Blair says EU needs to struggle to compete with emerging powers

The European Union need to workout a financing plan that will boost its competitive muscle and help it contend with emerging powers such as China and India, British Prime Minister Tony Blair said Monday.

Opening talks with European Commission President Jose Manuel Barroso and the leaders of Austria and Finland, Blair the current EU president said he was pushing for a budget deal by the year's end.

But he insisted the 25-nation bloc must agree on a program of economic modernization before turning to future financing.

The budget must be resolved, Blair said, in "a way that enhances the overall competitiveness of the European economy."

Monday's talks, also attended by European business leaders and trade unionists, paved the way for an informal summit at Hampton Court palace near London on Thursday, when EU heads of government will grapple with the issue of economic reform.

Blair insists negotiations over the budget will have to wait until December's formal summit in Brussels.

Barroso said Monday he hoped the informal summit would build a "new consensus about the urgency of a more modern Europe, a reforming Europe."

"If we want to keep and preserve our European values, we have to reform and modernize our policies," he added.

The reform agenda is a source of tension in the bloc, pitting the so-called "Anglo Saxon" model of deregulation and the free market against the French social model of strong labor and social protections, reports the AP.