British Prime Minister Tony Blair hosted a meeting of European socialist leaders Wednesday, hoping to reach common ground on the need for economic reform on the eve of an EU summit.
Blair wants a fresh push to modernize Europe's economy and liberalize its labor markets so the 25-nation bloc can meet the challenges of globalization.
The reform agenda has created tensions, however, and some member states, notably France, fear Europe's welfare state could be eroded.
The British leader, who is EU president until the year's end, sought to calm such fears saying economic reform would not mean social protection being scrapped.
"We social democrats and socialists know that we cannot simply leave everything to the market. On the contrary, active government is one of the keys to economic success in the new global economy," Blair said in a joint statement with Poul Nyrup Rasmussen, the head of the Party of European Socialists who co-hosted Wednesday's meeting.
As current EU president, Blair is pushing for greater deregulation and free-market liberalization in Europe and hopes consensus at Thursday's informal summit at Hampton Court near London could pave the way for a deal on future EU financing. Blair has said he wants to secure agreement on the EU's 2007-2013 budget in December.
A June summit on the budget collapsed in acrimony, largely due to Britain's refusal to give up its cherished rebate and France's refusal to scale back European agricultural subsidies to its farmers.
Rasmussen said he was optimistic that Blair could secure a deal by the year's end, and that discussions would take place in the sidelines Thursday, AP reports.