three conditions must be met to ensure that the relative price mechanism
makes possible a redistribution of productivity gains between sectors, enabling sectors
with low productivity growth to create new jobs and to maintain similar wages for
similar work:
    relative prices must continue to change without artificial rigidities, and the
    increased competition and flexibility on all markets should help this;

    Sectoral changes need to be socially acceptable, with market mechanisms being
    complemented by forward looking active policies and social dialogue;

    the overall macroeconomic rate of growth must be strong enough to allow for a
    positive balance between job creation and job destruction across sectors.

4.3 Employment and labour market policies
The economic recovery, if it progresses as predicted, could absorb by 1997 the cyclical
component of unemployment.          This component is estimated at about 3 million
unemployed or only 2 percentage points of the present eleven per cent rate of
unemployment in the Community. To absorb 3 million unemployed is indeed a first
important step and an .essential one towards the achievement of the White Paper
objectives. Nevertheless, in order to reduce, in a significant and progressive manner,
the remaining 9 per cent of unemployment, it is necessary not only to achieve a strong
and sustainable medium-term growth process, brought about by investment in order to
create the necessary working posts, but it is also necessary to implement more active
and more efficient labour market policies which may need to bring about significant
changes in the areas of educational systems, labour law, work contracts, wage
settlement arrangements and the social security systems.
 ---pagebreak---                                             -m

To this end, the Essen European Council, identified the following five priorities:
1)     Improving the employment opportunities for the labour force by promoting
       investment in vocational training,
2)     Increasing the employment intesiveness of growth,
3)     Reducing non-wage labour costs,
4)     Improving the effectiveness of labour market policies,
5)     Improving measures to help groups which are particularly hard hit by
       unemployment.

Active and more efficient labour market policies contribute to the goal of increasing
employment through three main channels.
i)     reinforce the growth potential itself by an improvement in the quality of human
       capital;

ii)    make growth more employment-creating without, however, negatively affecting
       the growth process itself; and finally

iii) facilitate, to the extent that the new jobs will become available, the absorption of
       those unemployed who are still easily employable as well as to help the long-term
      ...unemployed and particular disadvantaged groups who cannot easily occupy the
       available working posts and who risk being affected by social exclusion.

Labour market policies in the above three areas constitute not only an indispensable
complement to macroeconomic policies and to structural policies in the area of
competitiveness but they also contribute to maintaining and reinforcing cohesion and
social consensus inside the Union in the long and difficult process of absorbing
unemployment.

i)     As regards the improvement of the quality of human capital, it is a matter of
       strengthening the systems of professional training, in particular that of the young,
       and to promote continuous training of the workforce in order to prepare and
       adapt the latter to social and technological changé in a world of free trade and in a
       process of strong structural adjustment. These policies will improve the flexibility
       of the labourforce, individual opportunities, and the comparative advantage of the
       European economy in comparison with other geographical regions of the world
       [Essenpriority n° I].
 ---pagebreak---                                            31

    These policies will increase the growth potential of the European economy and,
    like the policies for competitiveness, will generate their full benefit from the point
    of view of both their costs and their creation of employment, if simultaneously the
    effective rate of economic growth can develop without encountering the obstacles
    of inflation and of capacity constraints.

ii) The contribution of the medium-term growth process to the reduction of
    unemployment is indispensable, but it must be complemented by a large effort,
    targeted and concrete, to increase the employment content of growth [Essen
    priority n° 2J. Actions in three areas, which must not hold back the growth
    process itself, are necessary in this regard:
    •   the examination, by the social partners, of whether a reorganisation, a
        reduction and/or new patterns of working time could lead to increases in the
        employment content of growth without reducing the competitiveness of firms.
        In particular, the de-coupling of the working time of individuals from that of
        the enterprise may open promising opportunities: the existing capital stock -
        equipment, premises, etc. - could be better exploited with significant
        productivity gains which may be used to encourage different working patterns
        among the employees. Development of part-time and other atypical forms of
        employment may also help. Progress in this area might also require a
        revision of existing regulations [Essen priority n° 2[.
    •   increasing the incentives to employment by reducing non-wage labour costs,
        especially at the lower end of the wage and productivity scale, without
        harming other parts of the labour market; from a macroeconomic point of
        view this must be achieved in ways which do not compromise the reduction
        of budgetary deficits nor the competitiveness of enterprises. Reforms,
        including where appropriate alternative financing sources for social protection
        systems, are therefore required [Essen priority n° 3J;
    •   easing the development of new employment opportunities and activities, e.g.
        those linked to the service society and environmental sustainability [Essen
        priority n° 2j.

iii) The task of facilitating the absorption without tensions of the unemployed and the
     new entrants to the labour market, when the economy makes available the new
     working posts, concerns firstly the efficiency of labour and manpower offices and
     the promotion offlexibilityin the areas of professional and geographical mobility
 ---pagebreak---                                            32-

    [Essen priority n°4[. An important part of the non-cyclical component of
    unemployment could be progressively integrated into working life by reasonable
    efforts in these areas provided that the recovery can be transformed into the
    medium-term growth and employment creation process described by the White
    Paper and aimed at by the present economic policy guidelines.

    Nevertheless, to significantly reduce the hard core of structural unemployment -
    which could represent about half of the 9 per cent of non-cyclical unemployment -
    different and much greater efforts will be necessary. It is a matter not only of
    strengthening the link between the granting of social allowances and the
    availability of the unemployed to accept work, but especially of reinforcing active
    labour market policies aimed at improving the "employability" of long-term
    unemployed workers by giving access to specific training and of concentrating the
    latter on particularly disadvantaged groups i.e. women, young people and older
    citizens who risk to being affected by social exclusion [Essen priority n°5J.

    These relatively expensive policies also only achieve their full benefit if labour,
    which in this way is rendered employable, has the opportunity in practice to find a
   job. Nevertheless, these policies must not only be evaluated in terms of their
   •immediate economic benefit; taking into account the inevitable and necessary time
    to significantly reduce the hard core of structural unemployment, these policies
    must also act to safeguard the existing human capital of the unemployed in order
    to prevent social exclusion and to maintain social cohesion.

In order to better organise the implementation of the priorities identified by the Essen
European Council, the Commission, on 8 March 1995, presented a Communication to
the Council in which it suggests the implementation, in the context of Article 103 of
the Treaty, of a surveillance procedure with regard to employment trends and policies.

                                           •
                                       •         •
                                           •

Bearing these considerations in mind, the Commission is proposing the present broad
economic policy guidelines for the Community and the Member States which confirm
the medium-term framework of those of June 1994, and assert the policy priority of
reducing unemployment.
 ---pagebreak---  ---pagebreak---                                     3 3
                                                                    ISSN 1024-4506

                                                        KOM(95) 228 slutlig

                                               DOKUMENT

sv                                                                        .    w

                                     Katalognummer : CB-CO-95-270-SV-C

                                                               ISBN 92-77-89591-8

Byrån för Europeiska gemenskapernas officiella publikationer
L-2985 Luxemburg