The European Union executive outlined a new long-term plan for economic revival which, in a break with the past, puts the focus squarely on deregulation and business-friendly policies.
The plan, while urging EU governments to accelerate reforms to their labour markets and to cut red tape, ditches the EU's long-stated ambition of forging the "world's most dynamic economy" by 2010.
The report marks the mid-way review of the EU's five-year-old "Lisbon Strategy" of reform, launched amid much fanfare in the Portuguese capital with the goal of overtaking the United States in the competitiveness stakes.
"The central message of the last five years is that Europe must refocus if it is to refuel its flagging economic engine," European Commission president Jose Manuel Barroso told a news conference.
After the EU's achievements in forging a single market, a common currency and last year's addition of 10 more member states, he said the drive to slash unemployment through higher growth "is Europe's next great project".
The new-look Lisbon Strategy will be presented to EU leaders at a March summit where, diplomats believe, it will win strong approval.
The 2010 target is no longer mentioned in the report, giving formal recognition to the widespread view that owing to years of economic slowdown and a lack of reformist zeal, the EU is nowhere near ready to meet the goal.
But Barroso, who when Portugal's prime minister was in the vanguard of Europe's free-marketeers, made clear that reforms could no longer be put off.
He said the EU was now averaging economic growth of just 2.0 percent, compared to 3.5 percent in the United States, while China and India are marking "huge strides" at a time that the EU's populations are ageing rapidly.
"A job is the best weapon against poverty," he added, on the day that new figures confirmed unemployment in Germany is now at its highest level since the 1930s.
But Barroso also sought to assuage the fears of left-wingers and environmentalists who fear he wants to take the EU down the road to a US-style, freewheeling capitalism with minimal safeguards and rampant poverty.
"It is as if I have three children -- the economy, our social agenda, and the environment," he said, explaining that all deserved equal love.
The report recommended a range of action:
-- Pensions and healthcare systems must be modernised to cope with the ageing societies.
-- Billions more euros should be pumped into research and developmentand D). Europe should create its own elite academy along the lines of the world-famous Massachusetts Institute of Technology.
-- Business must be freed from onerous regulation.
-- The EU's internal market should be completed with long overdue deregulation of the telecommunications, energy and transport sectors.
-- Government aid for companies should be channelled into nimble start-ups rather than national champions to support the R and D goal.
-- The EU should appoint an economic reform overseer -- dubbed "Mr or Ms Lisbon".
The commission's plan would appear to mark a radical break with a past in which Brussels was caricatured as a busybody keen to spread its reach into every facet of life in EU countries.
It received a warm welcome from European conservatives and a qualified one from liberals, but was met with hostility by the Party of European Socialists (PES).
Left-wingers accused the commission of ditching Europe's "social model" of consensual politics and ignoring the ability of Scandinavian nations to stay competitive despite their high welfare costs.
"We have, in the most successful economies in Europe, proven that the right and modern framework for growth and competitiveness does include social and environmental policies," PES president Poul Nyrup Rasmussen said.
"Those are not part of the problem but part of the solution," the former Danish prime minister said.
By: N. Peter Kramer
