European Union leaders will approve tighter bank supervision rules at a summit starting on Thursday, a day after President Barack Obama unveiled a sweeping reform of U.S. financial supervision.
EU leaders will also back Jose Manuel Barroso for a second five-year term as head of the European Commission, although his critics say the EU reacted slowly to the economic crisis under his leadership and that he lacks ideas.
The two-day meeting in Brussels is intended to show the 27-nation bloc has the economic crisis under control and look at ways to prevent it happening again.
The EU has begun stimulus measures which it says will cost up to 4 percent of its total output, and now wants to tighten a financial supervisory system that failed to shelter Europe from a crisis that stemmed from bad U.S. home loans.
The leaders agree on the need for tougher rules but Britain is concerned that the blueprint under discussion could encroach on its national regulator's power to steer the financial services sector, which is crucial to Britain's economy.
But Britain's EU partners are confident London will sign up, especially after U.S. President Barack Obama unveiled what he called the most sweeping reform of U.S. financial supervision since the 1930s.
"There will be a pincer movement on Britain," a French official said.
The EU proposals involve creating three pan-European watchdogs next year to ensure countries introduce new rules on supervision, and a new European Systemic Risk Board that would monitor the build-up of risks to stability.
BARROSO UNCHALLENGED
Barroso, a former prime minister of Portugal, will address EU leaders over dinner on Thursday evening to set out what he will do if he secures another five years as Commission president, leading the EU's regulator.
"I believe that in times of crisis we need more than ever a strong European Union and a strong European Commission," Barroso wrote to the leaders. "This is, more than ever, the moment for action. The world will not wait for Europe."
Barroso's backers say the 53-year-old conservative leader is the best person to provide stability in troubled times.
No rival candidate has emerged.
"If you ask me, I can't see any alternative at all," Danish Prime Minister Lars Lokke Rasmussen, whose liberal allies in the European Parliament will be vital to ensure Barroso's nomination is also approved by the assembly, told reporters.
The leaders are also expected to agree legal guarantees to help persuade Irish voters to back the Lisbon treaty intended to streamline decision making in the EU following its expansion to 27 member states.
The Irish government expects to receive legal guarantees including assurances its policies on military neutrality, abortion and taxation will not be affected by the treaty. Dublin is expected to hold a new referendum by early October.
"We are very satisfied with the progress we have been making," Irish Prime Minister Brian Cowen told reporters in Brussels. "Obviously there are further issues to discuss … We have to formally finalise the text and see in what way we are going to ensure the legal guarantees are provided."
Diplomats say there is broad agreement the guarantees should be legally binding but Britain has resisted Irish demands that they have the status of a treaty protocol, saying this would require ratification by all member states.
