EU reform summit focuses on Asian economic crisis

EU reform summit focuses on Asian economic crisis

CARDIFF (Reuters): Asia's economic crisis weighed on the
European Union summit yesterday, with British Prime Minister Tony
Blair telling fellow leaders the world economy faced its greatest
risks in almost two decades.

Blair, chairing the summit called to discuss political and
economic reforms ahead of the 15-nation bloc's ambitious single
currency and enlargement projects, warned that Europe could not
shrug off Asia's financial woes.

"Our economies will not emerge from this turmoil without being
affected by it and we have to decide how we intend to react," a
British spokesman quoted Blair as telling the summit.

The Japanese yen slid to an eight-year low on the foreign
exchange market, sinking to 146.55 against the dollar -- a drop
of 1.4 percent from its level in late European trading last
Friday.

The Asian turmoil has stoked fears that long bull runs on
European and U.S. share markets could be dented amid fears of a
fresh round of competitive currency devaluations in Asia.

French Prime Minister Lionel Jospin told the summit that the
EU should rapidly assess the risks posed by Japan's economic
crisis and consider how to respond.

It was vital for Europe to capitalize on the EU's current
positive economic outlook to ensure lasting growth, he added.

The 1999 launch of the euro single currency in 11 of the 15 EU
states would create a euro zone with a single monetary policy and
this in turn would require greater coordination on economic
policy, Jospin said.

In Brussels, European Trade Commissioner Sir Leon Brittan
warned there could be far-reaching consequences if the yen
continued to fall and dragged down China's currency, the yuan.

"The decline of the yen, if it continues, is clearly going to
put pressure on China's currency. This could have far-reaching
consequences for the region and the world economy," Brittan told
a Brussels seminar.

Brittan said Europe and the United States would have to bear
the main brunt of the Asian crisis, having to take in more cheap
imports while seeing exports decline.

Britain, under fire for an insipid six-month stint as EU
presidency, asked EU leaders to focus on how the bloc can be made
to work for its 360 million citizens, many of whom see Brussels
as a remote but powerful influence on their lives.

Blair said he wanted a political vision for the bloc "where
we're moving Europe closer to the people rather than (having)
some European federal superstate".

The aim of economic reform was to "move us away from heavy
regulation towards help on jobs, for small businesses and
completing the single European market to help trade and
investment," he told reporters earlier.

The leaders also kicked off a debate to review the Union's
decision-making processes, costly farm and regional funding
programs and budgetary issues.

German Chancellor Helmut Kohl, trailing in opinion polls ahead
of a September election that could end his 16 years in power, is
seeking a cut in Bonn's EU payments.

Germany, burdened by the costs of reunification and millions
out of work, insists it should not have to bankroll poorer
southern partners who, in turn, will not give up their Brussels
handouts to make room for even poorer states from Central and
Eastern Europe.

Ten former Soviet bloc nations and Cyprus have been invited to
start the accession process, prompting European Parliament
President Jose Maria Gil-Robles to warn that enlargement could be
delayed because of the need to overhaul EU institutions.