BRUSSELS (Reuters) - European Union leaders must show US President-elect Barack Obama they are serious about tackling economic slowdown and climate change by agreeing firm action on both this week, the bloc's executive said yesterday.

European Commission President Jose Barroso said a two-day summit in Brussels starting tomorrow was the most important in years, with potential to set the stage for future European cooperation with a more like-minded US president. Barroso also voiced confidence the summit could pave the way for rules revamping the 27-nation EU's clunky decision-making structures by overcoming Ireland's veto of a reform treaty which backers say will give the EU more voice in the world.

With Obama announcing a recovery plan to create at least 2.5 million new jobs by 2011, Barroso said it was all the more vital that EU states overcame differences and agreed on a Commission plan to devote a total 1.5 percent of the bloc's 13 trillion-euro ($16.7 trillion) output to reviving the economy.

"I will insist on that, that we have 1.5 percent as a sign that we mean business when we talk about fiscal stimulus," he told a pre-summit news conference of a plan many economists believe will not be enough to pull Europe out of recession. Barroso refused to join calls on Germany — Europe's largest economy — to contribute more to the package but hinted that Berlin could at some point top up its 32 billion-euro scheme.

"I think Germany is doing and will do very important contribution to European efforts," he said.

Market reaction to the EU plan has been lukewarm, with analysts noting it will mostly incorporate national schemes that have already been announced by the bloc's main economies.

The global economic downturn comes just as the EU wants to put itself in the vanguard of the fight against climate change before global talks next year, despite growing concerns by its industry over the cost of the schemes proposed.

However, Barroso said he was confident that the summit would agree the main lines of the plan — which aims to cut greenhouse gas emissions by a fifth by 2020 and boost renewable energy by the same amount — and could form the basis of a consensus with the Obama administration on joint efforts.

"Americans are coming around to our way of thinking," he said of European hopes for Obama's climate policies, floating the idea of joint initiatives to cut carbon emissions blamed for the warming of the earth's temperature.

The main barriers to a successful agreement are Poland's worries that the plan will create heavy costs for its power sector, which is about 95 percent dependent on coal — the most polluting source of energy.

Italy and Germany are worried it will increase costs for manufacturers and heavy industry, harming their ability to compete with rivals in less regulated areas. Yet prospects of a final deal were given a boost yesterday as German Chancellor Angela Merkel and Polish Prime Minister Donald Tusk said after talks in Warsaw they both now expected a compromise deal of some kind from the summit.