Commission's 1997 annual economic report

The Commission has published its 1997 Annual Economic Report, presenting its views on the economic situation and prospects of the EU. In particular, the report analyses convergence of Member States' economies in the run-up to monetary union. The report shows that the EU's ave...

The Commission has published its 1997 Annual Economic Report, presenting its views on the economic situation and prospects of the EU. In particular, the report analyses convergence of Member States' economies in the run-up to monetary union.

The report shows that the EU's average annual economic growth during the years 1991 to 1996 was 1.5%, while total employment dropped by 4.5 million jobs. On these figures, the EU's economic performance was much worse than the USA's in the same period, and also worse than Japan's. The Commission finds that this poor economic performance resulted from macroeconomic obstacles to growth within the Community.

Obstacles to growth included inflationary pressures due to insufficient expansion of productive capacity, overly lax budgetary policies and inappropriate wage increases. These led to high interest rates and consequently undermined exchange rate stability, with the resulting recession of 1992-1993. These factors were also responsible for the faltering of the recovery between 1995 and 1996.

According to the report, the efforts being made by Member States to meet the convergence criteria for economic and monetary union are also helping to eliminate obstacles to sustained growth and job creation.

The Commission notes that globalization and technological developments are not the causes of unemployment, although they do lead to continuous changes in the structure of output and employment. In order to reduce unemployment rates, the Commission calls for structural measures to improve education and training and employment opportunities for low-skilled workers, and to ensure that efficient markets facilitate sectoral changes in a smooth and socially acceptable manner. There is a need, according to the Commission, for greater labour cost flexibility and employment.