The summit in Poertschach has brought together the centre-left heads of government in France, Germany, Britain and Italy for the first time.

There have been calls for more devolution of decision-making, the lowering of interest rates and a public works programme to cut unemployment.

The BBC Europe Correspondent says the meeting is not expected to produce any concrete proposals and has been distracted by the Middle East peace talks and the crisis in Kosovo.

European tax plan

One of the more controversial ideas put forward at the summit was for a European income tax to finance the European Union.

Political Editor Robin Oakley says Mr Blair was unimpressed

The suggestion was made by the President of the European Parliament, Jose Maria Gil-Robles at an EU summit aiming to look into ways of bringing the union closer to its citizens.

"If we are genuinely committed to involving the ordinary person more fully in the process of European integration, we shall have not only to develop tax harmonisation but to move towards involving the citizen directly in the financing of the union," said Mr Gil-Robles.

But the UK Government immediately slapped down the proposals.

The UK Prime Minister, Tony Blair, said: "I can't believe that other European leaders would favour income tax rates being set by the European Commission," said Mr Blair.

Blair attacks Kosovo policy

Mr Blair has also spearheaded calls for a common defence policy for the EU.

Mr Blair said that if Europe wanted to match America's influence, it had to be ready to back diplomacy with the threat of real military action.

Calling the EU's response to the Kosovo crisis "dithering and disunited," Mr Blair urged other European leaders to reflect on how to "stand on their own two feet" on occasions where the United States did not want to get involved.