JPRS ID: 8220 TRANSLATIONS ON WESTERN EUROPE

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iS JANUARY i979 , CFOUO ~ ~ , : i dF i

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JPRS. L,/:8220
15 January 1979
TRANSLATIONS ON WESTERN EUROPE ' � '
(FOUO 4/79)
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JPRS L/8220
, 15 January ~979
TRANSLATIONS ON WE~TERN EUROPE
(FOUO 4/79)
CONTENTS ' ~ PAGE -
FRANC~ '
Giscard's RecenC Monetary Po13.cy Fteviewed
(Marc U1lmann; PARIS MATCH, 15 Dec 78) 1
Air Transport Problems, Outlook Reviewed
(Claude Abraham; A?R & COSMOS, 25 Nov 78) 6
Briefs .
' Trainin~ for Corsican Extremists 11
Missile Regiment Operational 11
ITALY
~NI's 5-Year Investment Plan Announced
(Fabrizio Dragosei; CORRIERE DELLA SERA, 18 Nov 78).. 12
' WCST GCRMANY
Repatriation of Ethnic Germans From USSR Declines
(FRANKFURTER ALLGEMEINE, 14 Dec 78) 15
Expert Views Economic Growth, Problems for 1979
(CAPITAL, Dec 78) 17
Subsidized Research To Create New Jobs
(Werner Heilemann; STERN, 23 Nov 78) 27
- a - (III - WE - 150 FOUO~
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FOIt O~~ICIAI, US~ ONLY -
. FRANC~
GISCARD'S RECENT MONETARY POLICY REVIEWED
Paris PARIS MATCH in French 15 Dec 78 pp 118-119 ~
' [Article by Mara Ullmann: "Why Giscard Ventures To Hitch the Frana to the
Mark"]
(Text] "Giscard has lost his mind. France'a rate of inflation ia 10 per-
cent while Germany's is only 3 percent. And yet he is convinced the franc
will maintain its value againat the mark." Was this comment made by Fran- ,
cois Mitterrand? Not at all. By Georges Marchais then? No, neither by
him. IC was made by a former Cabinet minister belonging to the parliamentary
ma~ority. And furthermore, he was speaking on behalf of'several of his '
colleagues.
Some high-level officials expresa the same view but in more polite terms.
One of them told me on the very day of the European aummit meeCing in Brussels:
"The only big question is whether the French Pconomy is strong enough to
support the recently approved European Monetary System (EMS)." And since he
knows me very well, he did not heaitate to add: "I am worried."
This man's line of reasoning is quite simple. It can be summarized in two
. sentences. First of all, the French economy is still too weak for the franc
to maintain constant parity with the mark. Secor,dly, if the EMS authorizes
frequent parity ad~ustments, it will not be of much use. Conclusion: France -
should not have joined th3s club if its rules are inflexible; and it will be of
no use if its rules are flexible. If it were not for the fact that I highly
respect this man, I would characterize him as a Marxist, a MarxisC of the
Groucho school. I rEfer to the oldest of the Marx brothers, the one with the
big cigar and black mustache, who used to say: "I'm not. interested in joining
� any club that would accept me sa a member."
Such 3oking aside, this is indeed a serious sub~ect. We shall begin by asking
ourselves why Giscerd d'Estaing has'been eo patently determined the past 6~
months, and why he displayed ao much will power Tuesday.�
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i`
rott F tr, cnt~ lfSC ONI,Y
,r~ ~
~F, ~lis reasone, As I se~ it, can b~ grouped inCo tihree prtc~cipal catcgori~s: ~
inCellecCual reaqon~, �oreign po~icy r~:~agons, ~nd laetly nnd abo~re al.l~ domes~ ~
~~ic er.onomiC palicy reasdns.
Inrel~.ectunlly, the presidenr nf the republ:ic i.~ unhnppy aC the Enc~ Cht~C
~~r Che pasC ~ew ye~rs r.urr~ncy exchan~e r~te:~ h~?ve I~ern f`ixed fro~n clay L�o ~
day nn foreign-exchun~e mark~e~. Ln orher words, ~he L~te oC exchange is nn
more aCablc th~n tiie pric~ of m~~k or fiyh. 'Tlit~ rae~ i.s ~llgo vulnerable to
any kind of rumor nnd ita �1ucCUetions c~xn be abru~~t and unrelur~d Gn the lou~-
term evolution ~.n ~he economic sit~int~.~n. This staCe uf a~fnil~ in deeriment~l
ro internntiocial trade bec~use impor~�~r~ gener~ally settle their ~ccounta on ~i 9U-
d~y basis and dn not h~ve the sligheesC idea Fis Co whaC r.he final amnunt oti -
their bill wil~. be. Munu�acturers auffer ~rom the repercussi~ns of eh~.s unceL-
tainry. They are reluctnnt to caunt on r.heir cont:rnces abroad Blla 11~t1Cc2 co
expand their exportable product:ton whir.h, und~r oth~:r circum~Cances, wou1d ,
crenCe job5.
To break Chis vicious chain, Giecard d'Fstaing, in ap,reement with ~Jest Gerwan
Chancellor Ilelmut Schr?idC, was convinced thut European currencies had ta be
tighCly linked eo each oeher within ~"7one of monet~ry stability." To prevent ;
' speculation from causing the structure to colLapse, the i:M5 call~ for establish-
ment of a common �und which wi1L be the 1~rgest ever creaCed anywhere in the
world. To set up this fund, each member country will contriUut~ pare of its
reserves, in o~her words, part of the "pile" of gold and dollars it reeains ~
to finance its foreign trade. An addi.tional equivalent FunounC will also be
conCribueed by each country, but this Cime in national curr.encies. Ttie fund.
;,rill be denominated in a new European Currency Un3t, or ECU. The total amount
of Che fund ~-fi11 be much greaCer than the amounti any speculator or group of
speculators cnn ever hope to amass. Consequently, the val.ue of tihe different ;
European curxencies will revert to being the business of governments. ;
This does not mean that a common currency will be created right away, or even ~
Chat the relative value of our different currencies will be unalterable. If,
for example, prices continue to rise more in Fran::e than in Germany, the �ran~
will, after all, definitely have to drop and the murk rise.
But this drop and this rise will be negotiated within Europeau institutinns
and governments will thus be obliged to determine a common policy together. ,
This is where the foreign policy aspect of Giscard's reasons comes into play.
For a long time, too long a time, the Fr~nch and German governments wrangled
over a matter of principle. Officia~s in Bonn contended t;~at applicatton of ,
coordiz~ated economic policies had to precede the pooling of monetary resources. ~
Officials in Paris rebutted that such pooling was an indispensable prerequi-
site to implementation of concerted policies. This quarrel has now been
settled: both actions will take place concurrently and, therefore, the task of
organizing Europe will be.able to move forward, at long last.
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From the monetary aCandpoinC, guch org~nizatinn ig especially n~cessnry
~n view o~ ~he do11~r's i.nsCability, Cvery time ehe dollar drops, greater
pressure ~s generally exertied on Che mark Chan nn the Er~nc. As a result,
the dispariCy betiw~en G~rm~n money gnd ~'rench money broadens, Now Chgt the
mark~ the franc, and several other Europe~n currencies are 1i.nked, they W~.ii
f].uctuaCe more or 1.ess in cnncerC gnd the ampliCude of ehis flucCuation
should be less. The bigger Che basin, the sma].ler the waves. ~
~ This aspect of the system is of parti~cular ineerese eo Schmide. He'is sick
~nd Cired or' having Americans target snlely ehe Cerman mark, along with the
Japanese yen. ConstanC reevaluation of the German currency has certainly
not prevented German manu�acCurers from selling their producCs abroad, but
they do so at a lower profit each day. Should Che mark be drawn slighCly
downward by weaker currencies~ profits would increase once again and new factoriea
could be built in Germany.
For converse reasons, Callaghan is hesitane Co rie the pound's fate to the
mark's fate. He believe�.3, and rightly so, that Chis would ultimately restrict
his government's freedom of acCion. He has decided, therefore, to keep Great
Brirain parCly aloof from the EMS. As for Italy, a�ter a day of aharp Euro-
. pean bargaining, it was sti11 not known Tuesday night whether that counCry
~ would be sACisfied with the compensations it has been offered.
Giscard d'Estaing ha~ no such hesitancy. In his view, it is better for France
to be in the company of good rather than poor students. Nor is it by mere coin-
cidence that he has asked [Prime Minister] Barre to follow a policy which
subo~c'�;tnates everyChing to improving Che French economy's competitive posture.
A policy designed precisely to bring France closer to Germany, in other words,
closer to the best student in the class.
This thus brings us to the economic aspect of Giscard's line of reasoning.
~ If France today is in a less favorable posture than Germany, it is because
it was unable, before.the oil cri?is, to make the r~~~,~sary change in its ~
industries. Why was it unable Co do this? Because the franc was constantly
undervalued and firms could export without too much trouble. For the past
2 years, the president of the republic and his prime minisCer r~ave sought to
accelerate such change instead of ctirbing it. The current imperative require-
ment is to make France competitive in world markets. Giscard d'Estaing is
convinced this is the one and only way France can gain "a key position among
the leading industrial countries." Should it fail to do so, Franca would
inevitably slide downhill into a situation of financial indebtedness and
ind~istrial subcontracting, in short, into a status of dependency and under-
development. In other words, France still cannot see the light "at the end
of the tunnel" andthere will be no "eleventh hours." The recovery plan
launched by Barre is but an initial step. Success demands a lengthy period
of self-discipline and association with Germany is Cangible proof of such
discipline.
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roh nt~ l~' IC t~~L USC C1NI,Y
'Ch;iC lc~ves c.hr.. eytaentt~l ~~ue~Lion: Tr, 1'r~ince t.n n poql.ti,un Co keep p~cc
with i~s Cermnn p~rtneri 'Co answrr r.hira question, one muqt mnke a dia~nosi,s
of our ~cnc~emy. I liereby hubmiC my diagnosis tc~ ~'AltrS MATCH re~ders. IC is
~ c~nsci~ntin~as ~n~lysls b~~:aed an ~ d~talled surt~ey 'T h~ve be:en cnnducting
since September, Thi.s dingnr~s�.ls tr tollows: thr. ~rc~iich ~:connmy is improv-
in~ som~whAC but Chis i.mprovement is qLow aiid we havc Lon~ dif~icutt years
ahead of us.
I shall ararr my dingn~sis wich eh~ price ~it~~atin~i, Adm~.tt~dly the decon- ~
trol of indiastriul pri.ces did nat r.r.ig~;er excey:~ive .tncre~ses and price
indexes Eor Augu~t, September, nnd Gven Ocr.~b~r. w~E~r.e tavornble. Admitt~dly by
sharply incr~asing pub].ic rares and farrs in the serond quarrer of Che year, ~
the government did nor. hesit~lt~ to '"bite the bu~.lct" early and thaC sh~ck is
now behind us. Admit~edly compante~ Look advanCage nf the der_line :tn raw
maCeri~ls to build up their ~rnckpil.es reasonable prices over a pe~�iod o~
~evergl motnhs, ~nd these stockpi.les will be mo~twelcorne next year. Admittedly,
the cost-of-living tn~c~ea3e ~t.n 1979 should be be.tnw 8 percent, barring some
serious incidene on t-~~e oil front. The fact rem~ins, however, that 8 percent
or even 7 percenC~ l:> sc1.11 high; and at any raCe, it i~ doub~.e what the Germans
will have. We musC, Cherefore, conr.inuc our ef.forts. For how long? For
several years inasmuch as experience shows thaC iC is very dif�icult Co cher.k
rising prices by more than 1 percenC per year on the average.
I shall now consider our fore~,gn trade. Admittedly we once agairi have a favorable
balance of Crade and France now sells as much merch~ndise abroad gs tt purchases ~
Chere. Yet up~n scrurinizing our overal.l trade picture, we notice that the
distribuLion of our trade by country and by product is noc favorxble. For
instance, geographically speaking, we have a erad~ deficit wiCh Che most
advanced industrial counCries and a trade surplus wiCh the less developed ;
countries. For instance, sec:torially speaking, we import more processed goods j
than we export. These two wealcnesses show Chat our industry has far from ;
completed its necessar.y changes, or as we say today, its "redeployment." It
will take many more years to complete these changes. Years during which even ~
a revival of private investment will not reduce unemployment substantially.
To enhance their coropetttive posture in world markeCS, large companies
are now obliged--and will be obliged for a long time to come--to si.multaneously
make decisions to create jobs in ane place and close plants in anoth~r. In
some instances,reducCions in personnel may possibly equal or exceed the number
of new personnel hired. This is actually what is happening at Rhone-Pouleuc.
While that firm is making both useful and considerable capital inyestments in ~
new production units, it is, however, also making personnel cuts in its old
plants. This example shows us wtiy esCablishment of new companies has become a
currently popular theme. When a new business starts operating, it has, by de-
finition, no excess personnel and any possible growth~has repercussions, in
toto, on the labor market. Unfortunately, o1d habits also change slowly in this
field, and several tens of thousands of heroes ready and willing to start their
own business cannot be found overnight. This shows why action to combat
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~~o~ nr~~cx~ us~ oHLY
unemp~.oymenti must be a national priorlCy. Ir ~lso means ehat, for the presi-
dent of Che republic, the mainCenance oE econom~.c discipline is noC suffi-
cient per se.
Since we face the prospect o� a 1on~ and dr~wn-out effort, ~usCice and
prudence both dictate rhae all sacrifices be shared as equieably as possi-
_ , ble. 'Three examples amply demonstraee this requirement, FirsC, should this
or ehat r~gion be plunged into a severe economic depression, it is feared �
that ehis would cause an explosion thar could politically trigger sCrikea
in the public aector. Secondly, if an excessively lengthy period of unemploy-
ment and idleness were to drive many young men and women to desperation, some
of them mighC well yield to the tempCaCion of Italian-style terrorism.
Thirdly,, if wage earner~ should ever get the feel3ng that they alone were
carrying the burden o� all necessary transformations, no lasting consensus
could emerge in our country.
All things considered, France's ability ro ~oin forces with Germany depends
on maintaining a rigorous economic policy for several years. Yet such an
effort can be sustained only if the chief of state is able to forego the
, interesCs of some of this electorate in order to satisfy the aspirations of
those who wi11 probably vote foc his opponent again in 1981. I believe
Giscard d'Estaing is the first one to admiC this. His loyal supporters insist
such would be his ambiCion for a second 7-year term.
COPYRIGHT: 1978 par Cogedipresse SA
8041
CSO: 3100
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FRANCE

, AIR TitANSPORT PROBLEMS, OUTLOOK REVIEWED -
Pa'ris AIR & COSMOS in T'rer~ch 25 rlov 78 pp 38-39, 56
[Artic].e by Claude Abraham]
[Text] Mr Claude Abraham, the director general of Civil Aviation, was
the guest of honor of Che UCCEGA (Union of Chambers of Commerce and of
' AirporC Management) during Che l~st general meeCing of this organization,
which was held in Paris on 15 November. He agreed to address the current
problems of French air transport but, rather than making a fu11 reporC,
he chose to make some comments. We reproduce their substance below and
thank the UCCEGA for having.sent them to us. ,
A Positive Balance Sheet
The yeAr 1950 saw the renaissancE of French air transport. In 1960,
Air Inter was born. In 1970, regional aviation was developed, for 1980,
there is a question mark. Every 10 years, the director general of Civil
AviaCion observed, French air transport reaches~new thresholds.
The first posiCive element to bring to Che balance sheet is the importan~
. share of world traffic that French air transport has been able to main-
~ tain. In 1950, France was the fifth "aviation power" in t:~e world, be-
~ hind the United StaCes, the Soviet Union, Canada and Great Britain. It
had only 3 pzrcent o� world traffic, and that was sovereign traffic wiCh
its colonies. Today, France is still in fifth place, behind the same
countries, (although their order has changed), but it has 4 percent of
world traffic, having in the meanCime "achieved its reconversion," since
. it no longer depends on sovereign traffic.
On the 1eve1 of infrastructure, today Paris has the second largest air-
port in Europe and the sixth largest in the world. Sixty-five French
cities have sir service. Abroad, 170 airports in a hundred or so coun-
tries can be reached by French airplanes. This rasult, Mr Abraham em-
phasizes, is not at all bad, if we take into consideration the fact that
during the same period other counCries saw their share of international
traffic grow. . ~ _
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I~UIt Ul~'CI:(.1:~1, Uyl. c)N1,Y
'Che growth of fr~tgh~ constiiCures n scr.oilci posj.tiv~ e:l.cmenL i.n the bal~~ ,
:~nc~ sheet which c~nn be drnum up. '1'his tcir,d of. ar.~iv3.~y is recent ici
I'rance. Ir rcpres~n~s at Che moment: Ir.om 30 r~ 40 per.r.ent of tonnage
of rrench long-1.ines carrl.ers.
Another posit�~ve elemenC, buC a coniple~e.ly new bn~, is r.l~e penetration of
~ir trnnspnrr ehroughnur rr~ttce. La~~: year., 6,5 pprcent uf Che ~~rench ;
trnvel.led Uy air ~t 1r~~t once; Ghat represents 3.5 million p~ssengers. ~
Ouly a few year~ agn, Che pener.ration rate ~oas on:ly 4 per~:ent. The ~
growrh is subsCanttal, but it coulcl be great~r. ?ndeed, we note that ~.4
percent of the Paris populaCion travel by p].ane once a yc~ar, that is, ;
one Parisian ~ut of si:c. Fifty-six percent of Che ~rips are made for
personal reasnns; young adiilts ac:count for almost t~alE of tihe passengers.
Th:is pettetr~Cion of ttir ~r~nsporC i3 very strung ~C present in Che noreh-
ern and eastiern sections of. rhe counCry. ,
What are Che less posieive elements in the bal.~nce at~eee? Essentially, ~
tourist travel ancl, in parricular, conCracr. flighes by chartered air- ~
crafr. Th~re, we see ttiat the French flag occupi~s a very small place,
although ChaC observation must be qualified: in ~he case. of Paris, ouC-
going charCers are strong, buC incoming charrers are eoeak. In the prov- ;
inces, both directions are weak. In this area, rir Claude Abra}~am remarks, ;
it must be noCed that the French companies, whetiher publ:ic or private, ;
suffer �rom a considerable handicap: compared to their ex3s~ing or poten-
tial competiCors, their costs are much higher.
A New Form of CompetiCion
The environment f.or air transport in ~rance has developed considerably,
observes Che director general of Civil Aviation, coho foresees the coming
of "a completely different world, of which we are seeing only the dawn."
The first character:t.stic of this development is the new forn that compe-
tiCion has assumed. IC works on three levels. rirst, it is represented
by Che transporters in the developing counCries. Not only are they ask-
ing, and rightly so, for their ~ust share o� the traf.fic--that is, for
the Craffic in their own country--buC they also are entering th~ world
market with such technical quality, prices and ambiCions, that they be-
come very strong competitors. This is particularly true of the countries
of Southeast Asia: Singapore Aizlines, Korean Airlines, etc.
Secondly, these are countries wttti socialist economies. They have a very
comprehensive and well conceived idea of their own inCerests and of their
balance of payments. They are ready to use the means necessary in order
to play an essential role.
A third form of competition is represented by the position of the UniCed
States. In 1955, American.national and international transport ac^ounCed
for 78 percent of world air traffic. In 1978, their share was reducad by
7
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, t~nu c~i~r~~cr,rni, us~:' c)NLY
abouC ha1� (th~t S,s, to 33 perc~nti) and they nnw accounti for only ~.8 per-
cenr of intern~rion~]. CraEEic. In 20 yenrs, the Americans hnve ~herefore
losr half of Glieir dominion'and, consequenrly, of ~heir superior:tty. But
they have retiained.the habiCs they had when rhe,y were,3lone. They sCi11
want to regulate world transport and have undertaken a srratiegy to recon-
quer the mnrket. To do this, they intend:
~ --to rely upon dynamic, young and very prnducCive companies in order Co
launch an Assault on ehe world market. It should be understiood tihati be-
tween the best managed of Che American companies and Che whole of the
European ones, the difference in costs can reach 35 percent.
--to support uncondiCionally Che fares of supplemenCary air transport -
companies. The support accorded by the American government to these
companies is explained a11 the more by the fact thaC the fleet of these
companies is considered one of the elements of its national de�ens~.
--to conducC a policy of low fares, which is all the more popular since
consumerism is now fashionable.
A11 Che elements for success have thus been broughC rogether to permit
the Americans Co win the batitle for air transport. In 18 months, Dr Kahn,
the director of the CAB, C3vi1 Aeronautics Board, has overthrown all the
traditions and defenses of the world of internaCional air transport. In
addition, he has found a111es in Europe, ob~ective or resigned ones, who
accept willy-nilly the new rules of the game.
Originally, each country proceeded to an exchange of air rouCes. The
system was in balance. Each counCry conCrolled the capacities estab-
lished by the companies. The fares which were established were discussed
in the IATA and the final rates were set by the countries of origin and .
of desCinaCion.
. Today, the whole system has blown apart with the new bilaCeral agreements:
agreements with Great Brttain (Bermuda II), then with the NeCherlands,
Belg'ium, Tsrael and the FRG. The rule, today, is ChaC of the freedom, for
an American company, to go anywhere at the nrice it ~hooses. On the other
hand, the European companies do not have abso?.ute freed~m: they have only
received a greater number of cities which they are permitted to serve in
the United States. There is therefore an imbalance. Lufthansa, for ex-
ample, has obtair.ed the right to serve 11 cities in the United States,
while the Americans can go anywhere they want in W~st Germany. ~
To be even more certain that there will not be any more regulation for the
American companies, the Cor~gress of the United States has ~~oted to abolish
the CAB in 5 years. It was a real tour de force!
The last element in this wild competition: the IATA. This organization ~
~ has adopted new statutes in order to survive in the face of the United
~ 8�
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rc~~i r rc; t nt, i?;;i, r~?vt~v
StnC~s. It t~ noC e~ire th~t eh~y w:tll .~uc~ee.l. N~v~rChe.te~a, ehere ig
n~w ~n "a 1~ carrc" farQ yystem~
- Libernliz~tion ~ud IJ~e~hing ~ar~~
t'or us, tli~ d3rer,tor g~tierbl d~ C~.vil Avi~~ic~n a5ks, wh~zt nr~ rlie Gans2-
qu~nCp~ nE guch ~~ieu~~in�7 tae shot~ld beCOmc! ~~w,~re nf ~erC~in numb~r
nf r~q~~i.r~m~nts. ,
CJ~ trnnsp~rt ~ millinn pr~~y~ag~rs. 'Chnt repres~nts d client~l.~ ~erge
pnuu~h eo m~ke irs~l~ heard. They mur,t b~ K~risfied~
~3~~id~s, ie wi11 ba difficule for ug Co make pnsgenb~r~ FICCEpt eompli-
car~d f.~rc~ sCructur~s, incdmpreh~n~ib1~ on~s.
In thc Chird p1~c~, we mu~e eake into ~onsid~ration thc very ~;reaC perme-
ability of irontiers. lJhnC h~pp~ns ~mdng our n~ighbors is very cnntaginus.
We ~re mnre ablig~d tu take ittCo ~CCOUtlt ehe dhvelopmenC goiag on around
u~. "Spl~nclid isolfieic?n" ig no longer posaible. ~
'Theae neeo requirpmenes h~~ve immediate couseqUCnces. We cannot hope Co ~
muintt?in the protectioni:~m of rhe past, Mr Abrnham declnres. ~rench pol-
icy must chang~ complerely in orcier to re~pond to fietcer and f~iErcer com-
peti~ion. We have therefore changed our r~gul.atary systen to a signifi-
cant extent. Tl~is is a renlity which is nnt yet too well known. _
Nonscheduled inerg-F:urope~n flights have now been gre~7Cly liberalized,
with a few minor reservations for reciprocity. "We are perhaps a little
too liberal." ~rance is the one country in ~urope which has the greatest ~
numb~r of airporCs open to international traffic (1$0 permanently and 160
on requcst). This is probubly excessive. In the area of scheduled long-
lines flights, liberalization is a?so increasing. This is nn irresi~r-
ible developmene. It also exists in the cnse of overseas flights: for
the Carribean, tlie destinaCion is camplet~ly open.
Liberalization thcn exists and it will grow. 7'hnt me~ns we must take care
to balrnce the right3 between different countrics.
Another characteristic: watching fare~ will remain nece~3sary. I do not
think, rtr Abrah~~m continues, that we can leC ~ust any marginal transporter
nffer anything at all on the markee because he enters it from time to
time. $ut we cnnnot alloc~ urchaic fare structures to continue to exist.
We must therefore "police" ~ur affairs with discernment.
Finally, the third and last characteris:ic of the future of air transport:
the situation of the French companies.
Cach time we ask for the freedom to do something, we mu5C ask for the free-
clom not to do it. In other words,.we must noC impose restrictions on the
~ 9
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H'dlt nl~'t~ IGIAt, USt~. ONLY
public wi.ehnue cnmhtn~nCing iC~ Cnmp~CiCion ~nd cnn~Cr~inC~ whiCh nr~
e~o gr~ar ar~ irrechneiLabl~, W~ mu~t ~1so unclergr~nd ehaC th~r~ i~ ~
pr~blem af ehoi~~ b~ew~~n camp~C~.C~on wiCh ie~ ro~gibl~ con~~qu~nc~~
and e con~rc~~,lad re~ime ~ff~cein~ a c~rr~in number of dome~eic d~~tin~-
~ eian~ ar af ed~~tnl ~ra~fiC.
Andthar po~.nt to be n1~nt~.~n~d in Cha siCu~tian of eha French r.ompani~s ~ _
rhe problem of n~w charC~r~~ IC i~ noe ~hocking to Curn Cnward~ a gy~-
tem in which initiaCivss w~u~d be more greaely ~neour~~ed than they ~re
eod~y. But w~ m~~C ~cc~pt th~ nongPquencp~~ The dis~ppedrance of ~
cnmpany or a 1~,ne should n~t be ~ naeionaL tragedy~ IC wi11. ~1so be
neces~ary for the "Cour operaCor~" to beco;n~ conACinus of their role
in Chis respect. It muet be under~tood ehat ~n ~ircrnft becomes prof3t-
abl~ aftnr 2,500 or 3,000 hour~ and not aft~r 1,20a. The airline com-
panie~ ~nd the "tour operaCors" must work togather to fi~1 the pianes.
As fnr Che companies Air ~rance ~nd UTA, thQy will havp to become con-
sci~us di the necesgitiy of adapting to a ~r,~re and more ~.ompetitive con-
text.
"Thinking Sma11"
The director general of Civil Aviation concluded hia remarks by launching
an appeal. The productivity o� an airline company; he said, is a collec-
tive reeponsibility. IC ie too easy and Coo un~ust to say that the per-
sonnel is too well paid. 'There are no amall economies in air transport.
Any increased expense, as ~ustified as it may be in appearance, is an ex-
tra weight that the companies will have Co drag along. More than ever, ~
Mr Abr~ham believes, the moment has come to "think small." This is an
essential objective that must not be lost sight of. It concerns all the
partners of sir transport, including sirports. This is an appeal for a
strong effort that must be made now because the air transport battle will
' be a hard one.
COPYRIGHT: Air & Cosmos, Paris, 1978
8956
CSO: 3100
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I
i
. r~K t~t~~rt.r, rnt, u5t, urtt,Y '
F'EtANC C
;
~
i
LkXE'~5 ,
TitAINING FOtt CORSICAN ~X"fttEhiL5T5--A r~porC by tf~n bS'~ [rr~nch Internal
S~curiey S~rvicQ] indicneed prior t~~ (Pri.me Minister] ~arrQ'~ d~pareura ~
for Corsica that ~hn ~xtr4misCg on rh~ islnnd h~d recen~ly und~rgon~
training in pnlesCini~n camps in zrnq, ~yrig ~nd Leb~non. [Texe~ [Paris ~
PAttI5 MATCN in ~'rench 22 D~c 78 p 117~
MISSILE R~GII~iV'r ~JPCRA'~IONAL--'i'hc~ �irse of six regiments of the army's ;
ground forc:~s eo be equipped wi.th Roland gurface-to-air misailes is now ~
pxactic~lly operational in th~: Verdun r~gfon. The r~gimenr is provid~d ~
with thc Roland I(clear-weaChf.r version) mount~d on an AMX�30 chasais. '
E~ch vehicle carries 10 mis~iles, ewo of which are always ready for ~iring. ~
i
[Texr~ (Pnris MOr1ITEUR DE L'A~RONAUTIQUE in French Uec 78 p 6~
i
~
C5d: 3100 ' k
,
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I~ALY
ENI'S 5-YEAR INVESTMENT ~LAN ANNOUNC~D
MiLan CORRIERE DELLA SERA in Irali~n i8 Nov 78 p 11
[Artici~ by Fabrizio Dragosei: "The ENI Wi11 Inv~at 8,800 Btilion Lira in
En~rgy in S Years"~
[Text~ .Rome--For the 5 years �rom 1978 (included) thr~ugh 1982, the ENI
[National :tydrocaYbons Agency] group wi11 heve t~tgl financial needs of
11,500 billion lira. Of this sum, 10,000 billion is earmarked for inveat-
ment. These figures are conCained in l�he program~report of Minister of
~ State Participations Bisaglia. Among Che appendices, which have not yet
been made public, are ENI's programa for ehe 5-year period 1978-1982. At
the end of 1982, the debt will be equal to 73 percene of commitments, a
l~vel which is def{.ned in the report as "notably high~r than the level for
companies which operate in analo~ous sectors and with which ENI finda it-
, self competing in the national and international markets."
In eh~ last 12 months, ehe group's short-term debt has decreased by about .
1,000 billion, going from 2,300 to 1,300 billion. There.is, however,a risk
that the agency's financial situation will become difficult in the years
to cane, especially because of the inadequacy of the endowmenr funds and
the delay in paying Chem out. And the demanding investment prngram, which
in the report is judged es.sential for the country's energy policy, could
run jerkily also because of failur~ to pay out the funds: in other words,
"unless there is an unforeseen improvement in self-financing, a propor-
tionate reahaping of the investment programs, for th~t parC of them whose
implementation has not yet been sCarted," would be made necessary.
To be precise, investments of 10,039 billion lira, including 6,155 billion
in Italy, e~re forecast ior the 5-year period. In toto, a little more than
8,800 billion will be earmarked for investments in the sector of energy
sources and related activfties. One thousand billion will be invested in
chemicals, 77 billion in textiles, and 41 billion in the mechanical industry.
Th~ total of net commitments, which at the end of 1977 came to 8,952 billion,
will rise at the end of 1982 to 14,479 billion, 73 percent of which (the per-
centage today is 71 percent) will be covered, as was said above, by borrowing.
12
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i
, i
~'Olt (1l~H'IC1AL U;i[i hNLY
Cener.al ~~xc~min~tiaci nt th~ .tieuation ~.E thcj t:Nr ~roup ("cohLch ~lyo hc~s
enngtcuilly qhncm net-prd~i.t rxteec~ hi.gh~r tl~~n th~gc ehE 747 ~nCerpri~a~
Lri C~1C M~dinb~nca 9t1111~1~~~~~ 1GVet119 ~~C~li'Ott~.C ~.q3:i 5~.tU~IC~.Orig ~.tt tht~ Ch~tll~.Ct11
~cctor, tcixtiteh, ~tnd in tl~~~ re~i.ning ~nc1 di~t~:ibueidn acriviti~s of ~ha ~
r~trol~um gecrur." ~n the ~-yc~~r perind 1h78-1g79, Grie chemiC~l and eex-
~il~ E1~Cr0Yy leacl onc to fntesec~ ne~~~tiv~~ c~~:~ulry a~ n~~rr ~t~~n 650 billion
lir~. nne A~.yO te~icid in ehe d~cum~:n~. that itt e;:~s~ ~pc~~rg, iti :tm a pri-
oriry ~b~~crive rn rce~e~bltsl~ rondieion~ oti r.rEiricncy and co~C-cff~eC~.v~- ;
ftt~~9 in m~n~ig~ment-." I
;
In the cnming ye~rs, etic gruup wi11 move ~~1nn~ gevcrr~l prcci~e serat~~ic ;
1in~s indic~r.ed in th~ repart: ~
Intcrn~tionnlizaeion--Tn buy raw mgtrrialq in a more ~ffacrive manner; to ;
nbCain ~ part of ehe neee;~vary financial r~~ourcGs in the in~ern~ei~n~l ,
m~rkee; ea yell mdre C~~e products t~uc~ Se~'VECC3 nf Chr group's ftrtns (b~- ~
Cw~en 1975 and 1977, foreign billin$s inCre~sed 90 percene, topping 3,0(10
billion; in the fir3t 6 monthg nf 19?'8 they re~ahed 2,450 billion), ;
,
A New Investment P~licy--Secking ~reater flexibiliCy of the installAtions.
N~w I~escarch Policy-�To enrich the technologic~l contc~nt n� the pr~duct
line:s. ~
Acccntuaec~d Action in the South. `
Uiversification of Product Lines--~he documen~ worked out by the ~NI and '
tlie Ministry of Stnte participations also tak~s under examinati.on the pro- i
grams for the individull sectora in which the stare petro~eum agency `
operates.
Energy Sources--For ehe mineral sector,,the ~NI will invest,3,849 billion
in the 5-ye~r period, both in Italy and abroad. For refining of petrolcum ,
products, investments of 306 billion in Italy are forecast; they will be
used, among other things, for incre~sing the yields of intermediate disCil-
laCes (gas nils, etc.), fnr which th~re ia greater demand. As regards
nucle~r energy, the ~NI will be involved only in the a:ea of the fuel cycle,
"taking a position as a national broker in this sector." The petroleum
agency is g~ing heuvily ineo.coal (investments of 142 billion), geothermy
(investments of 77 billion), and solar energy (3 billion to the end of
1979) . ,
ChemisCry--Ninety percent of the antfcip~ted investments in this sector are .
earma~ked for restructuring of the e~iscing establishments. The program is
to go more heavily into refined chemical products, and in general, invest-
ments with low capital intensity.
Textiles--In this sector alao, the priority objecCive is improvement of
the existing enterprises, fur which 77 bfllion is set aside. On t~:e
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~mploymene ~id~--rh~ r~pore 9C~C~9--"cc~n~iderable ~~cri�ic~s ar~ n~ce~s~ry."
~y ehc ~nd of 1982, ~obs should d~crettsr by 4,785,
M~ch~nical. Indu~ery--Th~ ENI is working wieh ehp Nuovo Pignon~ [New Pinion]
compnny, which is diming, i,n the next yeurs tio come, ~r ~n ~ven seron~~r
po~ition in th~ inearn~tional markets. ~urth~trnor~, Chere will b~ ~ gre~Cc~r
cdmmitimenr 3n the nucle~r secCor~
COPYRIGH~; 1978 Editoriale de1 "Corricre d~11a Sera" 8.t1~8.
11267
CSO; 3104 `
~ 14
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~
i
I~~)IZ t)I~ I~ I t; I AI~ I1;il; t1Nt,Y `
~
. ~
WCS'T G~1tMANY '
~
i
~
i
it~I~A'1'EttA'CION 0~ ~TtiNtC G~ItMAN5 F12UM U55Ct ULCLINi:5
l~rc~nkfurt/Mnin I~'kANKFUE2T~R ALLC~:rtr.INL 1.n Germni~ :L4 I)~c 78 p 3
,t
(Areicle signed Lgn~] ~
~
(TexrJ Nurember~, 1''~ Dec--I~ seem~ ~s ehnugh rhe f.edera]. gnvernment has had ;
to take some setbacks in iea e�forts tow~rd the reseCtlement of Soviet citt- ~
zens of Ger.man desCent to the Federal Republic. Etope~ generally linked ro !
the Bonn vistt by Soviet head of sCaCe and par~y cha:Lrmttn I~rezhnev in early ~
hiay this year obviou~ly have not come Crue. Whi1e the xesetrler figures ;
during Lhe first 4 monChs of Chis year seill allowed Co aesum~ a tendency ~
of increase--in March, for example, 929 Russians of German or.igin were j
registered in the Friedland border-transit cnmp--they decreased to 657 in May ;
;~nd to 600 in June. 'The restilt improvcd once more in JuLy when 825 resettl~rs f
came. But when 503 Russixns of G~rman ori~in arrived in the Federal Republic ;
in August, the number of resettlements reached tihe tentatively loweat level "
of Che year. In September, the border CransiC camp at Friedland had accommo- i
dated 530 resettlers from Russia and in October 573. With 533 resettlements i
in November finally, the quota dropped by nearly half in comparison with a
November 1977 (1,103).
The situation is termed particularly difficult in the Tadzhik and Kirgiz
5oviet republics. This paper has learned from reliable sources that in '
these republics exit permits for whicti people of German descent often had .
been waiting for many years, in many cases have been annulled again since
about early Ju1y. Utterances by the intelligence service as well as by the
aurhorities competent for the resettlement indicate the reasons for the
repressive actions. It is obviously difficult to fi11 with new personnel
Che gaps caused to many production enterprises by resetClements to the
~ederul Republic. Thus, reportedly,~plant managers have been told Chat a
labor shortage, for instance in the harvest assignmenC, may not be justified
or excused with Che absence of personnel of German descent having left the
SovieC Union.
What caused concern~among~the people of German origin was the announcement
thaC the family reunion in the present form might be concluded by the Soviet
- Union in early 1981. Ttiese rumors spread by Che intelligence service
15
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I~Ok Ul~'l~'I:(~IAL IISI, ONI,Y
reporC~d~y ~r~ b~s~c1 ~n cdnsid~r~~inn~ rn cdnc~.ude w~.~h Ch~ ~~der~?~. R~publ.ic
�~n agreem~nr nn tih~ ~urure fumi~.y reun~.nn. 'Che rapn~ri~~~ton ~gre~ment o�
1958 is r;nnsidered nbgoleCe~ Circl.~s df ~hc 5ovieti inre~li~;pnce s~rvic~
furCl~er ~re gA~.d ro have reporeed eh~e ~ti~ Sov~.et Union is aJ..sn int~rested in
ttn exp~?nded family reunion ~.n Che evenr of ~ conCracCual agreement wiCh ~he
Federal Itepublic. So far only the clo~egr relativee, as a rule married
~dup~eg, parentis, ch~.ldren, ~nd broCh~r~ ~nd sig~~r~ hav~ been a~.lowed ro
leave rh~ country.
ttt Chig connecCinn Chere i~ t~lk of financinl pnymenrs expeceed frnm Bonn.
In ehis even the ~ederal ltepublic would be facing dem~nds in the amount of
bil~ions, which the federal government--i� aeked--ce~tainly would deny, if
only becuuae it does nor wanr, to be dibturbed in prel~.minary ealks on auch
a tickliah isaue.
An extended Esmily reunion would even increase rhe number of applicanCa.
Acnording to Che findinga of Che stuttgart "land group o� the Germans from
Russia", more Chnn 10,000 separated �amiliea had applied for family reunion
in 1974. Reportedly the German Red Cross has now receifed abouC 65,000 ~
applications~
COpYRIGHT: F.A.Z. GmbH, FrankfurC am Main 1978
C50: 3103
: 16
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W~5~' GCFtNWNY ~
~ ,
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, I
' I
~
EXP~PT VIEWS ~CONOMIC GROWTFi, PFtOBI,~MS F0~2 1979 ;
Etan~iurg CAPITAL in German Dec 78 pp 133, 1:~5-G, 141-2
(Tex~1 The Economy, 1979--In ~he German ecor.omy there wi1J. be a more !
rapid upward movement than in this year, a~ leas~ until the middl~ of ~
1979. Above all, consumptiion, cons~ruction outlays, and exports are i
imp~rting their upward impulses. Whe~her these ~orc~:s will subsequently , i
also prove to be las~inq and will push growth further upwards depends ~
on ~emperate wage settlements and on a delica~ely measured-out monetary j
policy. Prices, which are likely to once again rise more sharply ~
next year, harbor an additional d~nger, says Professor Norbert Walter, I
economic research expert at the Kiel Insti~ute for World Economy. ~
' !
Upward Pressnre I
The initial conditions for 1979 are more f~vorable than in the previous i
year. Consumers arid employers are view3ng ~he economic situation with ;
confidence. Among wage and salary earners, anxiety about losing their ~
jobs is disappearing. The firms are handling better than expected ;
their persistant monetary troubles. And finally, in other countries E
of Western Europe as well demand is reviving, which promises to German ~ ~
busiriesses additional orders and a qreater 1eve1 of activity. Thus ~
the employers and the consumers are a].so redny to increase their
budgets for investcnents and consumption respectively. The result: ;
Economic growth is gaining in �orce and intensity. An increment o� }
4 percent is probably in the cards. .
But the apparently stable situation which is now giving a lift to the i
economy can quickly change. There have been enough examples of this j
from recent years, when strikes, lockouts., and deficiencies in i
connection with foreign demand have shifted the balance in an instant. ;
One quarter, the economy would go up; but in.the~following quarter ;
it would already be going down again. The enduring, self-sustaining
upswing failed to appear. The economists coined for this the concept +
of the "washboard economy." ~
- Thus in the summer of 1977 a pr~found lull prevailed, and the economic
output stagnated. Iri the fall and early winter, the businessmen were
~ i~
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~ roR orr~c~nL usr o~Y
able tio ge~ many orders, and p~~~ductiion r,ose again, nn~y ~o ~hen
abruptily and utterJ.y g3ve way a~ tih~ ~urn o� tih~ year. ~he labor
conflicts in ~he ~rin~ing and metal indus~rie~ for higher wages and
seCUre ~obg disconcerted ~he econnmy. The enterprises became res~ra3ned
with their orders.
A~tor the collective wage agreements were concluded, uncerta3nty also
rec~ded. Since the summer of 1978, onca again ~he expansive forces
havQ clearly dominated. Bu~ they are no~ qui~e suf�~.cient ~o offset
the losses of ~he firsti hal� o� the yeax. Instiead of the aimed-a~
mark of 3.5 percent more growtih, in ~he economic annua~ balance shee~
~ of 1978 a half point less than ~his is likely to emerge. This is
; never~heless sti311 a sizable increase, if it is addi~ionally tiaken into
consideration that the populatiion is decreasing and thus fewer persons
have to be provided for.
Yet ~his growth rate is not enough ~o push ~he number of unemployed
persons below the million-person limit on a yearly avexage, because
structural problems are paramount in the ].abor market. This is shown
by a breakdown o� the overall unemployment �igure. Hal� o� it is made
up of women seeking a job, although ~heir proportion of a11 persons
employed comes to only around a third. Unskilled workers are likewise
ou~ o� work tio a degree greater than the average.
~ In 1979 as well, nothing of this fundamental weakness of the labor
market will change. But to judge economic development simply in view
of the underemployment si~uation reflects a distorted picture of the
actual state of affairs, claims Professor Norbert Wal~er, 34 years old,
of the Kie1 Institute for World Economy, in an analysis made for
~ CAPITAL. Thus, �or this economic research expert, even "the growth
rate of next year is acceptable." However, if in the 1979 round of
collective wage agreements there are once again strikes, or if the
trade unions can force through high wage settlements, then despite
the generally favorable initial situation, a renewed *rend reversal
toward the negative is to be expectec3.
A new danger is looming: Prices are again climbing more sharply.
But if the Bundesbank were to react too strongly to this, perhaps
through drastic contraction of the money supply, the intierest rates
would shoot upwards and would necess~rily weaken employment and
production,: The analysis in detail:
Economic growth: a plus 4 percent; labor market and wages: functional
� weakness; exports: a plus 7.5 percent; finances and taxes: stimulants.
These stimulate qrowth: . ~
Investments--6.5$
Consumption--4.0$
Exports--7.5$
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~
ron ot~ crcint~ tr~i, oNt,Y i
i
;
zn?por~s--7 .5~ ~
Pro~itig--l~..n~ ~
Wages and s~laries-~6.6~ !
These aat gs a dr~g: ,
1 I
WagQ C09~S~��z.5~ ~
Pricas--4.0~
Un~mployad--920,000 peoplc~
This grow~h is 3n th~ cards: 4.0~
Pro� Walter on ~conomic Grow~h: + 4 Percent ~
~
The summer o� 1978 marked tihe ~urning poin~. If tihe ecnnomy has been ;
generally charac~erized in recent years by a iuia., this time tihe middle
n� the yoar brought the beg3.nning of an upward ~endency. This powerful
upswing is ].ikely to continue until �ar intio ~he year 1979= certainly ;
monetary and financial pol~.c1~ has so �ar not shown any departiure Erom {
i~s economic s~imula~ion course. The improved conditiions, even i� only ~
hesitant, in tihe mosti 3.mportant o� thQ countries who trade witih the !
~ FRG is contribcting to i:his upward davelopmen~. xhe stronge3t stimulants i
to the upswing in demand con~inue to come from the building trade, ~
which by now already has on hand well-filled order books. The outlays ~
on construction for next year in terms o� real value are likely to be ;
6 to ; percent higher than in 1978. '
Even if--something which is scarcely conceivable--tihe monetary and j
financial policy makers were to once again adopti in the near futiure ~
a restrictive course, nevertheless in view of ~he timQ lags with which
production reacts to such interventiions, a signi�icant setback for ;
construction investments can be ruled out, at all events �or 1979. r
,
mhe upward trend in housing constiructifon will be especially strong, ~
while the State will seek to avoid through an extension of the '
middlc-term investment programs the worst of ~he bottlQnecks in the r
s
civil~engineering field. The expansion of building output is not so '
much determined by how demand develops, but by how quickly the enterpr3ses ;
can expand their capacity. 5ince i~ is very hard to obtain skilled
workers, fndeed to hire even unskilled cons~ruction workers, it is
only through a modernization of the stock on hand of equipment and ~
machinery tlian an enlarqement of capacity can be achfeved. '
. Stronger investment activity is to be expected in other sectors of
ehe economy as well, such as for example in the electri.~al fndustry
and in trade, since in these branches sales expectations have firmed up.
In machine building, the technical advance made possible by microprocessors
makes the purchase. of new ~acilfties and machines necessary.
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~ FnIt OrrZCIAL USE ONZ,Y
~ mha sQCnnd g~abin dem~nd com,~onQn~ in 1979 ~.g ~ik~1y ~o be pr~.va~e
' consumpti~.on onc~ again, which b~ing hQ~d high bo~h by ~he consump~ion
c~.imata and alsn by ~hn incomeg being r~ce~.v~d. gecaug~:
i~ tiurns ou~ rha~ tihe ~ax relief will be nven grea~er than a~ ~he
b~ginn~.ng of 1978~
tihe d~velopmenti o� wages is likely to correspond tio tha~ o� tihe year 1977
on ~he whole=
in con~ras~ ~0 1978, pension incomes are rising again;
an exp~nsion of employmenti can be an~ic3patied.
Already in 1978, the savings ra~io reached a rela~ively low level.
Therefore a s13gh~ rise 3n ~his is at leasti noti ~o be excluded. Upon
the weighing of all these factors, a rise in privato ronsump~ion of~
~ 4 percent is in ~he cards.
Autinmobile sales will also have a good level o� actiivity in 1979. mhe
demand is as s~rong ~s ever, and tihQ manu�acturers are stii11 finding
, it hard to keep up with the domestic and foreign orders.
Travel likewise has once again a quite prominent position on the
expense account lists. And 3n ~h~ favored items of the consumer,
home requisites are probably to be forging far forward once again.
However, the basic conditions for a sus~ained improvement in the -
propensity to invest are still not fulfilled: temperate wage settlements.
Again conflicts are loominq between the negotiating par~ies. In the
end, they are hardly likely to turn out otherwise than in the previous
year--the effect being that the wage cost burden will continue to
remain too high. With other factors things look better.
For example, the prospect has disappeared that the interest rates
might drop even further, and therefore the borrowers have abandoned
their wait-and-see attitude. Anyway, the view with respect to a
deficiency of investment activity does not seem to be justified.
Because it has been evolving upwards, in spite of all the gloomy
predictions, with remarkable constancy and vigor: Since the nadir
in the recession of 1975, at a rate of a qood 5 percent per year.
In 1979, it is likely that on the average a rate of as much as 6.5 percent
will emerge. The computations which show, on the basis of the boom
year of 1970, an investment gap for the whole of the 1970's are based
on an inadmissible calculation. Because that very year of 1970 fell
in a phase of overinvestments, caused by the under-valuation of the
- mark and the excessive stimulatinq of the economy by political measures
_ at that time. All the same, the present lamentations abuut the weakness
of investments by all means have their justification. Because since
' the middle of the 1970's,.the number of gainfully employable persons
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I
ron orrrciA~, usc; nNr~Y
~
has bc:en climbing du~ to tltn en~ry iri~u gainful ac~~.vi~y c~~E age groups ;
witih a h~.qh birth rar~, anc~ i~he requ.isite j~bs can be prnvided only
through ~n ex~ansion o~ produc~ian ~c1p1C~.tY. Yet ~.n impnrt~nt ~orporative ~
grnups ~here aie doub~s abnu~ whetiher tihe la}~or marke~ probl.~m should
be solv~d by 1 policy of graw~h nr by a d3str~buting ~~f: the work.
As lor?~ as it z~emains politica].].y ~.n ~he air wha~ grow~h rat~ ~he I'RG ~
nughti ~o hav~ in the �uture~ an uriw~xrds develo~mEn~ of ~rivate investments ,
is scarcely 1ikoly to app~ar. (
In other wnrds: As long as we c~o no~ want more growth, it would be ~
- surprising ~.f we goti more growth nt~ ~he whole.
On Labor Market and Wages: I'unctional Weaknes~ ~
i
7'he FedEral Government is no~ makinq proper headway in the labor market--
despite its numerous economic policy programs. This 3.s no wcnder, :1~
because the pra~ent underemploymenti is less the cons~quence o� a ~
weakness in demand ~Iian the consequence instead of a non-functiioning ,
labor m~rket. ~
~'hus, ~he er~terprises in the boom branches of construction and vehicles ;
are not �inding adequate'..~ quali�3ed workers--and this with just under ~
a million unemployed and in addition around 700,000 citizens not i
registered with the employmen~; offices who are out of work but who i
at the present time figure that they do not have any chances for a ;
job plaoement. i
Even more clearly than the high number of unemployed is able to do, ;
~ the structural nature o� this set of economic problems is shown by
the trend of employmenti. Today there are no more gainfully active ~
people than in the middle of 1975, although economic growth has amounted
to between 3 and 3.5 percent on the average in the las~ 3 years.
The FRG thus owes its increase in prosperity to a higher ou~put per
employee. In contrast to this is the United States: There, an annual
growth of 4 to 4.5 percent has led t~ an expansion of employment of
about 3 percent. Consequently its rise in productivity was conside~ably
weaker than in the FRG, but the improvement in the employment situation
was notiably more favorable. The decisive cause of this difference:
Whereas in the United States real wages increased only slightly after
the oil crisis, th~y rose strongly in tY?e FRG. This has been reflected
in the investment activity. The American businesses are expanding
their production capacities, which entails the hiring of additional
workers. On the other hand, the German firms are above all taking
rationalization measures, and the number of persons employed can thus
at best be kept at the same level.
Consequently, the wage agreement negotiating parties have it in their
power to achieve full employment once again. It would be an important
step in the right direction for the 1979 round of collective agreements
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FOR OI'~'ZC~AL US~ ONLY
~ ~o adop~ a cau~3.ous cou~s~ wh3.ch brings ~he en~erprises a p~~c~ptiible
prof~.~ increa~e. mo be sure, �or ~ho upcoming wage ser~J.ements,
cons~rictive factors can be discerned which increase bo~h ~h~ demands
o� the ~rade unions and a7.so the willingness of tihe employers ~o give in
tn such demands. Thus a~ ~he beginning of the year when wagQS will be
negotia~ed, prices could rise more sharply. Moreove~: The business
upswinq oE ~he second half o� 1978 is ~horoughly visible from the
s~a~istics, just at the ~ime of ~he round of wage agreemen~s, so ~.ha~
the trade unions are thus already pressing for extra pay even though
the course of the economy as a whole in 1979 is not measurable. Wha~ 3s
more, they will be seeking to carry through fi.rst of a11 negot3.ations
, in the economically most �avored branches. Since--as is customary--
the first wage settlemen~ is likely to provide ~he mark to be aimed at
for the entire round of wage agreements, there is a danger that this time
the agreements will prove ~o be too high.
Aside �rom the quarrel over raise percentages, a,protecting o� the sncfal ,
wel�are in connection w3th the wage raises will probably be once again '
up for debate. Many trac3e unions maintain that the tax re].ief favars
especially those who draw higher incomes. They are therefore demanding
wage setitlements which provide for a larger raiso for the lower wage
groups. This could worsen even more the situation of the less skilled
~ workers: Such special wage raises trigger investments by means of which
jobs of unskilled workers above all are removed by rationalization
measures.
A third important issue of the round of wage agreements is certainly
the shortening of working time. Whereas the resistance of the businesses
~ against reducing the work week seems to be extensive enough to stave off
the trade union demands at least in 1979, a slight leng~hening of
leave time is probably not avoidable.
, . Employees' capital foxmation is likely to be only a peripheral issue,
as it has been for decades now. Genuine advar.:es will be made by this
concept only at the individual company level--i.f the employers want it.
� Because company-specific capital formation dissipates, in the trade-
union view, the forces o� the employees, who might thus develop an
` increasing interest in their own company. Thereby, that which justifies
the existence of the trade unions is lost: The state of being in
- solidarity with their own class. However, employers have not on the
whole as yet drawn the conclusion from this that in capital formation
there lies a chance to imprdve their position by making into partners
those workers and employees who have already become "rich."
In genera~.--an easing of the tension between labor and management,
especially on the question of wages, is a prerequisite �or overcoming
the problems which grow out of the increasing labor supply. Age groups
which had a high birth rate are now beginning their working life.
In fact, for the first time next year an increase in employment is
22 ~
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i
1~ dit tli~ t~ i t~tAt, US ~~DNt~Y '
ag~1n ~neicip~t~~, which Ls likely tv amdun~ tca al~nue 1 t�~cen~--eh~t
,i~, eo Ar~und 2n~,o0n p~r~~ng. ~ut ~-~d~li.ei~n~~1 em~~l~yment ne~r1 nr~t laa~i
wi~}iduti fxil to a decr~~se in ~he nwnber ~f ur~c~nplny~d, d~v~la~m~n~~
in nther indu~~ri~l ~out~tii~~ prave. in ~hc~~~ pl~ce~ ~.L ha~ l~e~n
db~~rv~c'i tha~ morr. p~rac~n~ ~rdm tl~~ ~~-c~~.l].ed ].~t~ent rr~sctve di t1i~
lahr~r market ~~e r~l,r,rtin~ ~~~k ~c~r w~rk ~nd aL~ b~.i.ng hi~~d ~g tti~
~mploym~nt gitu~tion tmproven so~ewh~t. t~ is p~ok~~b~.~~ h~w~ver, thaC.
th~ ntunt~~r of un~mpl~yc~d paaple is likeiy L�e? be r~r~u~~cl by xround
100,000 persnns.
~x~drr.~ : ~'o tnciease by 7 . 5 ~e~C~n~.
~ A11 mnnc~tary ogci] 1~Gior~n in i~~c~nt moneh~ no~withb~andinc~, rer.mah
@xpc~re~ ar~ ~ncrc~a~ing, for ~xample in t~h~ir ~mount o� th~ w~rlcl ~rade .
I~ has prc~v~~d po. sible tn r~i~a ~x~Yt~ to almo~ti the ~am~ cl~gree 5n
importis. 7~e be rur.~, th~a~ ~xport~ qu~ta~ c~n df~Nn be main~ain~d hnly
by et~e ~xp~di~nti n~ ~~:rm~n flrms conscie~u~ly ~cc~p~ing in th~ir pzicing
~ nar~owing of thei.r prd�it margin~.
Y~t ehis campr~gsion is �r~qiicntly ov~rest3.ma~~d. I3cr~u~n s~1a prnc~eds
h~xve not in tiurn fallpn so v~ry mu~h. mh~ r~asa?~: ~a b~ sur~, the
~o11ar has twnbl~d and wi~h that the vaiua af ~h~ mar~: h~~s automatiCally
risen. g~;t ~h~ U. 5. trade m~k~s up only a sma11 portion of th~a total
German c~xchange nf good~. Likewise fnvorably oper~ting for tha ~erman
exporters was ~h~ �act ehat th~ Swi~s franc and the ~apanesp yer? have
gained much more strongly even than the m~rrk in exchange-rat~ value.
The fa~1 nf ~l~e 8ollar brings ~vQn in t}~~ short run a cost adv~ntgg~
to the FRG. Becau~e many importan~ raw material pric~s ~r~ fixed in
dollars, such as for example crude oil. 2~he devaluati~n of the t3. S.
currency tt~us enables German enterprises to buy crude ot: at lower
prices. ~Jpshot: Although the rapid changes in the pxchange rat~s
have increased uncertainty, the competitiv~ness of tihe domestic
exporters has not been ldstiinqly impaired. Consequently the German
export trade ig likely to profit also by tha stimulation nf demand
in the West ~urnpean countries whtch is looming for the coming y~ar. �
The American business outlook alone is likely to weaken next year--
but this is something which does not c~ncel out the powerful European
stimulanes to world trade, because of our gmall share af trade with
the United 5tates. Sinca the ~uropean countries wil~ in thE future
~ demand more goods, the Americans will be able to sell more qoods and
to make up the deficit in their balance of trade. With that, one of
~he fundament~?1 causes of the dollar's w~akness might be eliminated.
in connection with the developing cauntries and the nations of the
Eastern Bloc, trade developments depend decisively on whether they
obtain international credits in order to cover their import needs.
The conditfons for this have been considorably improved, following the
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rar~ art~ tcir~t, usr; orrr,Y
~~~eiu~ion~ of ~h~ in~~rn~~~,an~1 M~n~tia~y ~'un~1 ~~~vid@ n~w cr~c~i~
faeiiiti~~~. A n~w wav~ ~F ~ro~~~~~on~.~t m~~~u~@~~ whieh r~~ard~
worid ~r~c~~, i~ no~ b~ ~xp~c~~~ b~c~u~~ ~h~ ~mploym~nt ~i~ua~~.on
in mog~ of ~he indu~tirial coun~riea i~ ne~ grewing any wor8@ and ~hu~
th~ ~~~~~u~~ for more impo~~ ~'@~~~'~.C~~Afl~ no~ only on ~he pag~ of ~hc~
tirad~ union~ bue a1~o un ~ha par~ o~ th~ ~ntier~r~~~~ {g ~CarC~~y
becaming any g~~ak~~~ ~u~t ag ~~~~a~n~y w~1~ ~h~ d~~.t~aL~~~ 1ib~ralix~~ion
of w~rlr~ ti�a8e p~obably make very iittle hea8way, in v1,ew of the cont~nuing
, yg~v~ labor marke~ probl~ms~
~ Hnw ~h@ mon~tary reia~i,on~ of th~ ma~k ana ~he comp~ti~iv8nes~ of
G~rm~n @n~~rprises fur~her dQVelog is ~iso ~iep~na~n~ on wha~ happens
~ witih ~h~ plan on establishing in Western ~urope an ~x~en8ec~ �one of
~tab1Q exchanqe rates. in ~hi~ a~~ociation, the in~ere~~s of the
partn~r~ witih weak currencies--such as for exampie France--lie
pre~lominantly in introducing ~tial~ility, wheYeas the s~ronqer par~icipants
auch a~ the FRG are hoping to gain a competi~iv~ advantage in tirie market~
of ~he member countries. 8u~ tt~~ prosp~atg are sligh~ o~ succesg 3n
carry3nq through witt~ tihes~ plans ~n oppog3tion to the forces on the
foreiqn exchanq~ marke~, as tihe experienc@e with the "~nake" have
~aught ug.
K'he preflicted export increase of 7.5 per~ent seems achievabi~ ev2n if
� the monQtary alliance were to not materialize ati ail or were to fall to
pieces after just a few months. Because ~ven the reqime of flexible
exchange rat~$ which would th~n continue to prevaii obvfously does not
prevent the international integration of th~ markets from continuing.
This is sufticiently shown by the ~xperiences to date with the fluctuating
exchange rate parities. Whereas total economiC production in the
industrial countries incr~ased by around 25 per~cent in the 1970's,
German foreiqn trade rose by 50 percent. Despite a strong upward
revaluation, exports in this decade have so far risen just as stronqly
. ~ as imports.
Nowever, this stable upa~ard development was connected with a redirecting
of the flows of goods. To be sure, t}~?e main portion of German exports
is still going to th~ European trading-partner nations, and the main
portiion of our importg comes from the same countries. But both the
oil-exporting countries and the Eastern Bloc nations have more ana more
bECOm~ a stabilizing element in German foreign trade.
2n the future, trade with the nations of the Third World offers above
all great prospects for grow~h. They have high import needs. Yet they
lack the capital for f.inancing these imports. One task of the industrial .
countri~s ~nd thus af tih~ ERG also shauld be to make ~v~ilable aredits
to these nations, for example within the framework of developmental aid.
The German economy would not be the least to proftt f.rom the augmenting
of their assets, since it could then export more to tt~e developinq
countrfes.
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~
,
~'dTt ~t~T'IC:tAL U;;~ di~tLY
~+}t~ ~~Q ~~g~:~t w~+ui~ be ar:hlove~l i� the U~ann gdverrvn~nt w~r~ tb u~
~ genckpil~ of impdrt�.~n~ iaa matr_eial~. t~ a~ould h~ve ~o buy ~ueh ar~g
in tha c~~vel~ping ~o�nerie~, wtiich cbulc~ pay ~~r more im~d~~.~ wi~h th~
prc~c~ed~ ~r~m tih~ r~w md~~ria:l t.~t~de�.
t~lt?~~ncc:~, 'C~xe:a: Se.imul~~nr.r~
~ite I'~~i~r~l ~ev~xnmen~ i:~ again pl~~in~ i~~ hr~p~s ~.x~ a pn].~Cy e~~ grnw~h.
mher~~nre .lt ig earm~r.king mt?re L�unr], ~dr r~~earch 3nv~:stmen~a, td h~lp j
tt~c~ ~nti~r~ris~~ in r.t~~ dev~�lo~~m~nt r~~ ne~~~ gaad~ ancl ~~~hniquaq whi~h ;
~~n ~uarantiec~ prr~duceidn ~nd emp2ayr�nt for ~mm~rraw, td~~rnnver, iti is `
1dw~ring ~h~ incnme ~~x an~~ wag~~ t~~x in order th~~ .~~r tih~ ~m~ioy~~g ;
~hair work may 0t1CE3 ~g~in ba rQwarding. t3onn i.s put~ing ~hrough ~hig
p1�~n, whiCh i~ ~ri@nt~d towar~~ ~hA m~dium term~ agdin~~ thc oppo~i~Son ~ ;
d~ the e~a8e uni~n~ ~ w}ii~ti 1t~tv~ endur~~c~ x r~pi.d, 8r+~mati~ raising d~
tih~ ~neir~ public Qxpendf~ur~c~. Y~t ~ntir~ly wi~hnut ~h~ trar~@ uniong
~ no~hin~ ~an bc done. mh~r~f~x~, ~h~ ~'~d~r~1 Gdv~~r?m~n~ also had to '
~nclos~ wiehin itis ~rdwth packagE improv~m~ries in connaetion wi~h
childreti'r a1low~n~~s and m~ternai protection: M~agures which m~rely
r~di~tril~ute th~ incom~s af t~day~ buti c~o not provid~ for ~h~ incomes
nf ~nmorrr,w.
The upward ad~ustmont of the v~lt~e��~rld~d ~~x is alsa growth-impairing, ~
sinco iti--lik~ ev~ry additional burdenfng of tt!E citixc~ns by ~h~ State-- ;
blocks inc~ntiives to wnrk. And after aii: It does no~ relieve th~ ;
capital market, evan though i~ is by this ~ha~ tha Fedarnl Government i
~ustifi~s ~he additional ch~rgo. Thus it is hoping for more tax
rc~venuQS and thrduqh this a smaller budget dc~ficiti, whiCh must be
madE up through loans in the cc~pital markQt. Up to this point, the :
official calculetinn might prnvQ right. ~xcept, the higher bill has
to be paid either by the consumers or by ehe busine~smen. If the firm~
cxnnot pass on the additional percentage point in their pric~s, then
it will depress prafits. Result: ThQ enterprises have less money
to finance their inv~s~ments from their own pockets. In~tead of the
State, it is now they who must raise loans in the capital market.
But iE thg consumers are asked to pay by way of higher pricee, their
expenditures will rise. Thereby the savings fraction of their incomes
n~cessarily drops. Less money flows intio the capital mazkQt, which
fn turn cancels out the effects di th~ less extensive borrowing by the ;
government. tlpshot: At bottom everything stands, one w~y or another,
as it was. ~
NQVerthcless, the enlivening stimulants of the new package axe dominant. .
The relief connected with the wagQS tax and income tax could ease the �
situation in the round of wage negotiations. $ecause the investment
propensity of the enterprises is improvinq. But even if the tra~~
unions remain adamant and ignore this relief in the things they insist
on, the proqram still has a demand-inereasing effect, since the disposable
incomes are thereby raised.
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~ ` FOR OFFICIAL U3E ON'LY
Wl,~t~ an im~~dvi,ng t~ut~ln@r~~ ou~look~ tih~ ~~r1ny~ df rax r@v@nue w~.~1 a~~o
m~r~ ~~rong~,y bubbl~ for~h. Si.~c~ a~ ~h~ ~ame ~~,m~ ~ho ~xpendi~ur~~
for ~he unemployad are dropping beaause of ~he somewha~ more favorable
employment ~i~uation and a continuation of the ourbing of co~~~ in ~he
public heal~h s~cb~r i~ ~o be an~icipated, ~he national defia3~ in 1979
for tih~ Fsderal Governmenti~ Laender, municipal~tiieg, and goc3~1 insurance
i~ not lik~ly to exaeed 6S billion marks. in view of this daficit,
many a ci~izen wili cri~icize th~ public budge~ policy as unsound.
But ~ue~ as lit~le ae ~t aan be figurad outi from tihe ~inancial deficit
of a company whetiher a sound or an unaound business polioy ia being
followed, can the quality of the financial policy be measured by tihe '
1eve1 of the national deficit. Whenever ind~bte9ness regul~s from ~he
. facti that private and overall economic forces of growtih are b~ing
atimula~ed, soundness ig a given fact. zn order to promota tihe forces
of qrowth, interventions in t}~t~ diatribu~ion of income--which inhibit
ths wi11 to work--ought to be curtailad. This invoives for exampie
aban8oning the funotioniess promoting of savings. The abolition of
the entire trade tiax wouid seem to be ~usti as urgent. The inaome and
wAqes tiax on the one hand anc] the value-aaded tax ot~ tihe otiher shouid
in *.he fu~ure alone form the pillars of tihe tax sy~~em. To be sure,
these renovations in the national revsnues would in the short run
bring shor~falls in tax revenues at~d tihus a higher deficit. With this,
those limitis wauld be exceeded which at present ar~ seen by the
Bundesbank a~ just still ~olerable. An adaitio~~al conflict between
the qovernment and the Bundesbank is looming in connection with the
policy on stabilitiy. Bacause in the courae of next year tihe rise in
prices is likely to accelerate to almost 4 percent. This is a consequence
: of sins from the past: The excessive expansion of the monetiary supply,
which commenced as long aqo as latie in the swnmer of 1977. It invar3ably
turns out that such an expansion is followed, after an interval of
a year and a half, by a rise in the rate of price increases.
Pointinq in the same price-raisinq dfrection are the bottlenecks in
the construction market. Any relfef_by way of fooclstuffs, such as has
_ been the cese in ~he lagt 2 1/2 years, is no longer to be expected.
Also the phase of price aiminutions in connection with import prices
is likely to be comfng to an end, because the mark is unlikely to
contfnue to be upvalued in terms of real value, anc] the phase of stable
' world market prices s~ems to be drawing to a close. Whereas in
` connection with the acceleratinq price upswing the Bundesbank has to
C be interested in the introduction of stabilization, the Federal Government
! is anxious to by all means prevent a recessive development in conjunctfon
' with the election year of 1980. Even if the Bundesbank only throttles
~ gently the increase in the monetary supply, a sliqht rise in the -
? interest rates could not be avofded, since at the same time the demand
of the consumers and businesses for loans is climbing. If Bonn continues
to remain expansive and if Frankfurt tries to put on the brakes more
, sharply, a rapid increase in interest rates could b~ expected in 1979.
For even next year the danger would exist that the upswing just under
way might come to an end.
COPYRIGHT: 1978 Gurner + Jahr AG 6 Co.
12114 26
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!
_ I
ro~ or~t~~LC1AL USL C)Nf,Y ' i
:
- w~s~r c~xr~rnc ;
SUBSIUI'L~D It~S~AItCI{ '~d C1tCATC N~W J0a5 ~
~
lt~mburg STERN in Germ~n 23 N~v 70 pp 252-255 . ;
i
~ArticXe by W~rner Heilemann: "~in~ncial In~ectiona: Monay To itevi.va
Tired~Manager~"~ ~
IText~ Vulker Nnuff, miniat~r for rese~zch and ;
. Cechnoingy, wanta ~o r,r~ae~ new jnbs by pouring ~
addiCional bil~.ions i.nCo r?ew technoingiea.
:[n ehe 5audi Arabian desert, Volker N~uff, minisCer for research, had dn i
original experience. ThE rich shaykhs were desperately looking for a i
producer o� equipment for the desalination of ~ea water, and they were l
nu~king inquiriee of Japanese and Weat German firms. Now the Japaneae ;
have cnme up with an item whicti will be worth millions, because Krupp nnd {
Demag had to give up aFter preliminary negoCiaCions: They lacked the ;
eechnical knoweh�or sales,gHauffewas struck ~bypthiairealization: 'Ourr
the lost battl ,
heroes are simply ton tired." '
The minister �or research enFederal GoveernmenttwantsbCoiincreaseathes1979
money. For that reasan th
budget for this ministry to DM 5.6 billion (A 14-percent increase compared
to 1978). And rightfully so, as is evident in a gtill unpublishee $auer
by the Prognos AG, ~ Swiss economic advisory service. The 49-pag p p
came to the conclusion that in recent years the promotion of projeces
and innovations crcated~~l?npsC 150,000 jobs and approximutely 300,000 jobs
resulCed. According to Hauff, this proves thaC ehe promoCion of research
is definiCely a useful means for lanon Watechnology~~han it hasitoedate,
If the ~RG shows no more intereat i
no new jobs could be created to talce Che place of those which are elimin~ted
because of expediency. .
According to Prognos, rhere was a danger e~Germancindustry~had8no desire
because at the beginning of Che 1970 s th
to put money into "uncerCain new and conCi~hen8~ountnofalubliclfundstfor
The vacuum was only prevented by doubling P
research: "Research and development are indispensable componenCs of a
liberal foreign Crade policy."
27
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,
FOtt OFFICIAL US~ ONLY
Who~v~r con~inun~ eo of.Enr ~~al~ ideag, how~v~~, W~ii not r~ce~v~ ~ sin~1~
~ired GE~.~nan m~rk ~rom NauEf ;"Z wan~ ~.nndva~~.on, nu~ subsidy." To d~Ce,
~rom 1975 unr~.l 1978, tiha largas~ sUms w~~e co],1~cC~d by
. --nonnuclear ener~y research (107,000 ~obs), DM 1 billinn;
--dara proeeaeing (51,000 ~obs), DM 1.2 billion;
--e1~cCronic~ (40,000 ~ob~), nM ~90 mi1l~.on; ~
--chemical rechnology (30,000 ~ob~), DM 52 million. ~
~ Occasionally promoCional policies directed in ~hi.s manner even lead to
the establiahmenti of new ~irms. For inat~nce, afCQr they were promised
DM 160 millinn by tihe Mi,niatry for Reae~rch, AEG and Wacker-Chemietronic
in Upper Savaria decided to found a subsidi,ary for the apecific purpose
of manufacCuring solar-cell generarors. Experts believe thae the solar-
ce11 market will be good in 15 years and we11 woreh DM 20 billion.
In the Ruhr are$, bM 12 million ia being spent on rQSring a"direcrional
gu~.d~nce syarem" for aueomobile drivera, which ie suppoaed to prevent
traffic jama. In the case of a naCion-wide introduction, Cens oF thousanda
of ~obs wou~.d be assured because of extensive ordera. Automobile suppliers
will also profiti from the developmene of a new nonlocking brake syatem,
which is being financed with a grant of almosti DM 8 million.
Even the reaignatiion in the suffering ahipbuilding indusCry ie being
helped through money from Bonn. For insCance, the Luehring Shipyard fn
Brake on the Lower Weaer, supporCed by the Ministry for Research, has
begun the development of a"twinMhull multipurpoae vehicle~~ to combaC oil
pollution. In the opinion of experts: "This is an opportunity to
penetrate an existing vacuum in the market. ProspecCs for export are _
� good." And Prognos �igures that in addition to the jobs which are directly
created or assured with the money from the Ministry for Research, 660,000
more workers will owe their ~obs to orders which will result from future '
' research.
. Even if Otto Graf Lan~bsdorff, minister for economics, views these develop- ~
ments with suspicion: Hauff wanta eo conCinue the present course, �
reassured by the expert opinion of Prognos A~G at a cosC of DM 150,000,
and he wants to create a mood of speculaCive enterprise in the German
economy: "We again need pioneer spirit among business managers and rhe
~ willingness to assume risks."
COPYRIGHT: 1978 STERN
' 8991
CSO: 3103 END ,
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