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Wed, Oct 15, 2003 - Page 12 News List

EU leaders to examine ways to get economy moving


EU leaders will this week tackle rival initiatives designed to kick-start economic growth after a prolonged slump that has strained the rulebook governing the euro zone.

At a summit tomorrow and on Friday, EU heads of government will return to a long-running debate about how the 15-nation bloc -- which is expanding to 25 next year -- can better compete with the US.

The EU has set itself the goal of becoming the world's "most competitive and dynamic knowledge-based economy" by 2010.

But performance on the ground has failed to match the rhetoric, with critics arguing that Europe remains fettered by too much red tape and rigid labor markets.

And with the EU's biggest economies stuck in a painful slowdown, the bloc is mired in a row over whether budgetary discipline should take precedence over pro-growth policies.

French President Jacques Chirac could find himself under attack at this week's Brussels gathering for flouting the EU's Stability and Growth Pact, the set of rules underpinning the common currency area.

France has angered other member states, such as Austria and the Netherlands, for repeatedly breaching the pact's obligation for euro countries to keep their public deficits under 3.0 percent of GDP.

The European Commission -- the EU's executive arm -- has noted the "first green shoots of recovery" after three years of low growth in the euro zone.

Chirac at the summit is looking to focus on Europe's longer-term growth by proposing, along with Britain and Germany, that the EU concentrate its efforts on research and development (R&D).

The three biggest economies in the EU have shifted the focus from the EU Italian presidency's wish-list for a spending spree on transport projects.

"In an increasingly competitive world economy, it is essential to boost our economies' potential for innovation," the British, French and German finance ministers said in a joint letter to their EU colleagues last week.

The Commission, in a report to the summit, will echo the trio's calls for more spending on R&D but also call for 220 billion euros (US$257 billion) to be earmarked for 29 key transport projects.

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