Leadership crisis set to split OECD: European delaying tactics upset Americans as agency bids to become the world's 'jobs doctor'

THE US is expected to express its intense irritation with the European Union's reluctance to decide on a new head for the Organisation for Economic Co-operation and Development at the agency's annual meetings this week.

Washington had hoped that the Paris talks, which begin tomorrow, would finalise the choice of the OECD's new secretary- general.

But it now believes European countries are dragging their heels in order to block the American selection, the Canadian politician Donald Johnston.

He is the favourite in a race that also includes Britain's Lord Lawson. Although the non- European camp will press for a decision, the outcome hangs in the balance.

The Americans may therefore privately repeat their threat to downgrade their participation in the organisation, turning instead to other forums, such as the Asia- Pacific Economic Co-operation group, for co-operation on economic policymaking.

The US is backed by other non- European members of the OECD, a 25-member club of rich industrial countries. It believes European behaviour may damage the OECD, sending a signal that it is ineffective.

The search for a new secretary- general is closely linked to a general desire to upgrade the agency's role. In the latest example, the OECD is bidding for the role of 'jobs doctor' to recommend state- by-state solutions to the world jobless crisis - now the top issue for economic diplomats and the Group of Seven.

If left unresolved, the leadership question could overshadow an important OECD report published this week, which prescribes a multitude of solutions to the jobless crisis.

The organisation hopes to use the report to establish its position as the jobs doctor - setting out detailed solutions for each country to pursue.

Many member states have concluded that it would be better for a politician to head the OECD rather than the bureaucrats who have run it to date. But Jean- Claude Paye, the current incumbent, is campaigning hard to hold on to his job.

Washington backs Mr Johnston because it believes it is time for a non-European and a politician to take the OECD post, reflecting the fact that countries in all three big trading blocs are members and that trade issues and joblessness top every political agenda.

Originally a European agency, the OECD broadened its membership in 1960 to include all leading industrial countries, but a European has always headed it.

Washington and its main allies, Japan and Canada, worry that the 19 European countries will try to defend that tradition. They are angry that Europe is delaying the decision until it has decided on a successor to Jacques Delors, president of the European Commission.

Britain and Germany claim to be seeking a solution this week but there is much antipathy between the two camps and each has its own candidate. Germany is fielding Lorenz Schomerus, a senior trade negotiator.

In Washington and other capitals outside Europe, the wrangle over the OECD leadership is being seen as yet another example of the EU turning inward and failing to co-operate in managing the global economy.

With OECD forecasts today set to show growth accelerating, the agency will deploy the UK line that structural reforms of the labour market are best taken when growth is accelerating. The organisation is set to upgrade its prediction of 2.1 per cent growth in the OECD area, driven by higher than previously forecast growth in the US and Japan. Last December, it expected the US to expand by 3.1 per cent this year, and Japan by 0.5 per cent.