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CHAPTER II

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CHAPTER II THE BACKGROUND

¹• Introduction

In our 1986 Report we expounded and crltlclzed in a very detalled way the featurea and the pltfalls of the preaently prevalling aacroeconoaic aodela, uaing aa a. target for our critlcal evaluation the 1985 CEPS Report (0. Blanchard, R. Dornbusch, J. Dreze, H.. Gierach, R. Layard, M. Montl, Eaploygent. and Growth In Europejka Two-Handed Apprpach).

We conaider thoae arguaienta aa available to the Cpanisaion, and we will not return upon theai here. However, we feel the need, on the one hand, to illuatrate the aajor . changea occurred In the aiacr oeconoalc background and *in the aiacroeconoailc pollclea around the flrst half of the Seuenties and, on the other hand, to Integrate our prevloua analysla by a better deacrlption of. the basie rationale of the on-golng atrateglea at the International level. We will accoapllah thistask in a aynthetic way.

2 • The_£ar.ly_Se ven 11 e s_as_ą_t urn i i nt

We conaider 1972 and 1973 as the cruclal years durlng whlch a sharp change in the structural functioning of our econoilc systeas occurred. The eventa that we conslder as cruclal are the followlng ones: (a) the abandonaent of fixed exchange ratea, and (b) the firat oil shock.

Notice that we do not conaider auch events as the causes of the aajor factual changea we conaidered in thls chapter, but aa the eventa whlch concluded an era and began new one; at the sale tine we conslder auch events aa the catalyat of a transforwati on whlch was prepared by a aequence of eventa whlch had been occurring durlng the late Sixtles. Purthernore, and obvloualy enough, we do not conaider the preaent altuatlon as cloae to that whlch iawediately eierged after the eventa recalled above, but as the end result of a aeąuence of further adjustaents and tranaforaations that began with those eventa .

³•    ixties

The aixtle8 were the golden age of the Keynesian Outlook. An unprecedented growth had been occurring ln Europę alnce the late Plftiea. In the flrst half of the Sixtiea ali EEC countries reached what they consldered as fuli eaployaent.