51994IE0750

Opinion on the economic and financial aspects of the White Paper on growth, competitiveness, employment (94/C 295/09)

At its Plenary Session meeting of 21 December 1993, the Economic and Social Committee, acting under the fourth paragraph of Article 20 of its Rules of Procedure, decided to draw up an Opinion on economic and financial aspects of the White Paper on growth, competitiveness, employment.

The Section for Economic, Financial and Monetary Questions, which was responsible for preparing the Committee`s work on the subject, adopted its Opinion on 6 May 1994. The Rapporteur was Mr Romoli.

At its 316th Plenary Session (meeting of 1 June 1994), the Economic and Social Committee adopted the following Opinion by a large majority, with four votes against and three abstentions.

1. Preliminary comments

1.1. After the publication of the White Paper

1.1.1. The Commission`s White Paper on Growth, Competitiveness and Employment - the Challenges and Ways Forward into the 21st Century, currently the only document on the European Union`s overall economic policy had a considerable impact on the most alert and best-informed sectors of public opinion when it was published in mid-December 1993.

1.1.2. Given the depth of the economic crisis, together with rising unemployment, citizens have viewed to the Commission`s proposals with the hope that they might, at last, indicate a way out from the difficult situation in which Europe has found itself over recent years.

1.1.3. It should however be noted, a few months after publication, that the initial public interest has gradually dissipated, partly due to the media silence on it.

1.1.4. It may therefore be concluded that the White Paper has not been met with the favourable response which greeted the launch of the 1992 single market project in 1985.

1.1.5. It is regrettable that the mass media, political bodies and governments have failed to give the White Paper the attention it deserves.

1.1.6. There are a number of reasons. One of these may be that the White Paper, by its very nature, sets out possible guidelines for medium-term economic policies: these are largely the responsibility of Member State governments who are loath to delegate authority in this area to the Community institutions. Citizens` concerns, on the other hand, focus chiefly on the short term.

1.1.7. Moreover, elections, the outcome of which is far from sure, are either under way or pending in a number of Member States, while there is a risk that the European Parliament elections will be determined more by national questions than by the future of European integration.

1.1.8. It is, then, not surprising that the White Paper`s complex technical analyses - which do not make for easy reading - have not attracted attention.

1.1.9. There is an exception to this general picture: the keen interest in this question consistently shown by various business and labour circles.

1.1.10 Among them, the White Paper has generated discussion and examination centring upon those areas where there is disagreement about what approaches or priorities should be adopted, or where it is claimed that the White Paper`s recommendations are inadequate.

1.1.11 The process under way is heartening: significant results have already been achieved. The Committee hopes that this will continue and intensify in the near future (1).

2. Comments on the macroeconomic aspects of the White Paper

2.1. The Economic and Social Committee and the White Paper initiative

2.1.1. The White Paper, intended as a general strategic document for the medium term provides a basis for starting a process of reviewing the prospects and future structures of the European Union - a process which would directly involve Member State governments and economic and social organizations.

2.1.2. In this sense the White Paper seems capable of fulfilling its brief, which is to map out the ways forward for the European Union, created by the Maastricht Treaty, identifying medium-term solutions to the key problems of development, focussing on employment.

2.1.3. The ESC therefore expresses its agreement with, and support for, the initiative taken by the Commission and the Council, acknowledging that the substance and the aims of the White Paper`s approach are correct.

2.1.4. The ESC has expressed its views on the subject in a number of earlier Opinions on the general problems of the Community. The most recent of these, adopted on 20 October 1993, sought to contribute to the preparation of the Commission White Paper (1).

2.1.5. However, the Committee would draw attention to certain inconsistencies, some conceptual uncertainty, and above all the absence of certain important arguments in the White Paper (see below).

2.1.6. The Committee is also convinced that (apart from the abovementioned studies by socio-occupational groups) there has so far been a lack of a general, thorough debate on these subjects, such as would provide a response to citizens` concerns and help to mobilize the consensus on the demanding programmes of structural reform of the European economy and society which are now necessary.

2.1.7. Public opinion cannot understand why Europe has lost the capacity for stable, ordered growth which it had in the past.

2.1.8. How can the Community`s primary and fundamental objective of halting and reversing the upward trend of unemployment be achieved under such circumstances?

2.1.9. Citizens still wonder whether the 'European model`, in which economic growth has always been accompanied by high levels of social protection and practical support for the weaker sectors of society, is now truly at risk.

2.1.10. In its overall, non-specific reply to these questions, the White Paper points out that there are no miracle cures on offer. The answer does not lie in protectionism, or a headlong, inflation-fuelled dash for growth, or a Malthusian scheme to divide up work or, lastly, vain attempts to compete with labour costs in developing countries by pushing down pay levels and drastically cutting back on social welfare.

2.1.11. However, the White Paper remains vague on how to give practical content to the general programmes proposed, and how to check that the objectives set are achieved.

2.1.12. It is therefore urgent to re-examine these matters in depth, and the appropriate fora for doing so may include the European Parliament and the Economic and Social Committee.

2.2. The White Paper, the European Council`s 'action plan` and the 'Main economic policy guidelines` of the ECOFIN Council

2.2.1. The European Council held in Brussels on 10/11 December 1993 adopted the White Paper on the medium-term strategy to encourage growth, competitiveness and employment.

2.2.2. On the basis of this document the European Council decided to implement a short-and medium-term 'action plan` defining a general framework of policies which the Member States must follow, supplemented by a series of specific accompanying measures and the relevant procedures.

2.2.3. The assumptions on which the 'action plan` is based are a healthy, open economy with social solidarity, tending to decentralization at local level (subjects dealt with at length in the White Paper).

2.2.4. At the same meeting last December the European Council also approved a recommendation proposed by the ECOFIN Council on the 'main economic policy guidelines`.

2.2.5. This recommendation contains a macroeconomic reference framework for 1994, aiming at a return to non-inflationary economic growth (inflation between 2 % and 3 % in 1996). It also provides for the removal of various macro- and micro-economic structural obstacles (2), and for strengthening of national budgets and European Monetary System mechanisms (while respecting the timetable for achieving Economic and Monetary Union).

2.2.6. The main divergence from the White Paper is that the general 'guidelines` emphasize convergence-related aspects, rather than development (such as boosting investment from 19 % to 23-24 % of GDP).

2.2.7. The Commission and Council should strive to ensure that the general guidelines are amended so as to lend more active support to growth and impetus to a medium-term process of convergence.

2.3. Macroeconomic policy and unemployment

2.3.1. The White Paper has analyzed this subject at some length and made a number of recommendations to the Member States.

2.3.2. The views expressed are based on a macroeconomic comparison of growth and employment rates in the European Union over recent decades with the corresponding figures in the United States and Japan.

2.3.3. The White Paper concludes that the structural imbalance affecting the European Union is to a very large extent the result of inappropriate macroeconomic policies.

2.3.4. Nevertheless, this very serious conclusion of the White Paper does not attempt to trace such mistakes and shortcomings back to their origins, or to undertake a 'self-criticism` of the macroeconomic policies pursued by the Union`s institutions and the Member States` governments and central banks over recent years (1).

2.3.5. The White Paper quickly turned to a high-profile political objective: to adopt corrective measures to resolve the current crisis and create at least 15 million new jobs by the year 2000 (2).

2.3.6. Action to attune Community economic structures to developments on the international economic and social scene must essentially remain within the ambit of Member States. The Commission and Council, indeed, wish only to issue general recommendations on such action.

2.3.7. The Committee is critical of this minimalist view of the Community`s executive role in the macroeconomic sphere. The Committee considers that the European Union will not fully discharge its responsibilities if it simply publishes a White Paper and leaves the Member States to face this difficult situation on their own.

2.3.8. The Committee nevertheless acknowledges that in earlier years, until the ratification of the Treaty of Maastricht, the Community did not have adequate means to guide and monitor the macroeconomic policies of the Member States (3).

2.3.9. Now the task of guidance and monitoring can and must be carried out more effectively, in the interests of better coordinating the thrust of economic and monetary policy, so as to ensure that everybody works in the same direction.

2.3.10. The Committee welcomes the idea of coordinating, monitoring and encouraging the convergence of Member-State macro-economic policies.

2.3.11. In practice, it does not seem that the short-term 'action plan` drawn up by the Council can give real effect to the guidelines of the White Paper.

2.3.12. There is therefore an urgent need to provide concerted practical follow-up involving a series of action programmes with detailed proposals.

2.3.13. The Committee also stresses the need to resume the debate on the links between unemployment and trends in overall demand within the European economy.

2.3.14. There has to be an assessment of how far the restrictive monetary policies dictated by the need to fund German unification and by the strict convergence criteria of the Maastricht Treaty have had a negative impact on aggregate demand in the European economy and have thereby contributed to the current recession (4).

2.3.15. This is necessary in order to assess whether there is room for a non-inflationary economic upturn in Europe in the near future.

2.3.16. It should be remembered that the basic aim of Maastricht, originally formulated in 1990, is the stabilization and convergence of the Member States` economies. Priority should now focus on the absorption of unemployment, to be achieved through economic growth and European commercial competitiveness, but without inflation or a heavier budget deficit.

2.3.17. The Committee urges the Council to state explicitly that employment in the European Union is a priority. This priority should also be reflected in the Union`s own macroeconomic and monetary policy.

2.3.18. Such a policy will have to reconcile the demands of stability with the need to generate a stable recovery with growth capable of providing, directly and indirectly, substantial numbers of new jobs in all EU countries.

2.3.19. In conclusion, the Committee stresses that the creation of a favourable economic climate is a basic condition for a return to economic growth, commercial competitiveness and substantial productive investment, all essential to the creation of new jobs in the Union.

2.3.20. The Committee endorses the White Paper`s aim of raising aggregate investment from 19 % to 23-24 % of GDP, and trusts that the measures necessary to boost private and public investment will be taken within the framework of a medium-term programme.

2.4. Economic growth, unemployment and cohesion between Member States

2.4.1. The analyses in the White Paper suggest that the European economy would need to achieve an annual growth rate in excess of 3 % if it is gradually to reduce unemployment. With a rate of 2 % the employment situation could be stabilized: any lower and unemployment will continue to rise (1).

2.4.2. The situation is difficult, since it involves maintaining, and perhaps exceeding - not only in the short-term but on a durable basis - a 3 % growth rate, without running the risk of restocking inflation: in any case, the opportunity of launching major, Europe-wide development must not be missed.

2.4.3. A further complex problem must be tackled: that of redressing the severe imbalances, within individual Member States, between developed and backward regions (where unemployment is building up at an alarming rate) (2).

2.4.4. Coherent economic policies on cooperation between EU frontier regions must also be implemented, with a view to improving economic cohesion.

2.4.5. Crisis situations are proliferating throughout the Union, where the 'employment emergency` is generating dangerous tensions.

2.4.6. Member State Governments and the European Union itself must act, with the necessary support measures, to defuse the most urgent crises and simultaneously issue a clear signal likely to restore the confidence of Europe`s citizens and in particular, of entrepreneurs on whom investment decisions will depend.

2.4.7. Moreover, there is a potential risk that emergency action by individual Member States may create discrepancies among them detrimental to the aim of cohesion between Community countries, which is one of the cornerstones of European integration.

2.5. Consolidating the European socio-economic model: need for a balance between productive sector and public sector

2.5.1. The White Paper briefly mentions (page 11) the reasons which led the countries of Europe to develop collective social protection and solidarity mechanisms as a way of offsetting the imbalances which generally hit the weakest groups, when market growth is highly dynamic.

2.5.2. In its Opinion of 20 October 1993, the Committee stressed that the most pressing problem facing the EU Member States at present is how to return to a growth rate high enough to mop up unemployment while also maintaining an effective system of social protection and solidarity which reflects the aspirations and traditions of EU citizens.

2.5.3. The Committee has given further thought to this and feels that it is not possible for Europe to base itself on the United States model, where social protection and solidarity concerns are largely neglected or virtually absent, or on the Japanese model, which is too bound up with the cultural values of Japan (1).

2.5.4. On the other hand, the traditional Scandinavian 'welfare state` model, for decades studied and admired by all industrialized nations, and now being revised, deserves further consideration. It offers clear proof that a loss of balance between the productive side of the economy and the State social system can trigger negative reactions which send the whole socio-economic system into crisis.

2.5.5. In some countries - Sweden for example (2) - imbalances have arisen between the productive market and social public sectors, throwing the entire national socio-economic system into crisis. Total unemployment, which remained at low levels for a long time, has rapidly increased while the public sector, deprived of resources by the weakening of the productive sector and by the general economic recession, has lost its capacity to absorb labour.

2.5.6. In some Nordic countries, there is now a search for new formulae for a large part of public activities, including the introduction of solutions closer to the market.

2.5.7. This experience should lead the EU Member States to conclude that a balance between the state social intervention and the market sector must be maintained.

2.5.8. The White Paper pays little attention to the absolute level of public expenditure and concerns itself with the public sector deficit only as a convergence criteria for long term achievement of monetary union. The conclusions of the European Council held in December 1993 are also silent on this point.

2.5.9. The Committee takes the view that this subject cannot be ignored but should be discussed in depth to arrive at appropriate EU recommendations.

2.5.10. Indeed, undoubted negative repercussions have been observed in a number of countries (including Italy (3)) as a result of excessive expansion of public spending, which has absorbed high, and in some cases excessive, proportions of the national income of the Member States (4).

2.5.11. In general a redirection of savings and financial flows to productive investments could stimulate greater growth, and consequently a higher level of employment throughout the European Union.

2.5.12. In this context it should be remembered that it is now acknowledged that the major industrial sector will only be able to provide new jobs to a limited extent, even if there is a return to growth.

2.5.13. The aim of an annual employment growth rate of 2 % proposed in the White Paper could be achieved chiefly:

- through SMEs, which play a key role in linking growth and employment;

- by building up local economies, requiring devolution of public authority structures, decision-making processes and expenditure;

- in the public and social economy sectors and community services.

2.5.14. The Committee, however, believes that the main thrust of employment creation should be to encourage businesses to invest and create new, economically justified and necessary jobs. (In particular, proper access to credit and effective technology-dissemination programmes should be provided to encourage SME growth).

2.5.15. At the same time, consideration will have to be given to creating jobs funded directly from the public purse. However, the necessary financial resources must first be created by the productive system and not, as in the past, by inflation or public debt.

2.5.16. The Commission has the very important task of examining and shedding light on the public sector, which remains a little-known area despite taking up over half the national income of the Member States (i.e. more than investments plus private consumption) (1).

2.5.17. The aim will have to be to identify ways of making public expenditure more effective and ensuring that it is more tightly targeted. Public budget resources are, with a few commendable exceptions, in some Member States mis-used, handled very inefficiently, and largely wasted.

2.5.18. The Commission could help here by making a comparative study of national track records in different sectors (health, education, political pricing, social insurance) in order to find the most efficient solutions and notify them to all the EU countries.

2.5.19. The Committee has long stressed the need for consideration of the role of the public sector, the efficiency and productivity of which are preconditions for a recovery of the international competitiveness of European industry (2).

2.5.20. The Economic and Social Committee offers itself as a forum for analysis, discussion and comparison on this subject.

3. Financial and tax aspects of the White Paper

3.1. Financing of trans-European infrastructure networks

3.1.1. To revive the European economy and strengthen its competitiveness, the White paper attributes great importance to the development of trans-European networks in the sectors of transport, energy and telecommunications.

3.1.2. The White Paper provides a first indicative list of priority projects.

3.1.3. The massive investments necessary up to 1999 have been quantified as follows: ECU 220 bn. in the transport sector, ECU 13 bn. for energy networks and ECU 67 bn. for telecommunications networks.

3.1.4. According to the White Paper (which refers here to the provisions of the Maastricht Treaty) the European Union must confine itself to supporting the investment efforts of private and public operators in the individual countries, by providing feasibility studies, guarantees for loans raised in the markets and interest rebates.

3.1.5. This last-mentioned form of support could involve a maximum contribution of 10 % of the cost of the financing the investments, equivalent to an interest-rate subsidy of 2-3 percentage points.

3.1.6. The White Paper also expresses the wish to take action to eliminate procedural delays and the obstacles at various levels which have so far hindered the launching of initiatives in the field of European infrastructure.

3.1.7. The Committee has over a long period of time examined the complex problems thrown up by the Union`s proposals, which seek above all to systematize projects which for the most part already exist and create synergistic advantages.

3.1.8. More generally, the Committee feels that, faced with a demand for such considerable financial resources, the Union could perhaps play a more active and direct role by providing an additional financial contribution (from the Community budget or through Community loans raised on the international financial market).

3.1.9. All this is to obviate the risk that the proposals in the White Paper may remain partly a dead letter, in view of the difficulties encountered by many Member States and private operators, or may be implemented in an unbalanced way, thus accentuating the economic and social divergences already found in the European Union.

3.1.10. It is however common knowledge that at its Brussels meeting last December the ECOFIN Council did not come out in favour of direct European Union initiatives in the financial sphere, thus adopting a more dilatory, less decisive posture than the Brussels European Council which had approved the White Paper and the infrastructure action it entailed.

3.1.11. It is hoped that all ambiguity will be removed at forthcoming Council meetings, and that the commitment to the speedy implementation of the programmes contained in the White Paper will be reiterated, so as not to miss this opportunity to stimulate Member State`s economies.

3.1.12. The Committee is, however, aware that recourse to the international financial market on this scale could generate strains and partially rekindle the tendency to State indebtedness.

3.1.13. Nevertheless, due weight must be given to the positive stimulating effects on growth which the European economy could rapidly experience and, in particular, to the longer term structural effects benefiting the economy as a whole. Future projects must be selected in line with the appropriate priorities.

3.1.14. A proper balance must be struck, with a view to expansion, if the question of absorbing unemployment in Europe is to be tackled seriously, and if the gains resulting from the completion of the internal market are to be consolidated.

3.2. Taxation of non-wage labour costs

3.2.1. Much space in the White Paper is dedicated to the subject of the relationship between the level of obligatory social contributions on the one hand, and growth, competitiveness and employment on the other.

3.2.2. It is noted that a high level of non-wage labour costs is an obstacle to job creation, encourages the substitution of capital for labour and can cause the relocation of investment and economic activities to countries outside the European Union.

3.2.3. Non-wage costs should therefore be diminished particularly where less-qualified and youth labour is concerned. In order to do this without dismantling the existing social security system, compensatory tax measures will have to be considered.

3.2.4. The White Paper examines possible 'neutral` tax measures (i.e. measures which do not compromise the competitiveness of European industry), and stresses the need for a thorough study to be made, not least because opinions differ greatly on this among the governments of the Member States.

3.2.5. However, special consideration is given to the possibility of imposing environmental taxes on the use of scarce natural sources of energy.

3.2.6. This solution would be along the lines of Chapter 10 of the White Paper (considerations on a new development model for the Community) which examines the structural relations between environment and employment.

3.2.7. Under this 'sustainable growth` model, ecological taxation of energy could alleviate the burden of obligatory non-wage levies on the cost of labour, and at the same time would help to create new job opportunities in the environmental protection and clean technology sector.

3.2.8. The Committee is prepared to give sympathetic, unprejudiced consideration to this 'sustainable growth` approach (1).

3.2.9. Nevertheless the Committee overwhelmingly shares the opinion expressed in the White Paper that there is a need for a serious analysis of the likely effects of the various possibilities, before final decisions are made.

3.2.10. Consideration should also be given to schemes already under way in other Community countries such as Denmark, where the social security component of labour costs has long been replaced by an increase in indirect taxation (VAT), with results which deserved to be assessed.

3.2.11. On the other hand, the Committee would recall that though the conclusions of the Presidency of the European Council of 10-11 December 1993 do not specifically cover these problems, they rightly point out that some environmental tax measures 'could be one of the means of offsetting a drop in social contributions, within a general context of stabilizing all statutory contributions and reducing the tax burden`.

4. The European Union in the world economy - An active long term external relations policy

4.1. The Committee Opinion of 20 October 1993 stated that the 'second key component` of the drive to boost economic activity and end the present recession was an expansion of trade and assistance with the development of third country economies, beginning with the Union`s closest neighbours (which could represent significant new markets).

4.2. The Opinion stressed both the poorly defined and uncertain nature of the Union`s external economic policy towards other industrialized countries and the multilateral trade system, and the lack of an effective strategy towards the countries of Central and Eastern Europe and the Third World.

4.3. The White Paper pays less attention to these subjects than to economic development within the Union, and does not seem to have taken on board the Committee`s criticisms about lack of strategy.

4.4. The Committee wishes to return to this subject in order to stress the need for a much more active external relations policy with a more long-term perspective.

4.5. The Committee`s insistence on this point is buoyed up by the apparent recent shift in the Commission`s thinking on this matter, as demonstrated by Mr Delors` recent admission that the EU lacks clear perspectives in its relations with the countries of Eastern Europe, and that some 'self-analysis` is therefore needed of what has been done so far to pinpoint new areas of action.

4.6. The Committee therefore wishes to reconsider a few key subjects, such as the Commission`s uncertainty on the globalization of trade and communications and on the mobility of international investment (with businesses relocating), which are changing the pattern of the international division of labour.

4.7. Europe`s role in the world economy does not seem clear, and seems to lack long-term strategies (1).

4.8. A radical rethink is needed, not least because some of the major new ideas which are gaining favour question the tenets on which the Commission has based its external economic relations.

4.9. For example, the role of the competition- and globalization-driven market is now being questioned. At the same time, there are signs that there are limits to the ability of market forces to resolve complex problems such as co-existence and cooperation between highly developed industrial areas and the large economically depressed and socially decaying areas, which house three quarters of the world`s rapidly rising population.

4.10. New ways are being devised, based on cooperation (and not just market competition), to channel the considerable technological, material and human resources of the western nations towards the poorer parts of the world (2).

4.11. These new solutions should dovetail with the multilateral system of international trade relations, which has been renewed and revitalized with completion of the GATT Uruguay Round negotiations.

4.12. The Committee feels that the European Union should give a lead and, in its dealings with the United States and Japan, work actively for the construction of a new economic and political order binding together the industrialized and the developing nations.

5. Conclusions

5.1. The Economic and Social Committee endorses the long-term, strategic content of the White Paper and supports the initiative of the Commission and the Council.

5.2. However, it points out that the White Paper is an analytical and strategic paper: its guidelines must be translated at once into effective, coherent actions.

5.3. Elimination of unemployment and the creation of new jobs for young people, must be the fundamental priority of macro-economic, monetary and other EU policies.

5.4. A return to sustained growth and commercial competitiveness must constitute the short- and medium-term objectives.

5.5. The European 'economic and social model`, based on the attempts to combine high growth with effective social protection and solidarity, must be defended and revitalized.

5.6. A better balance is needed between resources for production and investment on the one hand and to the public sector, where distortions and waste are sometimes found, on the other.

5.7. The Member States are responsible for the economic and social structures of their economies. The Commission should compare the way that the individual Member States manage their public sectors and the most efficient solutions found. The Economic and Social Committee will be able to contribute to this analysis and the discussions.

5.8. The construction of important trans-European infrastructures is one of the main points of the White Paper programme. These infrastructures are an essential counterpart to the completion of the internal market, and will help to strengthen cohesion within the Union. The Committee agrees with this proposal and affirms that the main task of the European Union must be that of creating conditions for the projects to be achieved rapidly and without distortions.

5.9. The non-wage element of labour costs is an obstacle to job creation and to the competitiveness of European industry. This burden could be mitigated by compensatory tax measures, but these will have to be studied carefully before final decisions are taken.

5.10. The Economic and Social Committee reiterates its view that the European Union must follow a much more active and long-term external relations policy. The industrialized countries need to set clear strategies and put forward coordinated proposals to accommodate the development needs of Central and Eastern Europe and of the Third World generally.

Done at Brussels, 1 June 1994.

The Chairman

of the Economic and Social Committee

Susanne TIEMANN

(1) See the UNICE report 'Making Europe more competitive`, and the European Round Table of Industrialists report 'Beating the crisis. A charter for Europe`s industrial future`, both published in December 1993. See also the ETUC Executive Committee document of 10-11. 3. 1994 on Growth, competitiveness, employment. Other sectoral initiatives are beginning. For example, Commissioners Bangemann and Christophersen have encouraged the creation of working groups between the main European firms to study initiatives in the sectors of telecommunications and networks.

(2) See the ESC Opinion on Growth, Competitiveness and Employment: medium-term considerations (OJ No C 352, 30. 12. 1993).

(3) One of the main macro-economic obstacles is the contradiction between (a) the objective of stability, which entails tight monetary policy, high interest rates and curbing the budget deficit and (b) the aim of an upturn in economic growth and employment, with expanding investment.

(4) An initial approach to identifying the causes of the current recession is contained in the chapter on The inheritance from the recent past in the 1994 Annual Economic Report, presented by the Commission [COM(94) 90 final] on 23. 3. 1994.

(5) The method used by the Commission in reaching this figure of 15 million by the year 2000 has been criticized. The figure given lacks credibility, particularly in view of the continuing recession and the modest prospects for recovery over the next few years.

(6) See the ESC Opinion of 27 April 1994 on the Annual Economic Report for 1994 (OJ No C 195, 18. 7. 1994). The Committee believes that the measures provided by the Maastricht Treaty will need to be strengthened subsequently.

(7) This issue was discussed at the Conference on technology, innovation and employment held in Helsinki on 7-9. 10. 1993, under the auspices of the OECD and the Finnish Government.

(8) It has, however, been observed recently that the link between growth and employment is not as direct as previously assumed.

(9) On the same subject of the relationship between the development of the Community`s regions and the White Paper`s hypotheses of growth, competitiveness and employment, see the parallel Opinion drawn up by the ESC`s Industry Section. More generally, the European Union will urgently have to tackle the problem of the connection between the trend to centralized decision-making, brought about by monetary union, and the need to carry out meaningful decentralization and regionalization of local decision-making procedures, including some tax and financial powers.

(10) For a thorough comparison of the four dominant economic models among OECD countries (European, American, EFTA and Japanese), see the Study on employment and unemployment, published in draft form by the OECD Secretariat on 4 January 1994 and presented officially to the G7 meeting in Detroit in March 1994.

(11) There has been a wealth of publications on the Swedish welfare - State model and its recent fortunes. For a summary, see the Time article, 'Model no more`, of 19. 7. 1993.

(12) Over recent years, the government deficit in Italy has absorbed 60 % of popular savings, diverting it away from productive investment.

(13) Despite the methodological uncertainties over the demarcation line between public and private sectors, it is significant that in many European countries the public sector accounts for 50 % of total economic activities, as against 40 % in the United States and about 30 % in Japan.

(14) See the previous note. An element of uncertainty in the statistics may be due to the transfer of income to specific social groups (e.g. pensions).

(15) See the ESC Own-initiative Opinion of 22. 9. 1993 on The public sector in Europe (OJ No C 304, 10. 11. 1993). Special attention will have to be paid in future studies to the role and efficiency of key public services.

(16) On this point, see the ESC Opinion of 24. 2. 1993 on the Proposal for a Council Directive introducing a tax on carbon dioxide emissions and energy (OJ No C 108, 19. 4. 1993).

(17) This subject is also dealt with in the Industry Section Opinion on the White Paper.

(18) See the 'Group of Lisbon` Report on limits to competition, Gulbenkian Foundation, December 1993.