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Former European Commission president Jacques Delors' 1992 drive to create a single European market where goods, services and people could move freely across national borders thrust the European Union onto the global stage, waking up US and Asian policymakers to the emerging economic might of once-sleepy Europe.
A decade later, the 2002 introduction of the euro, the common European currency currently shared by 13 EU states, once again put the spotlight on an upbeat Europe, determined to tear down national barriers, even in the sensitive monetary sector. Zoom forward to 2007, however, and Europe's economic landscape is looking more sombre.
Governments are lagging behind in keeping their promises to dismantle inefficient cartels, liberalise their economies and cut red tape as the EU's so-called "Lisbon Agenda" - adopted in 2000 to transform Europe into the world's most dynamic economy by 2010 - runs out of steam.
Most crucially, although EU economies appear to be picking up pace after years of slow growth and quasi-stagnation, Europe's overall economic performance remains lacklustre, with the US and Japan still ahead in terms of growth and job creation.
In addition, the now-27 nation bloc is grappling with the impact of globalisation. Labour unions complain about job losses as industries move to cheaper locations in search of low-cost labour.
Across Europe, politicians and business leaders are wringing their hands over the emerging might of China and India as global economic powerhouses. Recent studies confirm that Europeans are right to be worried.
The EU's economic development is only now reaching the level achieved by the US more than two decades ago, according to a report by Eurochambres, the pan-European business lobby.
An in-house study by the European Commission also recently issued a grim warning on the challenges facing Europe, including continuing high rates of unemployment and failure to keep up with a rapidly- changing "knowledge economy."
Striving to revive Europe's flagging fortunes, the commission recently called for a renewed commitment to reform and modernisation, saying governments should use the current economic "good times" to consolidate finances.
"What we are attempting is the whole-scale modernisation of our continent. A root-and-branch reform at all levels of governance and in all policy areas," European Commission President Jose Manuel Barroso said recently. The commission's focus now is less on removing barriers to cross-border trade and more on ensuring that markets function better.
But the task is proving more difficult than anticipated, with major barriers still existing in sectors such as services, energy, the free movement of workers and intellectual property protection.
A key problem is that while the commission sets targets for building an integrated single market, implementation of the rules are the responsibility of national authorities.
In energy and telecoms services for instance, national regulators have widely different powers and degrees of independence from governments. With energy security concerns high on the EU agenda, the commission's current priority is to push for further energy-sector liberalisation.
Barroso is calling for "full ownership unbundling" under which energy monopolies would have to sell off their transport and distribution networks to independent operators. The EU executive says this is essential to encourage competition and ensure lower energy prices for consumers.
However, several governments oppose such a separation of energy production and transport activities, fearing it will slash the clout of their domestic energy giants and reduce national energy security.
Breaking up inefficient energy cartels is another priority, with Brussels recently challenging Poland, Italy and Spain over their handling of foreign take-over bids for local companies.
In the telecommunications sector, Germany is facing EU charges over a new law allowing Deutsche Telekom, the German phone giant, to keep rivals temporarily off its high-speed internet network which the company plans to build in the country's main cities.
The telecoms industry also opposes a bill aimed at forcing mobile phone operators to slash the cost of making calls abroad, insisting that self-regulation would be more effective in driving down prices for consumers.
Finally, efforts to allow the free movement of service providers such as hairdressers, construction workers and consultants have had to be watered down to meet fears in the EU's old member states that the bill would lead to an influx of low-cost workers from the bloc's eastern European newcomers.
EU officials insist that despite resistance, EU governments are slowly but surely liberalising their economies to keep up with a changing world.
As one official in Brussels put it, "the EU single market is a work in progress. And will stay so for a long time."
Meanwhile, "Who speaks for Europe?" famously asked former US Secretary of State Henry Kissinger in 1973. These days, most foreign leaders seeking to talk to the European Union simply pick up the phone and call Javier Solana.
As the 27-nation bloc's "High Representative" for foreign and security policy, the 65-year old Spaniard - formerly a Nato secretary general - is certainly not the sole EU spokesman.
European Commission President Jose Manuel Barroso often speaks in the name of the EU as do presidents, prime ministers and foreign ministers of the nation holding the six-month rotating EU presidency.
But while Barroso holds the key to EU purse strings, he has only a small role in forging EU foreign and defence policy. And since the EU presidency changes every six months, its representatives are in the spotlight for a short time.
Solana, on the other hand, has been de facto EU foreign minister and head of military operations since October 1999. His staying power - and tireless diplomatic efforts in the Balkans, Iran and the Middle East - have given him a global reputation with which few EU politicians can compete.
Appropriately, the EU chief diplomat received the prestigious "peace through dialogue" award at the Munich Security Conference last month just hours before a meeting with Iran's leading nuclear negotiator Ali Larijani. Solana has been spearheading western efforts to find a diplomatic solution to the worsening nuclear crisis with Iran.
Despite the international praise, however, speaking for Europe on the global stage is no easy task. While the EU has pushed ahead over the last 50 years in breaking down internal barriers to trade, introducing a single currency and bringing new nations into the bloc, efforts at forging a common foreign policy have been stymied by countries' national interests and continuing reluctance to cede sovereignty to a central power.
As a result, EU governments have been - and often remain - at loggerheads over how best to deal with global flashpoints. The EU was badly divided in the early 1990s over the Balkans crises triggered by the breakdown of the former Yugoslavia. European politicians were unable to stop the fighting and EU peace monitors in the region were ridiculed as "ice cream men" because of their white suits and lack of authority.
Although Luxembourg's former foreign minister Jacques Poos said "this was the hour of Europe," the EUhad to surrender a military and political role in the Balkans to the United Nations and the United States.
More recently, disagreements over the pros and cons of the US-led Iraq war - which was backed by Britain, Spain and Italy but opposed by France and Germany - have provided another example of EU infighting over foreign policy.
However, while the discord over Iraq clearly tarnished Europe's international image, it did spur Solana and others to try to forge a united front on global affairs.
One result was the adoption of a first-ever EU "security strategy" in 2003, underlining Europe's commitment to strong international institutions and the use of "soft power" instruments of trade and aid to prevent crisis.
However, the soft approach - compared to the US policy of giving higher priority to military action - was tempered by a recognition that more active policies were needed to tackle "new dynamic threats" including terrorism and the proliferation of weapons of mass destruction.
When diplomacy failed, the strategy said the EU would be ready to envisage "early, rapid and when necessary, robust intervention."
The security strategy was the "founding act" of the EU's moves to forge a defence identity distinct from Nato, according to General Henri Bentegeat, head of the influential military body which advises Solana.
Since then the EU has deployed 16 civilian and military missions, including in Bosnia, Darfur, the Palestinian Territories and Iraq. However, EU governments want to do this in partnership with the UN, the 26-nation Nato military alliance and the African Union, said Bentegeat.
The general added that the EU's role as world security actor was "unique" because it could combine military and civilian operations when tackling crises.
In addition to a lead role in seeking to defuse the nuclear crisis with Iran, the EU last year sent troops to supervise national elections in Congo and to monitor a ceasefire between Israel and Hezbollah fighters in Lebanon. EU forces are also deployed in the Balkans.
Solana recently predicted an increase in international demand for EU peace missions, including in Afghanistan and Kosovo. If the spate of daily visits to Solana's headquarters in Brussels is any indication, the EU's global outreach looks set to become even wider.
-DPA

Copyright Reuters, 2007

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