They will formulate the "fifth freedom" – the free movement of knowledge, and stress the importance of creativity and small and medium-sized enterprises in the further development of the European economy.

The EU leaders will also devote special attention to the concept of flexicurity, a combined word of flexibility and security, within the social dimension of the Lisbon Strategy.

They hope reforms on the macro-economic level would put the EU in a better position to cope with the current financial turmoil and salvage the economy from cooling down in face of additional risks of rising oil prices and a strong euro.

The European Commission last month revised its economic forecast for the EU. According to the commission, the EU economy will grow by 2.0 percent this year, slowing down from 2.9 percent in 2007.

The two-day summit kicked off at a time when European financial markets are still under relentless turbulence, triggered by the US sub-prime mortgage crisis.

Based on an interim report of their finance chiefs, EU leaders will endorse a series of lines of action in the financial sector for increasing the level of transparency and improving the functioning of markets.

As clouds were gathering on the economic horizon of the EU, the European Commission president Jose Manuel Barroso said Thursday the European economy is coping well in view of the turmoil on financial markets.

"The European Economy is holding up very well," Barroso said ahead of the summit, "The European economy will not be completely immune to certain developments that are already taking place on financial markets."

As regards the issue of climate change and energy, EU leaders will set political guidelines for further discussion of the legislative package and approve a work timetable leading to its adoption.

One year after EU leaders agreed on an ambitious greenhouse gas emissions package at their last spring summit, they will turn to details this time, but analysts said they expect no hard decisions from the summit.

Further, the summit is to review the progress made in the field of further liberalization of the internal market for electricity and gas. Differences were foreseen on the break-up of energy giants, the so-called unbundling.

EU leaders will also discuss the role of sovereign wealth funds.

Recent years have seen some eye-catching investments by the sovereign wealth funds, which aroused concerns of some EU member states.

In line with the European Commission's proposal, EU leaders were expected to call for a voluntary code of conduct on the funds.

Though economic issues will dominate their talks, EU leaders will use the opportunity to touch upon a series of international hot spots, such as Kosovo, Western Balkan, Iran and Middle East peace process.

(Xinhua News Agency March 14, 2008)