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Issue No. 801 IN THIS ISSUE page Community: Rebuff of Commission's Borrowing Plan ••.•••.• 1 Bonn Urges Action in the European Transport Sector •••••• 2 In Brief: Railway Cooperation; Greek Trade Crisis ••••••• 3 Germany: Serious Labor Dispute in Metalworking Sector ..• 3 Denmark: Effect of Early Retirements on Unemployment .•.. 4 Britain: Current Accounting for New Tax Liabilities? •••• 4 Self-Regulation for U.K. Securities Industry? .•••.•..•.• 5 Ireland: Tax Breaks for Foreign Computer Companies ..•••. 6 France: 1985 Budget to Aim for Lower Taxes, Spending •••• 6 Italy: U.S. Leads Revival of Foreign Investment •••.••.•• 7 Spain: Madrid Asks Unions, Employers to Resume Talks .••• 8 Community: Rebuff of Commission's Borrowing Plan The EEC finance ministers have dealt a blow to the European Com­ • mission's plan to close this year's anticipated ECU 2.3 billion deficit through borrowing from the Member States. The gap will have to be closed through savings, the ministers say, though they have not indicated where spending cuts should be made. Brussels observers do not consider the ministers' first response to the Commission's plan to be final. The 1984 deficit can be traced largely to the fact that the Council of Ministers' March 31 decision to reform the costly common agricultural policy fell short of what is necessary to balance the 1984 budget. To close the deficit, the Commission recently proposed that the Member States extend loans to the Community based on each State's value-added tax contribution. The loans would be paid back with interest in eight semi-annual installments from 1986 through 1989. The money for principal and interest would come from increased VAT revenue (1.4% instead of the present 1%) that the Community is to receive under a pro­ visional agreement reached by the heads of government at their March 19-20 Brussels summit. ________ This lsme Is In two part,,, This Is Put I.-------- COMMON MARKET REPORTS (ISSN 0588-649X), published weekly by Commerce Clearing House, Inc., 4025 W. Peterson Ave., Chicago, Illinois 60646. Subscription rate $945 per year. Second-class oostage paid at Chicago, Illinois. POSTMASTER: SEND ADDRESS CHANGES TO COMMON MARKET REPORTS, 4025 W. PETERSON AVE., CHICAGO, ILLINOIS 60646. Printed in U. S. A. All rights reserved. © 1984, Commerce Clearing House, Inc. EUROMARKET NEWS No. 801 Page 2 The finance ministers' reaction to the Commission's borrowing plan casts a dark cloud over the yet undisclosed Commission plans for the 1985 draft budget. (The EC Executive is expected to • present its proposal soon.) According to Brussels sources, the Commission's draft budget for 1985 calls for around ECU 28.2 bil­ lion in spending and ECU 26.1 billion in revenue. It is not clear how the ECU 2.1 billion deficit would be funded, but the approach proposed for closing this year's deficit is considered the most likely choice. Of the planned ECU 28.2 billion in Com­ munity spending next year, around ECU 19 billion would be allo­ cated to the farm policy sector - some ECU 500 million above this year's expenditure. Commission officials emphasize that this additional expenditure is a direct consequence of the Coun­ cil's March 31 decision, in which Commission-proposed expendi­ tures for 1985 were exceeded by some ECU 1.3 billion. Bonn Urges Action in the European Transport Sector The Community would fare far better in developing a common trans­ port policy, says the German transport minister, Werner Dollin­ ger, if the Council of Ministers would live up to past commit­ ments instead of debating obligations it wants to assume in the future. In a frank letter to his French colleague Charles Fi­ terman, president of the Council of Transport Ministers, Dollin­ ger says that a common transport policy will get off the ground only if the Council abides by the EEC Treaty and its own dead­ lines set in the past. In Dollinger's view, it does not make sense for the Council to keep debating what should happen after • 1986 if it fails to make the necessary decisions that were due by the end of the transitional period in 1970. (The failure to take any action on transport policy by the end of the transitional period is the subject of a pending action brought by the European Parliament against the Council.) Dollinger gives several examples of the Council's failure to act despite definite commitments made almost 20 years ago, such as the Council's May 13, 1965, commitment to pass legislation for the harmonization of national .provisions affecting competition by rail, road, and inland waterways (Common Market Reports, Par. 1812.JOJ. The Council agreed to take action by Oct. 1, 1967, to abolish double taxation of motor vehicles used in Member States other than the State of registration (Common Market Reports, Par. 1812.J?J. The Council was supposed to have passed legislation by Jan. 1, 1968, to standardize national rules governing the calcu­ lation of the vehicle tax on cars and trucks as well as vessels used in inland shipping. Jan. 1, 1968, was also the deadline for aligning national rules on the composition of crews of all types of carriers. Distortions of competition arising from different tax bur­ dens and technical prov1sions, e.g., truck weights and measures (Common Market Reports, Par. 1812.35), must be removed before work on a common transport policy can progress, Dollinger says. EUROMARKET NEWS No. 801 Page 3 • In Brief ... The Council of Ministers has agreed to closer cooperation among the Member States' railways. This cooperation, provided for in a nonbinding recommendation, includes faster clearance of freight trains at border crossings, approximation of tariffs, and align­ ment of schedules for international trains. Several States were against a binding commitment + + + The Commission has refuted claims by the Greek government that accession to the EEC has caused a crisis in Greece's foreign trade by worsening the trade balance with the other Member States. This claim has been used in the past two years in support of stricter import restrictions than authorized by the Commission. In a recent report, the Com­ mission concedes that Greece's agricultural trade suffered after the accession, but says that there was no disturbance of indus­ trial trade between Greece and the other EEC States. Germany: Serious Labor Dispute in Metalworking Industry Some 12,000 German employees in the northern Baden-WUrttemberg district, around Stuttgart, walked off their jobs on May 14 in support of their union's demand for a 35-hour workweek. In addi­ tion, several thousand workers in the state of Hesse are expected to take part in what may prove to be the country's most serious labor dispute in years. For the time being, IG Metall, with 2.6 million members in the steel, engineering, and motor vehicle industries Germany's largest industrial union, is trying to avoid a nationwide strike by selecting a small number of plants, mostly suppliers for the automobile industry. However, the damage will soon be felt by Daimler-Benz and Porsche in Stuttgart and other • car makers elsewhere because two of the 14 plants struck in the Stuttgart region are the country's only piston manufacturers. Car makers usually do not keep more than a week's supply of parts. The strike in Baden-WLlrttemberg started after union ballot­ ing in the Stuttgart and Frankfurt areas produced majorities of slightly more than 80% in favor of strike action. According to union rules, a strike may not be called unless at least 75% are in favor. Some labor experts consider the relatively high margin this time to be an expression of union-organized workers' belief that 35 hours instead of 40 hours a week, with no loss in pay, will create jobs for 1 million unemployed. Employers and other observers view the strike vote as support from the rank and file for union leaders who believe the 35-hour workweek is essential for IG Metall's survival. Industry leaders, who originally had doubts about the union members' determination to support such a strike, still believe a majority of the working population is against the industrial dispute. Had the strike vote been taken in a high-unemployment region, they say, the results would have been different. © 1984, Commn'ce Cle<lring House, Inc. _E_UR_o_~_:A_R_K_ET_N_E_l"l_S_N_o_._B_0_1 ________________P_a,<.ge_4 • The employers have made an offer that would involve little addi­ tional cost and yet would give employees a 38-hour week. This proposal would involve a third shift for plants now operating on two shifts: employees would work fewer hours, production capacity would be better used, and unemployed persons could be put into the resulting jobs. Denmark: Effect of Early Retirements on Unemployment A national system that permits employees to retire early has been in effect in Denmark for about five years and is being extensive­ ly used. However, it has had only half the impact as regards unemployment as had been originally anticipated, according to a study recently issued by the state Social Research Institute, Co­ penhagen. When the system was introduced, the government had expected that 75% of the jobs vacated by early retirees would be refilled. In the first year, that quota was almost reached, at 70%. Since then, however, private employers have been reluctant to commit themselves to new hirings, and only four out of ten va­ cant positions have been refilled. The researchers believe that the low rehiring quota in the private sector can be explained largely by the fact that many em­ ployees who elected early retirement would otherwise have had to be laid off. However, the study also reports a "surprisingly low" rehiring quota in the public sector, even though employment there has risen slightly since 1979, despite an official hiring freeze and some manpower bottlenecks caused by early-retirement • attrition.

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