Schröder step ups pressure for Union job-creation programme

Date: 12/11/1998

By Tim Jones

GERMAN Chancellor Gerhard Schröder will push for early agreement on an EU job-creation pact to complement the euro-zone's tough public spending rules.

The new government in Bonn is determined to keep up the momentum created by last month's informal summit in Pörtschach, where Schröder's fellow leaders gave their support to a more pro-growth economic agenda for the Union.

In the Austrian resort, heads of state and government concluded, in the words of UK Prime Minister Tony Blair, that "the balance of risk has passed from inflation to deflation".

Diplomats expect Germany to propose a new 'pact for employment' - based on the idea proposed two years ago by European Commission President Jacques Santer - building on jobs guidelines already drawn up for 1999.

In Pörtschach, Schröder urged governments to cooperate more closely over employment policy and agree "clear guiding principles" for job creation to supplement the growth and stability pact on budgets.

The German leader hammered home that message this week in his inaugural address to the German parliament, insisting that fighting unemployment at home would be his government's top priority and stressing that this was a matter for all of Europe's predominantly centre-left governments. "I expect us to seize the unique opportunity that the new political constellation in Europe presents," he said.

Instead of coming up with a brand new proposal, Bonn is expected to use the negotiations on the Commission's 1999 draft guidelines for employment to try to realise the chancellor's ambitions.

Those guidelines concentrate on reforming tax and welfare systems to make work pay, encouraging people to retrain themselves throughout their careers and making the jobs market truly open to ethnic minorities and women.

But the Commission's call for governments to give a special push to promoting jobs growth in the services sector has run into some opposition from member states with less developed markets for services, such as the Nordic countries.

Following discussions in the EU's economic policy committee, officials are redrafting the chapters on the Union's economic outlook to take account of the slowdown in growth prospects following the crises in Asia, Russia and Latin America.

"What came out of the discussion was not so dramatic," said one official. "The change in outlook is a fraction of a percentage point off growth here and there, but the overall outlook is still good."

All sides acknowledge that even though 800,000 jobs were created across the EU last year, this is not enough to bring down the current level of unemployment and soak up new entrants to the labour market. The Union's rate of employment, measured against the working-age population, is still ten percentage points below that of the US at 60.5%.

The trickiest part of the negotiations will be over the chapter on tax and welfare systems, even though EU leaders themselves urged the Commission to address this issue at their Cardiff summit in June.

"This will be especially difficult since tax and benefit systems and institutions are so country-specific," said a national employment policy official. "Everyone can agree that tax systems should not prejudice job creation but, once you get down to specifics, it's very problematic."