EU Summit

Energy security and global warming also featured prominently with EU foreign policy chief Javier Solana telling the heads of the EU's 27 member states that climate change had turned from a threat to a reality.

Climate change is now impacting the conflict in Darfur, migration from flood-prone Bangladesh and hopes for stability in the Middle East, according to a new EU report.

European Commission President Jose Manuel Barroso said he hoped governments would agree on a common European energy policy.

"I think it's very important also to fulfill the goals on climate change," he said ahead of the summit. "One year ago we adopted (a proposal) unanimously, now we have to translate this commitment in concrete ways."

The EU executive has recently put forward controversial proposals designed to make energy markets more competitive by splitting up companies which both sell energy to consumers and manage power lines.

On climate change, leaders are being asked to cut the bloc's emissions of the greenhouse gas carbon dioxide (CO2) to at least 20 percent below 1990 levels -- a legally-binding goal they set themselves a year ago.

Protecting industry

While they were expected to broadly endorse a commission proposal presented in January, leaders were expected to steer clear of its most controversial aspect: how to share the burden of meeting that target.

Seen as a champion in the fight against climate change at last summer's G8 summit, German Chancellor Angela Merkel said she would not allow Germany's car industry to be excessively affected by the bloc's climate goals.

"I specifically support the German automobile industry," she said, stressing that countries like Germany, whose automobile industry makes larger cars, should not be discriminated against when the climate targets and fines are in force.

Summing up the view of many of his colleagues, Bulgarian Prime Minister Sergei Stanishev said the EU needed to "strike a balance" in its bid to cut CO2 emissions.

Leaders were also expected to discuss how to make financial markets more transparent in the wake of the recent turmoil and take stock of a number of foreign policy issues, including Afghanistan and the Middle East.

Club Med's could open in July

But much of the attention was being devoted to French plans to create a union between countries with borders on the Mediterranean Sea.

After fierce resistance from Berlin, French President Nicolas Sarkozy scaled the plan down from including only states bordering the Mediterranean, with nine new agencies and a bank, to an annual summit of EU and Mediterranean countries with a joint presidency and a small secretariat.

Barroso applauded the idea, saying the new proposal would not divide the EU into northern and southern sections.

"We have said from the beginning it was a very good idea to have more commitment of the European Union regarding the Mediterranean," he said. "At the same time, it is important that all member states of the EU are engaged in it. So it seems now the conditions are there to move forward."

Austrian Chancellor Alfred Gusenbauer said the idea "doesn't do any harm," but added: "What matters to us is that it's not some special grill party for a few member states."

The Union for the Mediterranean is expected to be formally launched in July, when France takes over the rotating presidency of the EU from Slovenia.