While most of the EU grapples with sluggish growth and rising unemployment, The Netherlands is enjoying the benefits of a reformed welfare system and a flexible workforce
In a glass box beside a new concrete flyover, a young woman in neat denim sits at a desk, with a plastic sphinx for company. A speaker pipes out "Yellow Submarine".

Paulina Vonkemar, aged 22, qualified from university last year as a business manager. She works here for Sphynx Debtor Control, as a secretary. Its a dull kind of job, which many of her friends would spurn, preferring welfare, she says. And she doesn't like the "business park concept" very much. "You could be anywhere, couldn't you," she says, looking out towards a giant Nissan sign and a big yellow "M" on a stick.

"Or nowhere", she might have added. Only the bicycle lane near the motorway suggests we could, possibly, be on the outer reaches of Amsterdam.

It's an odd kind of job too. Her company collects debts on behalf of petrol stations, chasing up wayward motorists who have failed to pay up at the pumps. But business, around here, is booming. Traffic is thundering out to the "hub" around Schiphol airport. New companies are opening up in the business park every day. And Sphynx has more work than it can cope with.

She may not know it, but Paulina Vonkemar, and others like her, are part of the Netherlands' new economic miracle. The Netherlands is becoming Europe's transit station - creating "new jobs", which are almost unheard of in other European Union countries. Efforts to cut back bloated benefits - the "Dutch disease" - appear to be forcing people like Paulina to take up low-paid work.

While the rest of Europe is numbed with slow growth and rising unemployment, the Dutch economy grew more strongly last year than any other country in the European Union apart from Ireland, with unemployment of about 6.6 per cent, compared with about 11 per cent in Germany and nearly 13 per cent in France. The Netherlands is the closest thing to a "tiger economy" that Europe has. As president of the EU for six months, its most significant impact could be as an example to the other 14 members on how to run a modern economy.

"THE DUTCH experience could certainly be interesting for other countries. We are cautious, but the trends are certainly good," says Ad Melkert, minister for social affairs, speaking with endearing Dutch understatement. His government is overseeing the creation of 100,000 jobs a year. The Netherlands is currently the fourth biggest investor in the US, and banks like ING (which bought Barings) and ABN-AMRO (which did not quite catch Nicola Horlick) are becoming familiar names in global banking. Of international companies seeking European headquarters, 45 per cent are now coming to the Netherlands.

Along with this economic revival there are those who say - and complain - that the whole character of the nation, and particularly of Amsterdam, is changing. The big boom has coincided with the big "clean up". The Amsterdam mayor is licensing the sale of marijuana in "coffee shops", and last week he even closed down Paradiso, the club made famous by the Beatles, for overstepping new stricter drug laws. The Amsterdam Hilton, where John Lennon and Yoko Ono staged their famous week-long "bed-in" for peace, now looks out over a thriving world trade centre, though it can still hire out the the suite they stayed in for pounds 500 a night.

Last week, in another luxury Amsterdam hotel, politicians, businessmen and trade unionists, all "stake-holders" alike, cheered as Tony Blair, the Labour leader, promoted his policy imperatives for getting single mothers off welfare, in a conference keynote speech. And they sipped cocktails to celebrate the Dutch success, while old Dutch fogies remembered the past. "It's true we Dutch are not as laid back as we used to be. The young seem to want to work harder nowadays, while we just went out and smoked dope and had a good time," intoned a nostalgic voice on a bar stool.

So how did the Dutch do it? What is the secret of their success? And where will it lead?

First, they diagnosed the "disease", which was reaching epidemic proportions by the late 1980s. About 46 per cent of gross domestic product was spent on benefits, one of the most "generous" systems in the world. In 1990, 1 million people out of a workforce of 6 million - low for a population of 15 million - were claiming lifelong sickness benefit.

"We had a period of extreme carelessness with public finances. We reached the conclusion that we just couldn't afford it - especially as we were one of the healthiest nations in the world," says Ad Melkert. Challenging dependency meant challenging assumptions about social provision. Some say the Dutch learned to value social networks centuries ago when they found the only way to survive, bunched up on this small slab of watery land, was to share and to help. Others say that assumptions about full employment in the 1950s and 1960s started a rot, which bred work-shy dependency.

Today employers pay insurance premiums which directly reflect the sickness of their staff, deterring sickness lay-offs, and incentives are in place to ensure healthy working environments.

Also, the governing coalition, led by Wim Kok, the Labour Prime Minister, insisted that minimum standards to ensure fair welfare remained as strong as ever. The Dutch reforms do not constitute deregulation, of the kind advocated by the British Government. "We believe in social standards to ensure stability and economic success. For that reason we support Europe's social chapter as a stimulus to economic growth," says Ad Melkert.

REFORMING welfare was, however, only the first challenge. Employment in the Netherlands was long marked by an extraordinary shortage of women in the workforce, which had to be rectified.

While other European women rushed to take full-time work in the 1970s, most Dutch women stayed at home. Why? Again, historical, religious and cultural explanations abound. "We were neutral in World War I and our women didn't have to go out to work. After the war the consensus of the protestant and Catholic churches, and the socialist movement, was that women should stay at home,." says Elske Ter Veld, a former government minister.

More important, perhaps, were the tax incentives, which made it pay for wives to stay at home - incentives which are only now being cut.

When Dutch women started to demand work in the 1980s, therefore, the Dutch government had a double incentive to find ways to create new jobs. The solution devised was a massive increase in part-time work and "flexible" labour. Today 60 per cent of women working in the Netherlands are part- timers, along with 16 per cent of men. Call up any Dutch business on a Friday and the chances are the person you want will be "off for the weekend", to be found on bicycle paths with the other "part-timers" balancing babies in baskets.

The Dutch boom has also come about because the country has decided to get on with doing what it has always been best at - import-export. The "motors" or "spearheads" of the Dutch economy are Rotterdam port - the busiest in the world - and Schiphol airport, the fastest growing airport in the world.

The Dutch have also always been good at reclaiming land. Around Schiphol they are reclaiming it as never before, building a transit hub to serve the whole of Europe. Last year 27.8 million passengers flew into Schiphol. It is not so much a European hub as the international hub for Europe, second only to Frankfurt as a cargo airport. Companies like Nissan and Canon use Schiphol as a base to distribute parts all over Europe.

In 1990, 35,000 people worked in the Schiphol area. Now 80,000 people work in jobs associated with the airport. Indeed, worries about the consequences of growth have already surfaced. What about the environment, the ozone layer, demands Friends of the Earth. There are jobs here, yes, but who are they for and at what cost?

The Dutch boom is bringing confidence, but it is also bringing acute unease. Friends of the Earth has held mass protests at Schiphol, complaining about air and noise pollution in the centre of one of the most highly populated areas of the world. Burgeoning international ports and airports attract international crime, which the Netherlands and the rest of Europe is only just beginning to address. A mafia gang trading in immigrants was arrested last week in Rotterdam. A major drugs syndicate went on trial in Amsterdam this week charged with shipping cannabis from Pakistan to ports all over Europe. The "jobs" being created by Holland's "globalisation" include jobs for international criminals such as these.

Youths outside Amsterdam's big hotels also bear testimony to the darker side of Holland's job creation. "You talking about jobs," said Jonan, an immigrant from Surinam. Introducing his friends, he joked: "We got jobs all right. I am the big dealer here. He is the little dealer and he is trying to get a job as a dealer. Whatever you want we can get you. They say this country is paved with gold. We know it is paved with gold."

Many ordinary Dutch people say they feel alienated from the process which is under way. For the most part, however, Dutch pragmatism seems to prevail when people look to the effects of the new boom. There is pride that a small nation can show a big, strong neighbour like Germany how things should be done. And there is a recognition that the Netherlands could not stand still. "The time for bed-ins is over," admitted the voice on the bar stool. "I guess you could say we got our wake-up call earlier than some."