Juncker urges EU to 'catch the wind in our sails'

By Alastair Macdonald

STRASBOURG (Reuters) - European Commission chief Jean-Claude Juncker urged EU governments on Wednesday to take advantage of Brexit and an economic upswing to forge a tighter union at the heart of world trade.

In the EU's equivalent of a U.S. president's State of the Union address, Juncker pledged to wrap up trade talks with Mexico and Brazil and proposed limiting China's ability to buy up European companies in infrastructure, hi-tech manufacturing and energy.

A veteran of dealmaking through decades of fractious European Union politics, Juncker said he had often despaired at the bloc. But he saw it now bouncing back, a decade after the global financial meltdown and ensuing euro zone crisis.

"The wind is back in Europe's sails," Junker told the European Parliament, citing recent faster economic growth than the United States.

"Now we have a window of opportunity, but it will not stay open for ever. Let us make the most of the moment: catch the wind in our sails."

Saying he regretted Britain's decision to leave the bloc in March 2019, Juncker called for the EU, the world's biggest trading bloc, to forge ahead with free trade deals as the United States under President Donald Trump takes a more insular turn.

"We will keep moving on because Brexit isn't everything, it is not the future of Europe," he said.

Following a July agreement for an EU trade deal with Japan, Juncker said the Commission - the bloc's executive arm - would now open free-trade negotiations with Australia and New Zealand.

It would aim to conclude talks with Mexico and the South American trading bloc Mercosur, led by Brazil and Argentina, by the end of the year.

But he warned that the EU was not "naive", and proposed a so-called investment screening framework to address concerns about a surge of Chinese takeovers in the bloc.

"We are not naive free traders. Europe will defend its strategic interests with an EU framework for investment screening," he said, enlarging on a position that is strongly backed by France but likely to irritate Beijing.

WARNING FOR TURKEY

With the election in France of reform-minded President Emmanuel Macron in May, and with German Chancellor Angela Merkel, the EU's pivotal leader, cruising to a fourth term later this month, Juncker's speech came as the bloc's key power tandem seeks to strengthen the euro common currency.

He renewed his call, also made by Macron, for a euro zone finance minister. But he stressed the EU did not need to create a new post, suggesting a senior European commissioner to coordinate economic policy across the euro zone.

Following the euro zone's near break-up during the 2010-2012 crisis, many economists argued the currency area can only survive as a proper monetary union like the United States.

Juncker also called for a euro zone budget but within the existing multi-annual EU budget, rather than a separate budget as Macron has proposed.

France has long sought a budget as a means to make fiscal transfers from richer to poorer euro zone states.

While Juncker had warm words for Western Balkan states seeking to join the EU, he warned Turkey that its membership bid was failing because of President Tayyip Erdogan's broad crackdown following a failed coup attempt last year.

"Our union is not a state but it's still governed by the rule of law," Juncker said. "And that rules out membership for Turkey for the foreseeable future."

(Additional reporting by Gabriela Baczynska, Philip Blenkinsop, Alissa de Carbonnel and Jan Strupczewski, writing by Robin Emmott and Alastair Macdonald; Editing by Mark Trevelyan)