Brussels  - Climate change, the financial crisis and the European Union's woes over the stalled Lisbon Treaty are set to top the agenda Thursday when EU leaders meet for what has been billed as the most important summit in years.

"This will be perhaps the most crucial European (summit) in recent years ... a real test for Europe," European Commission President Jose Manuel Barroso said ahead of the Brussels meeting.

The most explosive question at the two-day summit is likely to be over a series of proposals which the commission - the EU's executive - agreed to in January to force the bloc to cut its emissions of greenhouse gases to 20 per cent below 1990 levels by 2020.

Member states remain deeply at odds over key parts of the proposals. Germany, France and Italy, for example, insist that their industries should be protected from international competition if other developed economies do not sign up to binding emissions cuts.

German Chancellor Angela Merkel told the mass-circulation Bild newspaper on Monday that she would not agree to EU climate-change decisions "if they endanger jobs or investment in Germany."

Poland, meanwhile, says that the proposals will almost double electricity prices in the country, and that the EU must therefore change them to take Polish power generators into account.

And debate also remains over a proposal to give 10 per cent of the money raised from selling permits to emit greenhouse gases to the bloc's poorest countries to help them clean up their act.

"Some (countries) are asking for more (than 10 per cent), others are asking for less. This is quite typical before a European council ... I think we can reach agreement," Barroso said.

The second major issue is set to be the commission's call for a 200-billion-euro (256-billion-dollar) stimulus package for the European economy, a proposal Barroso unveiled on November 26.

The package was largely aimed at coordinating individual states' bail-out plans, rather than imposing an EU-level response - making it likely that EU leaders will endorse it.

But debate still rages over a proposal to invest 5 billion euros of unspent EU funds in high-technology initiatives such as broadband internet and international energy links, with some member states saying that the money should go back into national budgets.

And diplomats say that it is not yet clear whether EU leaders will endorse the package's 200-billion-euro target, a sum which works out to roughly 1.5 per cent of total EU economic output.

The quality of the package is more important than giving it a numerical value, Luxembourg Prime Minister Jean-Claude Juncker told Deutsche Presse-Agentur dpa on Tuesday, calling the commission's proposal a "guideline."

Finally, the summit is set to debate the question of how the EU should react to Ireland's June rejection of the Lisbon Treaty, which is meant to reform the bloc's rules.

The treaty can only come into force if all EU member states back it - putting pressure on Irish premier Brian Cowen to find a way of getting it approved either in parliament or by a second referendum.

The pressure is especially intense because the EU is set for European Parliament elections in June and the appointment of a new commission in November - and the Lisbon Treaty is meant to change the rules by which this process is effected.

Ahead of the summit, German officials said that Cowen would use the summit to call for a second referendum for October 2009. Irish officials said that no formal decision had yet been taken.

Czech Prime Minister Mirek Topolanek is also likely to come in for pressure, as his country's parliament on Tuesday decided to postpone a vote on the ratification of the treaty until February 3.

The Czech Republic is set to take over the EU's rotating presidency in January, making Topolanek the man who will have to broker a solution to the Lisbon crisis.

The EU's leaders are also set to discuss long-term defence and security issues for the bloc. (dpa)