EC Leaders Seek Plan To Boost Jobs Without Cutting Social System

Europeans differ on how to reduce unemployment, but shy away from `high social costs' of US model

WITH the alarms of Western Europe's worst unemployment crisis since the Great Depression sounding around them, leaders of the European Community mustered this week to confront a central EC challenge of the decade: how to translate economic growth into significant job creation.

Meeting in the Danish capital for their semi-annual summit, European leaders on June 22 endorsed a call by EC Commission President Jacques Delors to place on employment the same kind of intense focus that led to the Community's Single Market project in 1986. The Brussels-based EC executive Commission is to deliver to the next summit in December a "white paper" of concrete proposals for correcting the EC's dismal job-creation record.

Despite the call to arms, however, opinions vary widely among European leaders about the direction such a "white paper" should take.

British Prime Minister John Major outlined his preference for substantial industry deregulation, lower social security costs, and increased labor market flexibility, while French President Francois Mitterrand called for a tougher stance on international trade and reinforcement of the Community's system of favoring internal market products.

Still, a general tone of alarm centered on a few unavoidable facts: 17.5 million EC residents are unemployed, and the Commission says that number will rise to 20 million, or 12 percent of the working population, in 1994. While the United States created 29 million jobs from 1970-90, Europe created 9 million.

In a communique issued June 22, EC leaders glossed over differences by endorsing a list of short-term economic stimulus measures, such as infrastructure projects. They stressed that the recovery plan should not entail any reduction in the "social protection of citizens."

Noting that the crisis is already drawing into question Western Europe's highly developed but expensive and bureaucratic social welfare system, many leaders and officials said solutions had to be found that did not compromise the "European model" of broad social protection. Europe's social networks

"The very essence of our society is in the social networks we've created," said one senior EC official. "We cannot forget who we are and just stimulate growth by dismantling social provisions."

Frequently cited as the example not to follow was the "American social model," with its less-developed welfare system.

"I don't see a way out of this crisis by increasing the insecurity of people," said Danish Foreign Minister Helveg Petersen, who presented his view of the high social costs the US pays in terms of poverty, delinquency, urban decay, and community health.

Comparisons with the US and Japan as competitors stemmed from the charts and statistics that Commission President Jacques Delors cited in painting the bleak picture of EC job creation.

Aside from pointing out that the US created almost four times as many jobs as the EC with about the same growth rate, Mr. Delors noted that EC non-wage labor costs are almost twice those of the US and Japan. And the EC's share of world exports fell more than 5 percent in the 1980s, while the US share grew.

Faced with such statistics, Mr. Major said, the EC's choice is to "compete or contract." While none of the leaders would dispute that, broad agreement on the employment problem may end there.

Senior British officials said Delors' presentation suggested that "we're starting to see eye-to-eye on the problem," but they added that Delors, a French Socialist, and a number of other leaders remain "reluctant to accept what we see as the inevitable solutions." Two viewpoints

Discussions among European leaders revealed a philosophical splitting of countries into two broad groups, said French presidential spokesman Jean Musitelli. Britain, Netherlands, and Portugal emphasized deregulation and labor flexibility, while France, Spain, Italy, and Ireland favor "a more muscular approach" to international trade. But other observers noted that Spanish President Felipe Gonzalez cited the need to foster greater labor market flexibility, and they cited this as evidence of "new thinking"

in Europe.

Aides to Delors say his proposal for a "white paper" on employment reflected a conclusion that the root problem would not be solved with piecemeal measures or classic stimulus interventions - Commission experts estimate job growth would remain flat even at a 2.5 percent annual growth rate - but requires the impetus of a major project.

"We were struck by the evidence that the only time over the last 25 years the Community registered both significant job creation and steeply declining unemployment was during the implementation of [Europe's] Single Market," one Commission official says.

Although he steered clear of offering any concrete solutions, Delors said Europe's "economic renewal" should include a rededication to monetary union, including a single currency; more spending on infrastructure and research and development; creation of a "European information infrastructure" similar to the US proposal for an "information highway" involving fiber optics and telecommunications development; and better preparation of workers for technological change.

German Chancellor Helmut Kohl said that, while he did not oppose Delors' plan, he wanted quicker action. With Germany's dimmed economic aura darkening further, Mr. Kohl called on EC states to propose ideas for collective action within a month.

Yet while Delors proposed a number of short-term measures focused on stepped-up infrastructure development, officials acknowledged that public investment is limited by heavy budget deficits across Europe.