EU to grant Ireland reform guarantees, back Barroso

(BRUSSELS) - EU leaders chart out the bloc's future at a summit from Thursday by granting Ireland guarantees on the stalled Lisbon treaty, backing Commission chief Jose Manuel Barroso for a second term and endorsing tougher financial regulation.

Institutional reforms have divided the EU, which almost doubled in size five years ago and has since limped along on a severely outdated rule book which it is seeking to revamp with the Lisbon treaty.

To set the stage for Irish voters to return to the ballot boxes for s second referendum -- possibly in October -- EU leaders will affirm the sanctity of Dublin's military neutrality and stance on social issues like abortion.

A day after the Obama administration unveiled a sweeping shake-up of US financial regulation, the 27 EU leaders are also to approve steps to set up pan-European authorities to oversee banks, insurers and securities firms.

However they will have to deal with opposition from London, home to the biggest financial sector in the world, which fears the new bodies would be able to order governments to carry out costly bailouts of ailing financial groups.

Irish Prime Minister Brian Cowen was upbeat ahead of the summit.

"We all want to see a common efforts to win a treaty referendum," he told reporters at a pre-summit meeting of liberal leaders.

"I am confident that we will get what we were promised," he said in a statement ahead of the meeting.

The tricky question is whether those guarantees will be enshrined in the treaty as a binding protocol. Given the battle to ratify Lisbon so far, many countries, led by Britain, fear this could re-open the whole process.

Of the other EU nations, only the Czech Republic and Poland must complete the technical ratification, while a legal challenge is pending in Germany.

On the eve of the summit, eurosceptic Czech President Vaclav Klaus insisted that his country's parliament must ratify the Irish guarantees or he would refuse to approve the whole treaty.

The other main topic of the meeting is whether to return Jose Manuel Barroso, a conservative Portuguese former premier, for a second term as head of the European Commission, the EU's executive body.

In an effort to ensure continuity during the economic crisis, Barroso -- whose commission will have an operating budget of 138 billion euros next year -- is expected to get the green light to return, but no formal confirmation.

Little more than a week after European parliament elections, Barroso is virtually assured of winning five more years. There is no other viable candidate.

His candidacy would also have to be endorsed by the new European parliament, which sits for the first time in mid-July.

However Martin Schulz, head of the socialists in the European parliament, warned that his group would oppose Barroso's reappointment and that the former Portuguese PM's conservative backers would have to woo eurosceptics if they want to secure the necessary majority support.

EU diplomats say the politics surrounding his endorsement is a way for nations -- notably France and Germany -- to secure senior posts within Barroso's commission, whose mandate expires at the end of October.

Paris and Berlin have demanded that he lay out his vision before they decide whether to nominate him.

Therefore ahead of the summit, Barroso outlined his desire for a protective, all encompassing European project, which he will develop for the leaders over dinner Thursday night.

"I believe that in times of crisis we need more than ever a strong European Union and a strong European Commission," he wrote in a two-page letter. "We need more, not less, Europe."

The European Commission is responsible for drawing up legislation that impacts daily on the lives of almost half a billion Europeans, as well as enforcing the measures already in place.

Its president -- who like the commissioners is appointed rather than elected -- has significant leverage to influence legislative priorities.

European Council