Amsterdam summit: Europe's new order takes shape

Germany and France settle row over jobs

France and Germany yesterday patched up their differences over how to ensure the single currency creates new jobs, but the deal is unlikely to offer new hope to Europe's 18 million unemployed.

During the hard bargaining which produced the agreement at yesterday's Amsterdam summit, it was France, which had demanded new spending to spur growth, which gave ground, while Germany refused to dilute fiscal austerity measures.

The deal, based on a new resolution on jobs and growth, demonstrates that Europe's leaders now recognise the importance of job creation. At the weekend 30,000 unemployed protesters brought their demands to the streets of Amsterdam. The deal also allows European Union leaders to sign the crucial framework of rules for running monetary union known as the stability pact, thereby claiming that the euro is once again back on track.

Yesterday's moves are to be followed up by a special "summit for jobs" in October. This will help leaders argue that unity of purpose has been restored. Britain is committed to putting job creation at the top of its agenda when it takes over the EU presidency in January.

Tony Blair, who backed Helmut Kohl, the German Chancellor, during the jobs debate, argued that the agreed resolution reflected several British priorities on job creation, by emphasising the general objective of achieving flexible job markets and "employability".

However, the new jobs and growth resolution, though strong on promises to share experiences and look at good practices, offers little in the way of concrete new ideas to tackle the unemployment crisis.

The European Investment Bank, Europe's long-term investment house, has been invited to use its role more effectively by lending to small businesses, as well as EU projects in areas of education, health care, the environment and transport networks. However, the resolution contains no suggestion that new money can be used to promote investment, as France had hoped.

Lionel Jospin, the French Prime Minister, wanted a new political body to be formed which would set economic priorities, as a counter-weight to the monetary policies pursued by the European Central Bank.

The final deal reaffirms that the EU must be committed to economic as well as monetary priorities, but falls short of signalling creation of an economic government to enforce those commitments. In the weeks and months ahead it remains doubtful whether Mr Jospin will be able to sell the agreement to the French people.

Despite the declarations of new will to proceed towards the January 1999 deadline for Economic and Monetary Union, it also remains doubtful whether the agreement will prove to be anything but a temporary fig leaf used to hide the rift which has opened up between France and Germany over euro zone priorities.

The jobs row erupted after Mr Jospin's election and swiftly escalated into the most serious conflict yet to hit planning for the single currency. Mr Jospin was elected on a pledge to create 700,000 jobs in France and to re-balance Europe's single currency rules in order to promote greater emphasis on a "social Europe" and growth.

However, the French objectives set him on a collision course with Mr Kohl, who was determined to resist any moves which would involve more public spending to promote growth, or which might weaken the euro's economic criteria or stability pact.