European Union (EU) leaders wrapped up the first day of a summit in Brussels on Thursday with a plan to reform the economy while divided on the burden-sharing of cutting greenhouse gas emissions.

Slovenian Prime Minister Janez Jansa, whose country holds the rotating EU presidency, told reporters after the meeting, which dragged on until midnight that "we all agreed the Lisbon Strategy is functioning well. Because of the Lisbon Strategy, the EU has solid economic foundations."

The Lisbon strategy is the EU's flagship reform strategy for economic growth and jobs. It was first agreed on in 2000 by EU leaders in the Portuguese capital, initially aimed at making the EU "the most dynamic and competitive knowledge-based economy in the world" by 2010.

However, the bold strategy was later watered down and was re-launched in 2005, with clear focus placed on growth and jobs. It is based on a consensus among member states and organized around a three-year cycle, with the first starting in 2005.

The plan endorsed by EU leaders concerns the implementation of the strategy in the next three years, ending in 2010.

Based on a recommendation from the European Commission, EU leaders earmarked four priority areas for the next three-year cycle, namely knowledge and innovation, unlocking business potential, investing in people and modernizing labor markets, and energy and climate change.

A notable measure is called the "fifth freedom", referring to the free movement of knowledge. Also in the field of knowledge and innovation, the plan urged member states to fulfill their commitments by spending three percent of their gross domestic product (GDP) on research and development by 2010.

As far as the business environment is concerned, EU leaders agreed to cut red tape for small and medium-sized enterprises (SMEs) .

On investing in people and modernizing labor markets, the plan also called on member states to draw up action plans and set targets to substantially reduce early-school leaving and improve basic reading skills.

In this regard, EU leaders said applying "flexicurity" principles is essential to making labor markets more efficient. 'Flexicurity' is a policy strategy aimed at enhancing the flexibility of labor markets on the one hand, and employment security and income security, on the other.

Jansa said the efforts would add a social dimension to the Lisbon Strategy.

On energy and climate change, another hot issue at the summit, Jansa said EU leaders will try to hammer out an implementation roadmap on the agreed overall targets on the second day of their meeting.

"Given the goals that we set ourselves a year ago, we need to take decisions in order to achieve those goals. Only in this way will the EU maintain its leading role in fighting the negative consequences of climate change at the global level," Jansa said.

EU leaders pledged last March that greenhouse gas emissions should be reduced by 20 percent by 2020 from 1990 levels, and renewable energy should account for 20 percent of total energy use while biofuels make up 10 percent of fuel consumption.

However, it will prove no easy task to attain the ambitious goals. The European Commission presented a detailed plan in January setting out binding targets for each member state, which was not well received in all EU capitals.

The new-cycle plan also reinforced the external dimension of the Lisbon Strategy, combining openness with demand for equal market access to other economies.

In addition to economic reforms, EU leaders also agreed to launch a Mediterranean Union proposed by France to strengthen ties with countries from Morocco to Turkey.

The establishment of a Mediterranean Union "enjoyed support" among EU leaders, Jansa said.

"Today we recognized the need to upgrade the Barcelona Process, " he said.

The Barcelona Process was launched in 1995 to foster dialogue between EU member states and countries on the southern and eastern shores of the Mediterranean, including the Arab states, Israel, Cyprus, and Turkey.

The main aim of the process was to promote democratization, security and economic growth in the countries to Europe's south and east.

"When the Barcelona Process was launched, it was a quite different time," Jansa said, "but now things have changed, we need to adapt."

He stressed that the Mediterranean Union was not to replace the Barcelona Process but to upgrade it, noting the Process had produced results since it was launched a dozen years ago.

The Prime Minister noted that all EU member states would be involved in the process and work would begin in the relevant departments within the EU to see what, if anything, should be added to the Process.

French President Nicolas Sarkozy proposed in last year's election campaign to establish the Mediterranean Union. But the proposal met with a cool reaction at Thursday's summit of the EU, although leaders expressed support for the strengthening of relations with countries in the Mediterranean region.

"The European Union should increase its presence in the Mediterranean," Jansa told reporters upon his arrival for the summit earlier in the day.

"But we don't need parallel institutions, and of course we have to have all member countries and countries of the Mediterranean on board," he added.

On the second day of the summit, EU leaders were expected to discuss the current turmoil on the financial markets and sovereign wealth funds, as well as some international hot spots ranging from Afghanistan to the Middle East.

(Xinhua News Agency March 14, 2008)