EU needs 'competitiveness pact': Zapatero

(BERLIN) - Spain's prime minister Wednesday called for a European "competitiveness pact", saying this was more important than debating whether to increase the size or scope of the EU's bailout fund.

Ahead of a meeting with German Chancellor Angela Merkel in Madrid on Thursday, Jose Luis Rodriguez Zapatero said: "Before we deal with the fund, we need to lay the grounds for a competitiveness pact."

Such a deal would seek to make the whole eurozone economy more competitive in the global market.

"The mere fact the project has been floated and that big countries Germany, France, Spain and Italy are fully behind it, will create more market confidence than this whole debate over the size or flexibility of the rescue fund.

"I will speak to Angela Merkel about this on Thursday," he told several German newspapers on the eve of a joint meeting of the two governments he described as "perhaps the most important for years."

He appealed to Germany to "not play in defence but to play centre forward" in pushing forward the reforms seen as necessary to pull the eurozone out of a crippling debt crisis.

"There are three main countries at the moment: Germany, France and Spain. Spain is doing its homework, so France and Germany must push forward with a better economic union," business daily Handelsblatt quoted him as saying.

As the euro has a single monetary policy, set by the European Central Bank, the time has come to converge other areas of economic policy, Zapatero insisted, beginning with competitiveness.

And he reiterated that Spain was not in need of a bailout itself, despite falling prey to the debt crisis raging around the 17-country zone's periphery.

"We believe we can finance ourselves," said the prime minister.

On Friday, European leaders will gather in Brussels for a key meeting to discuss the EU's bailout mechanisms, but Berlin wants to broaden the agenda to include discussions about a deeper harmonisation of economic policies.