DATE=3/14/02

TYPE=CORRESPONDENT REPORT

NUMBER=2-287561(CQ)

TITLE=E-U / SUMMIT PREVIEW (L-ONLY)

BYLINE=ROGER WILKISON

DATELINE=BARCELONA

CONTENT=

VOICED AT:

/// Re-running w/change from "after" to "in" in 5th graph from text ///

INTRO: European Union leaders face tough economic and international issues when they gather for a two-day summit in Barcelona Friday. V-O-A correspondent Roger Wilkison reports they are expected to make little headway on the economic front but have been cheered by a last-minute diplomatic victory in the Balkans that was brokered by E-U foreign policy chief Javier Solana.

TEXT: Mr. Solana, looking tired but upbeat, flew into Barcelona from Belgrade after getting Serbs and Montenegrins to agree to a deal to set up a new federation that will grant more autonomy to the two Yugoslav republics and prevent the country's final breakup.

Speaking to reporters, Mr. Solana says the new arrangement, under which Yugoslavia will now be called Serbia and Montenegro, is a success for E-U diplomacy.

/// SOLANA ACT ///

A change in the constitution will be done, a change that will provide for the Montenegrins and Serbians to live together, to continue to live together, and therefore to have in the Balkans, instead of fragmentation, the opposite, the people who were in principle trying to separate from each other, to come back and to live together.

/// END ACT ///

The E-U needs such a shot in the arm (needs a diplomatic success) because it finds itself unable to exert much influence in the Middle East.

The E-U leaders will call at the summit for joint U-S / European / Arab backing of a Saudi plan that would grant Israel diplomatic recognition by Arab states in exchange for Israel's withdrawal from Arab lands that it occupied in 1967.

Still, the main task confronting the leaders is how to breathe new life into an ambitious plan they adopted two years ago to build the world's most competitive and dynamic economy by the year 2010.

That plan has fallen way behind schedule, and the United States has increased its economic and technological lead over the E-U.

/// OPT /// Spain, which holds the rotating E-U presidency, is pushing especially hard to open up the bloc's energy market so that a power company from one E-U country can compete in another. But, as analyst Steven Everts, at London's Center for European Reform notes, upcoming elections in France have made French leaders reluctant to agree to any market opening that could affect jobs.

/// EVERTS ACT ///

Structural reform, as we all know, is sort of painful in the short term but good for you in the long term. But politicians are, perhaps understandably, somewhat reluctant to incur those costs, if you like, those job losses, those painful decisions, those difficult choices, when they're facing the electorates in a couple of months time.

/// END ACT ///

Still, France may agree at the summit to open up its energy market for business users but not for residential consumers of gas and electricity. /// END OPT ///

Barcelona has mounted its tightest security operation since it hosted the Olympic Games ten years ago. The summit site has been sealed off from the rest of the city, and NATO has even sent an A-WACS surveillance aircraft to patrol the local skies.

Officials are especially concerned about the potential for violence by anti-globalization demonstrators who have disrupted other international meetings. But they also are worried about the threat of attacks by the outlawed Basque separatist group ETA and the possibility that Islamic extremists might want to punish Spain for its detention of alleged al-Qaida members. (Signed)

NEB/RW/KL/KBK