EU Faces World Crises

French President Nicolas Sarkozy summed up the fears of many present at the summit by delivering a speech at its close which concentrated on the euro's record-breaking strength.

Speaking after new figures were released at the close of Asian trading which showed the single currency hitting a new high over $1.56, Sarkozy told the summit that the heads of state and government had every reason to be concerned about market instability.

The French president said he was satisfied that the issue had been raised at the summit and that it was now time for action to avert a future financial meltdown.

"It would have been unthinkable for the summit would have remained silent on this," Sarkozy concluded.

Global financial markets have been gripped with extreme volatility amid concerns that tight credit conditions are threatening some finance houses and record-breaking runs for the euro, oil and gold.

Commission chief vows ECB will take action

As fears grew of a recession in the US economy and the knock-on effects on the world's nerve-wracked financial markets, European Commission chief Jose Manuel Barroso tried to instill calm by telling the summit that the European Central Bank (ECB) would take control of the situation should it be required to.

"The ECB will do what is necessary to secure financial stability," Barroso said.

The EU leaders also broached the subject of action in the fight against climate change during the two-day summit and at the end agreed to wrap up negotiations on ambitious targets to cut energy use and fight global warming by the end of the year.

"We committed ourselves to finishing negotiating on this package by the end of this year and by doing this we made a huge step forward," said Slovenian Prime Minister Janez Jansa, whose country holds the European Union's rotating presidency. "We are convinced that the costs of these measures will be much lower than if we don't act."

EU targets year-end for climate package agreement

The current plan aims to meet the European Union's over-arching goal to reduce emissions of carbon dioxide -- the main gas responsible for global warming -- by 20 percent by 2020, compared to 1990 levels. EU member states have committed to go to 30 percent if other countries match them.

In the upcoming negotiations on the details of meeting those goals, Jansa said: "We need to take into account the different positions of the member states and their needs for economic growth."

In another green move, the EU leaders agreed to support the development of environmentally-friendly products by reducing the level of VAT on them.

The proposal, first made by British Prime Minister Gordon Brown, "will start the debate in many member states about how and whether household goods ... can incentivize consumer behavior towards buying energy-efficient and environmentally friendly goods and services," Brown said.

Environmental VAT on EU agenda

Under the decision, the EU's executive body, the European Commission, is tasked with "reflecting" on "the best way to support the development of clean products by evoking the question of environmental VAT," Sarkozy said.

But the proposal is unlikely to lead to concrete measures soon. VAT is a sensitive issue, since much of the EU's common budget comes from the VAT which consumers pay in each member state, and any decisions on changing rates have to be approved unanimously.

"People are being persuaded by the argument that we should look at this very carefully," Brown said. "VAT is a uniquely European tax. ... We made substantial progress in only two days and I believe that over the next few months other countries will join the debate."

Despite the support of Britain and France -- two of the EU's three largest states -- some member states oppose the proposal and could well block it.

EU backs Club Med plan under new name

The EU also formally backed ambitious French plans for a Union for the Mediterranean, but watered it down to such an extent that it had to be given a new name.

According to a last-minute addition to the draft conclusions of their regular spring council in Brussels, the new organization is to be called "Barcelona Process: Union for the Mediterranean."

The Barcelona process is the name of the EU's 13-year-old policy which deals with the bloc's southern neighbors and which many critics say has so far failed to deliver.

The original "Club Med," as first conceived a year ago by French President Nicolas Sarkozy, envisaged uniting Israelis and Syrians, Turks and Spaniards, Italians and Libyans, and making them work together on such diverse issues as migration, the environment or the fight against terrorism.

But the latest draft of the proposal, brokered by Germany earlier this week and submitted to leaders over dinner on Thursday, includes all of the EU's member states and vaguely talks about "projects with an accent on regional cooperation."

Concerns over EU funds

The downsizing came after EU countries with no borders on the Mediterranean expressed skepticism at the proposal, with member states from Eastern Europe particularly concerned that it would divert precious EU funds away from their region.

In Friday's draft conclusions, the European Commission, "is invited to present to the Council of EU leaders the necessary proposals for defining the modalities of what will be called 'Barcelona Process: Union for the Mediterranean'" in view of a special summit to be convened in Paris on July 13.

Sarkozy nevertheless welcomed the compromise, pointing out that the new organization will for the first time give a strong voice to Middle Eastern and North African leaders in the way money in the region is spent.

He noted that the new political structure will be co-chaired by an EU member and a non-EU member. "Europe will not turn its back on the Mediterranean any more," Sarkozy said late Thursday.

Chinese clampdown on Tibet causes EU concern

The EU also took the opportunity provided by the summit to express concern about the violent protests taking place in Tibet, with Germany and Britain among those calling for dialogue and restraint.

German Foreign Minister Frank-Walter Steinmeier called for an end to the conflict by peaceful means while his British counterpart David Miliband said European governments would be seeking "clarification about what is actually happening on the ground," adding that "restraint" and "substantive dialogue" were the only way forward.

Reports coming out of Lhasa, the capital of China's Tibet Autonomous Region, suggest paramilitary riot police intervened to control protests initiated by Buddhist monks on the 49th anniversary of a Tibetan uprising against Chinese rule that was crushed by troops.