Schroder and Chirac pile the pressure on Blair

TONY BLAIR was under renewed pressure over Europe last night as France and Germany called for a reduction of the veto in European decision- making, new targets for cutting unemployment and a push for economic co-ordination.

In a joint letter, France and Germany proposed a controversial agenda for this weekend's summit of European Union leaders in Vienna, dashing British hopes of avoiding a debate on further integration. They also appeared to attack the special rebate on Britain's contributions to EU funds.

The letter raised the prospect of a direct confrontation between Mr Blair and European heads of government, after recent friction over tax harmonisation and suggestions that individual member states should lose their veto over tax policy.

That ambition remained alive in last night's letter from Gerhard Schroder, the German Chancellor, and Jacques Chirac, the French President, who called for bold new thinking about EU reform. They said an "extension of decisions taken by qualified majority is of vital importance".

Although France and Germany avoided the term "tax harmonisation", the joint letter called for a "programme in the area of social and tax policies, aimed especially at avoiding unfair tax practices and wage dumping".

Oskar Lafontaine, the German Finance Minister, called yesterday for "co- ordination" of tax policies throughout the EU. In a speech to a Social Democratic Party rally in Saarbrucken, he suggested that "our British colleagues" had asked him not to use the word "harmonisation".

In their letter, Mr Schroder and Mr Chirac called for "fixed and verifiable targets" to cut unemployment. This could be highly problematic for Britain, which opposes targets for reducing the jobless totals.

Other controversial issues raised include a move towards green taxes. The letter argues: "It is desirable to ease taxes on labour and strengthen the ecological aspects of tax policy Europe-wide."