UK's Brown says Europe needs to reform

LONDON - The European Union needs to wake up to the realities of the changing world and rise to the challenge of increasing global competition, British finance minister Gordon Brown said.

As London prepares to take over the presidency of the EU and recrimination continues over leaders' failure last week to agree on a budget, Brown said governments need to respond to rejection of the EU constitution in France and the Netherlands.

They also had to pay heed to the problem of low economic growth in Europe and people's attachment to their national values, for example on issues such as what is taxed and by whom.

"So if the old assumptions about federalism do not match the realities of our time, now more than ever we need a pro-European realism that starts from the founding case for the European Union," Brown will say according to a text of his speech at the annual Mansion House dinner in the City of London.

"Strengthened by the insistence that Europe looks outwards as a global Europe. And is driven forward by the need for reform." Europe also faced a new challenge in the form of the rapidly growing economies of Asia such as India and China and this had made the need for progress that much more urgent, he added.

And Brown put the recent wrangle over the budget for the 25-nation bloc in that context, arguing that agricultural subsidies were a relic of the past.

"With 40 per cent of the European union budget spent on agriculture, only 2 per cent of Europe's economy, the budget issue itself is a symptom of an even greater issue about the future of the European economy."

With tensions running high within the EU, Prime Minister Tony Blair is set to deliver a similar message to the European Parliament in Brussels on Thursday where he will call on the EU to implement economic and budgetary reform.

Brown said policies that promoted economic growth and jobs had to become a priority for Europe.

"The starting point must be a European-wide commitment to long-term structural reform founded on greater flexibility, and starting with a political commitment to completing the single market," he said.

"So we should set and hold to timetables for the opening up of sectors from energy to utilities and we should be insistent about moving forward quickly in...the opening up of the European financial services market." Brown also renewed his call for a more independent competition policy where independent authorities and not politicians make the decisions.

Responding to cries, especially from France and Germany, that the British model ignores the social dimension, Brown said a competitive economy could go hand in hand with the goal of full employment.

"To those who say there should be no change without security, we have to reply, there can be no security without change," he said.

"But while there is less that a government can do to stop people losing their last job, there is more government should do to help people gain their next.

- REUTERS