Europe seeks to outline common growth strategy

BRUSSELS: Europe sought on Wednesday to outline a new economic strategy for the next decade but first had to reassure Germany's all-powerful chancellor it would tighten budget rules amid a Greek debt crisis.

The head of the European Commission, the executive that runs the 27-nation European Union bloc on a day-to-day basis, said agreed rules limiting national overspending should be "reinforced and not weakened" on the day Athens announced radical new austerity measures to put its fiscal house in order.

Jose Manuel Barroso's announcement of his new 'Europe 2020' vision was overshadowed by the Greek crisis and tested by a letter from Angela Merkel outlining fears that budgetary surveillance by Brussels could be weakened.

Merkel expressed concern that an emphasis on structural economic reform may lessen the focus on the bloc's Stability Pact which enshrines fiscal discipline, limiting budget or public deficits to three percent of gross domestic product.

"We are not proposing any kind of overlapping between the Stability and Growth Pact (which governs such rules) and the European 2020 strategy," Barroso said.

The 2020 plan is anchored by investment in research and innovation, green energy and education as part of an overall bid to boost employment and accelerate growth in the face of powerful competitors, notably China and the United States.

It also includes an embryonic form of "economic government" for Europe, something championed by EU president Herman Van Rompuy.

The commission, as the EU's legal enforcer, would acquire powers to issue "recommendations" and "warnings" over countries' targets in the broad sphere of economic policy, coordinating them with the ultimate goal of shaping Europe-wide results.

Merkel had urged that budgetary management and wider economic targets be separated. Barroso said that while a "holistic" approach was sought, legally budgetary and other economic targets and reforms should be kept "separate."

"Difficult choices have to be made in all our countries, it has to be the head of state that makes that choice," he said, referring to decades-old difficulties in acquiring real sovereignty from heavyweight EU member states.

The 2020 strategy rests on core objectives that EU countries should work towards at national level -- increasing research and development investment; raising the working-age employment rate from 69 percent to 75 percent; reducing the numbers facing poverty by 20 million people and cutting harmful environmental emissions.

Barroso said that Greece "shows more than ever the need for increased coordination at European level" and claimed that the EU "appears ready for stronger economic coordination and governance."

National leaders will debate the plans next month.

"Looking at the targets, it looks like the tools to deliver are mostly at member state-level so it remains to be seen how far member states will match action to aspiration," said Hans Martens, chief executive of the European Policy Centre think-tank.