BRUSSELS (AFP) - European Union leaders began arriving for a two-day summit set against the backdrop of US President George W. Bush`s triumphant re-election and institutional crisis at the EU`s executive arm.
The summit was also to take stock of the Middle East peace process with Palestinian leader Yasser Arafat`s health declining fast.
Bush`s victory over Democratic challenger John Kerry has left EU leaders pondering over their options after his first term was marked by bitter transatlantic acrimony caused most notably by the war in Iraq.
While Britain`s Tony Blair looks reinforced in his staunch support for Bush in Iraq, others such as Jacques Chirac of France may not be so happy.
But in public at least, Europe has been fulsome in its tributes to Bush, while also appealing for a new page in a fraught transatlantic chapter.
"Of course political life is not an easy journey. Sometimes you have difficulties in the journey," EU foreign affairs chief Javier Solana said Thursday.
He forecast inevitable frictions in the next four years, "but I`m sure also we`ll be able to overcome those frictions with good will".
The set-piece agenda item for the summit, which was to open at 1700 GMT, was a report by Dutch former prime minister Wim Kok on the "Lisbon Strategy", a grand plan to make the EU the world`s most dynamic economy by 2010.
Kok`s update on the four-year-old strategy makes gloomy reading for the EU leaders. "Unfortunately progress to date has been inadequate, largely due to a lack of commitment and political will," the report argues.
But promises of accelerated economic reform have been set back by the crisis sparked last week when incoming European Commission chief Jose Manuel Barroso was forced to withdraw his proposed team due to protests by EU lawmakers.
Barroso, an economic liberal, has placed EU competitiveness at the heart of his commission`s agenda for the next five years. But the new executive can do nothing before it takes office.
There is hope that the standoff could be resolved at the Brussels summit, after the key figure at the centre of the row, Italian EU nominee Rocco Buttiglione, withdrew. Latvia has also changed its contested pick.
Barroso`s spokeswoman Pia Ahrenkilde said he was "near to unveiling his new team".
"The speed at which he can do this depends notably on the speed at which the Italian government can formally present a new candidate in place of Mr. Buttiglione," she added.
The Party of European Socialists, which led the opposition to Buttiglione and the Latvian nominee Ingrida Udre, said it was now "reasonably satisfied".
Other summit agenda items include how to dissuade Iran from pursuing its nuclear ambitions and how to promote the Middle East peace process.
On the first point, the EU appears no longer to be explicitly calling for an indefinite suspension of Iran`s uranium enrichment, in a compromise that could allow the Islamic republic to call a temporary halt to its nuclear drive.
On the second, the EU leaders are expected to endorse new ideas to keep the Middle East "roadmap" on track despite Arafat`s declining health.
With Bush back in power, the EU will be hoping for a renewed US commitment to the peace plan. But the health of the veteran Palestinian leader, who is hospitalised in Paris, is becoming a serious concern.
"The latest news from Paris is extremely worrying," caretaker commission president Romano Prodi said. "I hope that this is a false alarm. I hope that his health will stabilize," he said.

11/04/2004 - 15:45 GMT - AFP