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Broad economic policy guidelines (1997)
Broad economic policy guidelines (1997)
Broad economic policy guidelines (1997)
This summary has been archived and will not be updated, because the summarised document is no longer in force or does not reflect the current situation.
Broad economic policy guidelines (1997)
1) OBJECTIVE
To ensure closer coordination of economic policies and sustained convergence of the economic performances of the Member States and of the Community.
2) ACT
Council Recommendation of 7 July 1997 on the broad guidelines of the economic policies of the Member States and of the Community [Official Journal L 209 of 02.08.1997].
3) SUMMARY
In a climate of moderate recovery, priority had to be given to two fundamental policy concerns:
In the macroeconomic field, the broad guidelines reaffirmed that the common strategy should build further on the following three elements:
The more the stability task of monetary policy were facilitated by appropriate budgetary measures and wage developments, the more monetary conditions, including exchange rates and long-term interest rates, would be favourable to growth and employment.
Considerable headway had been made towards price stability and inflation convergence. In April 1997 fourteen Member States had an inflation rate of 2 % or less. This level needed to be maintained. Greece needed to redouble its efforts to reach the targets of 4.5 % by the end of 1997 and 3 % by the end of 1998.
The currencies participating in the exchange-rate mechanism had registered a remarkable degree of stability. Member States should continue to treat their exchange-rate policies as a matter of common interest. Countries not participating in the exchange-rate mechanism were called upon to continue with stability-oriented macroeconomic policies in order to make such participation possible.
A large majority of Member States had taken significant measures to reduce their budget deficits to 3 % of GDP (or even less) in 1997. These efforts needed to be maintained in order to build confidence in the sustainability of the budgetary adjustment, especially in those countries where the 1997 budget contained temporary measures and where the ratio of debt to GDP was not approaching the reference value at a satisfactory pace.
To be sustainable, budgetary projections should clearly indicate the underlying economic assumptions and the medium-term strategy of the Member State concerned (structural reforms, etc.).
The Council reaffirmed the same general principles as outlined in the broad guidelines in previous years:
Furthermore, any harmful competition between the tax systems of the Member States should be avoided.
As regards the budget deficit, five Member States met the 3% of GDP reference value in 1996: Luxembourg, Denmark, Ireland, the Netherlands and Finland. Luxembourg apart, they all needed to consolidate these results.
Greece again needed to make sustained efforts in order to meet the targets of its convergence programme, in particular with regard to the efficiency of the tax administration and the reduction in government spending.
The other nine Member States were expected to see their budget deficits reach the reference value of 3% of GDP or less in 1997. They should continue to implement their convergence programmes with determination in order to consolidate these results in the coming years.
It was essential to improve the operation of product and service markets, to stimulate competition, to foster innovation and to ensure efficient price setting in order to promote growth and employment. This improvement would be brought about by making the single market work better, with additional commitment on the part of Member States to:
The Commission's action plan proposed a number of measures which should be in place by 1 January 1999 in order to redynamise the single market.
Labour market reforms and increased investment in knowledge were essential. Various conclusions could be drawn from the positive experience of a number of Member States, especially the conclusion that structural reforms needed to be comprehensive in scope so as to address in a coherent manner the complex issue of incentives in creating and taking up jobs and to exploit policy complimentarity. The process under way should continue and, where necessary, be intensified, with priority being given to:
These reforms needed to be supported by a stronger employment orientation in other policies.
4) implementing measures
5) follow-up work
Last updated: 08.11.2002