EU attempts to regain credibility on jobs

Some 18 million people are unemployed in the European Union, each one a testimony to the harsh, uncaring face of Europe's great economic and political project. Between 1991 and 1996, the years when member-states turned the great ship of public debt around to prepare for monetary union, real growth stagnated at an average of 1.6 per cent and 4.4 million jobs were lost in the EU.

Despite protestations that budgetary rigour was good for its own sake, monetary union got the blame.

Today the leaders of Europe gather in Luxembourg for a summit devoted not just to convincing their public that they are aware of that pain but, as the Minister of State for Employment, Mr Tom Kitt, put it earlier this week, in a real sense "rescuing the credibility of the European Union".

To do so, as the architect of their agenda today, the Commissioner for Social Affairs, Mr Padraig Flynn, insists they will have to produce concrete results and not just the pious aspirations of the past.

At summit after summit - Essen, Madrid, Dublin - despite ostensibly putting jobs at the top of their agenda, Europe's leaders have been able only to return to the tired formula that job creation was a matter for the memberstates and business. The EU could only advise, monitor and collate best practice on tackling the structural problems which led to Europe producing such a poor return in new jobs.

But the Amsterdam summit in June made the difference. The election of socialist governments in France and Britain made realisable the wish of many member-states of all persuasions to enhance economic co-operation at EU level. France, in particular, needed to be able to show that the energy at EU level used to bring down debt and public deficits could also be turned to tackling unemployment.

The new employment chapter in the treaty signed in Amsterdam, at last gave Mr Flynn the tools he believed he needed: a new role for the Commission in setting targets based on benchmarking the best practice in the memberstates and then cracking the whip when they were not met.

Member-states would produce their own action plans to explain how they would meet agreed targets for reform of their labour markets, and the Commission would act as taskmaster.

The challenge is huge. Although growth next year is expected to reach 2.8 per cent it is likely to contribute only two million jobs in the 1997-98 period, barely denting the unemployment rate as the labour force, notably among women, and productivity are both growing.

For years there has been a broad consensus in the EU that structural problems in the labour market are fatally undermining the competitiveness of the EU, but progress on this front has been painfully slow. Indeed, on average, the level of taxation on labour has risen (although not in Ireland).

The cost of hiring labour is not the only problem. Many employers report that as growth picks up they are finding it increasingly difficult to find workers, and not simply because of pay levels.

Many of the unemployed, both those on the dole for lengthy periods and the young, are simply not employable either because they lack skills or have succumbed to a culture that makes a return to the workforce extremely difficult. Today, long-term unemployment represents as much as half those on the dole in Europe (in Ireland 60 per cent).

Youth unemployment is also running at twice the adult rate at 22 per cent, although in Ireland it has come down from 24 to 18 per cent since 1992.

Tackling these problems requires moving people from passive welfare programmes to active programmes which prepare them for work. And it means, though the Commission does not say so, using degrees of compulsion that depend on the inclinations of particular governments. The field is led by New Labour in Britain which has made no bones about threatening to cut off dole payments unless the unemployed take up training offers.

It is a potentially deeply unpopular course. The memory of compulsory work experience schemes in the late 1970s is not good. In many cases the poorly designed courses offered little training and young people felt they were being exploited by unscrupulous employers.

Making such schemes work, many suggest, requires considerable additional resources, but the Commission insists its proposals to the summit are "budget neutral".

It argues that the real cost of unemployment to the EU is not just the 2.7 per cent of GDP spent on benefits to the unemployed, but a further 2.3 per cent in forgone taxes and other social benefits. Allowing unemployment to persist at twice the rate of our competitors simply because we will not train the unemployed is prohibitively expensive.

But the main challenge to the Commission's proposals today will come from another quarter. Germany and Spain insist that job creation is a national competence and reject the idea of binding targets fixed at European level.

The Government, like the majority of member-states, accepts the broad approach taken by the Commission, arguing that much has already been tried successfully in Ireland. But targets for training of young people and for the expansion of child-care facilities are likely to prove challenging.

The Luxembourg Presidency is trying to bridge the gap by reducing the specificity of some of the guidelines. It is emphasising that each country can adapt them to their circumstances, while not undermining the Amsterdam-inspired system of monitoring.

The summit will also hear reports from the European Investment Bank on its new facility for helping small businesses invest in technology; and from the Commission on the job implications of its other policies.

The disagreements of memberstates are reflected in the attitudes to the summit of unions and employers. The President of the European Trade Union Confederation (ETUC), Mr Emilio Gabaglio, warned this week that without clear pledges and concrete action on jobs the EU's credibility would be undermined.

He urged the EU to go further by committing at least 1 per cent of GDP to training and ensuring that within five years the number of unemployed on training programmes would be up to 50 per cent. The summit should also "send out a signal that the reorganisation and reduction in working time are ways forward which must be used to improve employment prospects".

UNICE, the European employers confederation, while backing the need to get rid of rigidities in the labour market, emphasised the need to promote investment confidence through sound economic policies and wage moderation and counselled "extreme prudence" in the setting of quantified targets at EU level.

"Such figures have little meaning and raise unrealistic expectations and can therefore lead to disappointment," a UNICE statement said.

Yet there is a danger in such logic, almost a counsel of despair, that the EU will once again be perceived as doing nothing. The Flynn approach may not be wildly radical, but it is likely to be seen by the public at least as a step in the right direction.