Asian crisis lends added urgency

The shadow of the economic crisis in Asia gave an added sense of urgency to the discussions yesterday on the direction of EU economic and employment policies.

The British Prime Minister, Mr Blair, warned that the context of their discussion was the reality that there were now two key poles of global economic stability - the EU and the US. Both were withstanding the sort of pressures afflicting Asia and Russia because their economies were based on anti-inflationary policies and sound finances, he said.

The decision to launch the single currency reflected that need to continue the process of economic convergence, he argued. The euro would promote growth and stability, he said. Economic reform was needed to do the same for employment.

Ministers backed guidelines approved by Finance Ministers last week, although the President of the Commission, Mr Jacques Santer, complained that they had removed what he regarded as key elements of the paper - a series of country-specific recommendations which urged the Irish Minister for Finance, among others, not to engage in tax-cutting in the next Budget.

Mr Santer is understood to have reminded the heads of government that such recommendations were a necessary part of the detailed multilateral monitoring of member-states' economies to which they had committed themselves.

He was supported by six of the leaders on the issue - from Austria, Luxembourg, Italy, Finland, the Netherlands and France - but the Taoiseach, Mr Ahern, is understood simply to have welcomed the guidelines in their final form. Mr Ahern welcomed the emphasis now being placed on employment and growth.

Irish diplomats welcomed an attack by Mr Santer on the state subsidy policy of some of the bigger EU countries. Such aid, he said, damaged the principle of cohesion as smaller countries could not afford it.

The French Prime Minister, Mr Jospin, pointed to the need to cut taxes for the lowpaid as a central feature of their economic strategy. But he struck a discordant note, insisting that in finding a "harmonious balance" between the monetary policies of the European Central Bank and their national macro-economic strategies, their "first priority" had to be real growth, the precondition for dealing with unemployment.

In interviews later Mr Blair rejected speculation that Britain was moving any closer to joining the single currency.