Jobs crisis threatens plans for the single currency

Unemployment forcing its way on to the agenda as EU members face deadline pressure

European Union leaders are preparing for a special summit to address Europe's jobs crisis amid growing fears that failure to shorten the 18 million-strong dole queues could derail plans to launch the single currency on target, 16 months from now.

As Europe heads into a defining autumn for its most ambitious project, pressure to do more than wring hands about the unemployed is intensifying with the deadline for selecting the first batch of single currency members now just eight months away.

Decisions about how the euro is governed will have to be addressed when EU finance ministers meet next weekend while the European Commission's autumn economic forecasts are due towards the end of next month. These will indicate how Brussels sees deficits for 1997 - the year on which hopefuls will be judged - shaping up. Britain, now expected to meet the Maastricht entry conditions, will be asked to indicate by the end of the year whether it will definitely opt out of the first wave.

Meanwhile, the French preoccupation with its own critical unemployment problem has forced jobs to the top of the EU's agenda. Leaders agreed to the special summit after the Socialist Prime Minister, Lionel Jospin, threatened to plunge the entire project into crisis at Amsterdam in June. Mr Jospin eventually agreed to sign up to the harsh public spending limits required by Economic and Monetary Union (Emu) after winning a promise that unemployment would be tackled as a priority.

But there is deep reluctance to play up hopes for the Luxembourg summit scheduled for mid-November, reflecting the acute dilemma facing EU governments.

Single currency enthusiasts are aware that "selling" the euro to a sceptical public means that they must convince people it will bring prosperity and jobs. But the harsh disciplines imposed by monetary union rule out spending more money on job creation if the 1999 timetable is not to slip. And for borderline countries like France, just getting to the starting blocks on time will mean further belt-tightening and with it the prospect of more public sector job losses in the short term.

Last week, Mr Jospin and the German Chancellor, Helmut Kohl, moved to dispel doubts about their joint commitment to the launch of the common currency on time. German political leaders also rallied to quell talk of a possible delay sparked by remarks made by the Bundesbank president, Hans Tietmeyer.

But already, the promised jobs summit looks certain to expose the ideological tensions among member states over how to get people back to work: US-style deregulation to encourage entrepreneurship versus pumping more money into skills training and giving more power to Brussels to co-ordinate employment policies.

A first meeting of the European Commission after the summer recess last week foreshadowed the debate. The United Kingdom's Leon Brittan and Germany's Martin Bangemann argued that excessive regulation, blamed by business for strangling job creation must be on the agenda. This angered an opposing camp led by social affairs commissioner Padraig Flynn who insisted that the summit must not be an excuse to authorise "wholesale deregulation".

Luxembourg's Prime Minister Jean Claude Juncker, whose country holds the EU presidency, has controversially suggested giving a new role to the European Investment Bank to fund training or job-creation initiatives. He also wants the summit to set ambitious targets to boost the numbers in training. Currently only one in ten of the unemployed are on training schemes.

But the prospect of any additional public spending will raise hackles in Bonn which is struggling to cut its deficit to the maximum 3 per cent of GDP allowed for Emu candidates and may even propose shrinking its own contribution to the EU budget at the next meeting of finance ministers on 12 September.

An ambitious timetable for enlargement of the bloc into eastern Europe, meanwhile, has been mapped out with negotiations due to begin with some or all of the 10 applicants from January when Britain takes over the EU presidency.

The European Commission has recommended accession negotiations with Poland, Hungary, the Czech Republic, Slovenia, Estonia as well as Cyprus, but governments have only until the end of the year to overcome deep divisions on the pace of accession and on which candidates they want open talks with.

Here again by failing to match their political rhetoric on enlargement with realistic groundwork the EU leaders have stored up trouble. At Amsterdam they shelved decisions on the internal reforms which must precede enlargement.

Negotiations on Agenda 2000, the sweeping package of reforms designed to reform the bloc's budget and its costly farm and regional development policies ahead of enlargement are also about to begin but the signs are not promising.

Agriculture ministers meet in Luxembourg from tomorrow for the first round of talks on a radical farm reform plan, but those countries whose farmers benefit most from handouts, including Germany, have already voiced firm resistance to Commission proposals to slash guaranteed prices by 30 per cent.

Countdown to Emu qualifying date

8-9 September: Agriculture ministers hold first debate on Agenda 2000 proposals for radical reform of EU farm policy.

12-14 September: Finance ministers meet to discuss how euro will be governed and to open negotiations on future financing of Union after 1999.

24 September: France unveils its 1998 budget showing how it intends to slash the national deficit to meet Maastricht criteria

25-26 October: Foreign ministers to decide timetable for negotiating enlargement to eastern Europe.

Late October to early November: European Commission releases autumn economic forecasts.

Mid-November: EU leaders hold special jobs summit.

End December: Summit marking handover of EU presidency from Luxembourg to Britain. British government to say whether UK will join Emu in 1999.

1 January: Britain takes over six-month presidency coinciding with the opening of EU enlargement negotiations.

Spring 1998: Danes vote on Amsterdam treaty.

Decision on member states qualifying for Emu takes place based on 1997 economic figures.