A document on the European Union's economic future will warn this week that Europe is losing its battle to become the world's most competitive economy, the Financial Timeshas reported.
Sluggish growth and a lack of political will to promote economic reforms have hindered plans to make Europe the top economy by 2010, according to a draft copy of the document seen by the FT.
The document, which is due to be presented tomorrow , also highlights the risks of a "two-tier" Europe in which some countries - such as Sweden and Denmark - are performing better than others, such as Greece, Italy and France.
The document sets out the European Commission's position on this topic ahead of a European Union summit in Brussels in March, the FTsaid.
The Commission warns the emergence of a "two-speed" economy within the EU will be made worse by the arrival of 10 new countries, mainly from Eastern Europe, in 2004.
The European Union reassured Balkan countries last week the current wave of EU enlargement would not be the last and that they would soon be able to join the wealthy bloc.