EU Leaders Face Up to Asian Challenge | Europe| News and current affairs from around the continent | DW | 27.10.2005
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EU Leaders Face Up to Asian Challenge

EU leaders sought Thursday to thrash out a strategy to drag Europe out of its economic malaise and avoid being overtaken by rising Asian giants China and India.


EU leaders are waking up to rising confidence in China and India

The leaders, meeting amid the Tudor opulence of Hampton Court Palace outside London, are under pressure to deliver more than talk with economists saying that action is long overdue.

British Finance Minister Gordon Brown urged leaders to seize the chance at the summit to push ahead with long-stalled reforms aimed at injecting dynamism into Europe's lethargic economies.

"The Hampton Court meeting is the chance for Europe to show leadership and kick-start the European economy back onto a path of reform, modernization and growth," Brown said in an opinion piece in the Wall Street Journal Europe.

While the United States and Japan are enjoying an economic resurgence, much of Europe is still struggling to stimulate growth, with latest figures putting GDP expansion in the euro zone at a paltry 1.2 percent.

Blair: Europe faces "grand strategic failure"

Tony Blair in Straßburg Europaparlament

Tony Blair is using the summit to reissue his rallying call to the EU

Prime Minister Tony Blair has made reform the battle cry of Britain's six-month EU presidency, warning that Europe faces "grand strategic failure" if it shies away from the challenge.

The Hampton Court summit gives Blair a fresh chance to renew his call to arms, although bragging about Britain's superior growth and flexibility could reignite latent tensions with countries like France and Germany, more reluctant to pursue sweeping reforms.

Giving a preview of his thinking, Blair said Wednesday: "I think that it is agreed generally in Europe that we need to get Europe moving and we need to get it moving in the right direction. The question is how we do that," he told the European Parliament in Strasbourg.

Much of the debate -- which was taking place behind closed doors in order to preserve the informal nature of the brain-storming session -- is to be focused on which economic model can ensure European prosperity without jeopardizing citizens’ security amid growing competition from Asian countries.

Europe needs to update its social model, says Barroso

Jose Manuel Barroso EU Pressekonferenz in Brüssel

Jose Manuel Barroso warned of the EU being overtaken by globalization

Weighing into the debate, European Commission President Jose Manuel Barroso warned that the European social model needed an update if it was to survive in the fiercely competitive world of globalization.

He told German newspaper Suddeutsche Zeitung that "if you want to keep a social market economy you have to undertake reform." Although EU leaders widely agree that the right model for Europe is a "social market economy", interpretations of what that means vary widely.

"The Nordics are in an enviable position with a social model bearing both efficiency and equity while the Mediterraneans live in a model that bears neither," said Andre Sapir a respected authority on the subject at the Brussels-based economic think-tank BRUEGEL.

While the British and American free-market model has the advantage of flexibility it leaves too many citizens behind, in Sapir's view.

"The Anglo-Saxons have an efficient but unfair social model while the Continentals enjoy much more equity but weaker efficiency", Sapir said.

Lack of response could be fatal

Textilfabrik in China

Highly efficient work practices in China could leave the EU behind

However, inefficiency was a crippling handicap in the global race to get ahead, Sapir said.

"The models that are inefficient are simply not sustainable in the face of the growing tensions on public finances coming from globalization, technological change and population aging," he said.

Bank of American economist Lorenzo Codogno warned against imitating various models and recommended adapting each country's system to the challenges of globalization.

"The US model way is not to be followed blindly but also the Scandinavian way is not" to be simply imitated, he said.

"The reform process needs to be tailored to the specific needs of each individual country while maintaining an EU-wide coordination," he added.

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