Annual Report: The fifth annual report of the Organization for European Economic Cooperation, which was released in January 1954, stressed three developments:) the elimination of inflationary trends of recent years;) the improvement of west Europe's balance of payments, both over-all and with the dollar area; and) the continued failure of western European production to expand at a satisfactory rate. After a brief look at the causes and consequences of the first two of these developments, the report turned its attention to the third and concluded that, unless specific proposals were implemented and if world conditions remained generally the same, European production as a whole would increase only slightly, and Europe's exchange reserves were likely to increase. Several factors which led to these conclusions were:) internal demand was not likely to expand without more expansionary policies by governments;) since export earnings of primary producers were not likely to increase, external demand for European production was similarly not likely to increase; and) United States over-all current surplus, exclusive of all military transactions, would be offset by a new military expenditure abroad of $2.5 billion in 1953 and $2.1 billion in the first half of 1954.