BRUSSELS, Belgium?The European Union, shaken by Greece's fiscal crisis and struggling to get its new institutions into gear, hopes to relaunch itself this week as leaders mull improved, coordinated economic governance.

Europe's post-recession economic woes, highlighted by the swelling deficits of Greece and others, will be the focus of an European Union summit on Thursday.

The meeting in Brussels is also notable for being convened by the EU's first permanent president, Herman Van Rompuy, who has kept a markedly low profile since assuming his unelected role in December.

He has chosen to invite the 27 leaders to the listed Bibliotheque Solvay, set in a small park, which the former Belgian prime minister hopes will afford some informal wood-paneled coziness.

The choice will also, unlike former EU summits, keep prying media eyes away.

Van Rompuy will see it as his first real chance to stamp his imprimatur on the bloc and a test of the EU under its new reforming Lisbon Treaty, which created his post.

"He's concerned about the increasing chatter about the decline of Europe," one senior EU official said.

Such worries have been heightened recently by Europe's ineffectual performance at the international climate talks in Copenhagen and the perennial bickering and institutional navel-gazing.

The global economic crisis which has hit Greece, Spain, and Portugal particularly hard, even sparking fears that they could default on debts, adds to the urgency to restore growth and economic cohesion in the bloc, particularly in the 16-nation eurozone.

British Business Secretary Peter Mandelson attacked the European Union on Sunday for failing to provide stronger international leadership on banking reform.

"European heads of government need to show more of a strategic lead to the EU as a whole," the former EU trade commissioner deplored.

Europe is seeking to do just that, by drawing up a new ?EU 2020? strategy for growth over the next ten years, with research, new technologies, and green transport to the fore.

The idea is to replace the European Union's much-vaunted "Lisbon Strategy," launched in 2000 which is felt in many quarters to have lacked the teeth to make it work.

The new program won't be finalized till June, but the European heads of state and government are expected on Thursday to agree on the main principles.

They would add to the existing Stability Pact which monitors only national deficits.

Van Rompuy wants to see a "collective effort" to crank up the growth engine, it's a question of the survival of Europe's social model, he warned recently.

French President Nicolas Sarkozy has spoken of an "economic government of the 27" to a largely unenthusiastic European audience.

However more and more capitals are coming round to the idea that there has to be a way to impose fiscal discipline if there is to be an effective common EU approach.

The Spanish EU presidency has suggested "corrective measures" such as grants and cuts. But the idea of sanctions has elicited stern opposition, notably from Berlin.

"Imagine if the European Union were to say to a member state, don't carry out this or that reform or you will be punished. Well you're going to turn public opinion against Europe and against the reforms," as one European diplomat said it.

So the carrot could be used rather than the stick, with the good fiscal students rewarded in terms of funding.

Secondly European nations could intervene regularly to police each other.

Last week the European Commission approved Athens' efforts to tame its deficit crisis but placed Athens under unprecedented economic scrutiny.

The commission could also issue warnings to those that don't respect the common rules. However in the final analysis the nations intend to maintain control and limit the capacity of Brussels to intervene in their affairs, a fact which is raising doubts that any new mechanism will be effective.