Europe seeks to ride Arab democratic wave
The fighting in Libya and the wider upheaval in the Arab world will force EU leaders to overhaul their strategy towards the region at a special summit on Friday.
The rapidly changing Libya crisis demands fast action by the EU, which is under great pressure now to recognise the rebel National Libyan Council (NLC) and establish a no-fly zone to halt bombing raids by Col Muammar Gaddafi's forces.
Libya is a huge diplomatic challenge for the EU because of Arab sensitivities about Western intervention and the risk of more civilian casualties if a no-fly zone is imposed.
The excesses of European colonial powers left deep scars in the Arab world - including Libya. More recently, opponents of the war in oil-rich Iraq pointed to the West's anxiety to secure stable energy supplies from the region.
The "Arab Spring" is being compared with Europe's anti-communist rebellion in 1989. So Euro MPs reminded EU foreign policy chief Baroness Ashton on Wednesday that an historic opportunity for democratic change must not be squandered.
The democratic revolution in the Arab world is a "historical juncture", said the centre-right German MEP Elmar Brok, warning that "it will only have a chance if people have decent living conditions".
Mr Brok, a foreign policy expert in the European People's Party (EPP), urged the EU to help isolate Col Gaddafi. He said a no-fly zone could be imposed with Arab League co-operation, even without a UN resolution.
Haunted by Bosnia war
Greens leader Daniel Cohn-Bendit said the EU must give firm support to the anti-Gaddafi rebels - both humanitarian and military assistance.
"Let's not go back to what we did in Bosnia - an [arms] embargo on Serbs and Bosnians. No, we must be in one camp," he said.
The 27-nation EU is still haunted by the 1992-1995 Bosnia war, when policy divisions and delays contributed to the bloodshed. The EU watched impotently as the worst atrocities in Europe since World War II were committed.
This new crisis is also in the EU's neighbourhood - an opportunity for Europe's politicians to show they have learnt lessons from the Balkans.
The EU has moved to restrain Col Gaddafi by freezing his assets and those of 25 close aides, and imposing a visa ban on them.
Wider EU economic sanctions are expected against Libya within days, while EU humanitarian aid is helping to ease the refugee crisis as thousands of foreign workers flee the war zone.
Col Gaddafi's extensive business interests in Europe have made this a tricky crisis for the EU to navigate.
The Libyan Investment Authority (LIA), a huge sovereign wealth fund, has many assets in Europe, including a stake in Italy's Juventus football club.
In 2010 Libya provided about 13% of Italy's total gas imports, the European Council on Foreign Relations (ECFR) reports.
The ECFR, a leading think-tank, says Libya is even more important as a supplier of crude oil. Its biggest EU customers are Italy (22% of Italy's oil imports), the Irish Republic (23%), Austria (21%), France (15.7%) and Greece (14.6%).
The EU will pay a high price if it blunders now over Libya, warns Richard Youngs, director of the FRIDE European think-tank in Madrid.
He says a setback could "negatively affect the momentum of democratic change" in the region, as Arab leaders, as well as protesters, are learning lessons from the upheaval.
Talk of a "domino effect" is over-simplistic, he says, as the countries differ in many ways. Nevertheless, the authorities in Jordan and Saudi Arabia have offered sweeteners to nip any copycat opposition protests in the bud.
Europe's enthusiastic normalisation of ties with Col Gaddafi in recent years, including large-scale business deals, is an embarrassment in many capitals now, in light of his use of overwhelming force against civilian protesters.
Despite Col Gaddafi's previous links to terrorism the EU lifted an arms embargo on Libya in 2004. France and Italy became major arms suppliers to Col Gaddafi.
Civil society agenda
The Libya wake-up call means the EU is now putting human rights at the top of its agenda for change in Europe's relations with North Africa and the Middle East.
There have been calls for a new "Marshall Plan" to build civil society and create much-needed jobs in the Arab world.
The post-World War II Marshall Plan was a massive US aid project designed in part to prevent the spread of communism.
Stabilising and developing North Africa could prevent a new wave of illegal migration to Europe.
The EU leaders - jointly called the European Council - will study a new strategy document on Friday, drawn up by the European Commission and Baroness Ashton. As High Representative Baroness Ashton plays a key role in shaping EU foreign policy.
The document proposes a new "partnership for democracy and shared prosperity" with the EU's neighbours in the southern Mediterranean.
Emphatically the EU is planning a more differentiated approach in the region, to tailor assistance to the specific conditions in each country.
"It is an incentive-based approach... those that go further and faster with reforms will be able to count on greater support from the EU," it says.
"A commitment to adequately monitored, free and fair elections should be the entry qualification for the partnership."
North Africa and the Middle East already come under the EU's European Neighbourhood Policy, which has nearly 4bn euros (£3.5bn; $5.5bn) earmarked for the region in 2011-2013.
There is also a proposal now for the European Investment Bank (EIB) to provide 6bn euros in loans to the region over the same period.
Flawed Mediterranean plan
France launched the 43-nation Mediterranean Union during its EU presidency in 2008, to open a new chapter in Europe's ties with North Africa and the Middle East.
But the new EU document says the Union did not bear fruit and now "needs to work more as a catalyst" to generate "jobs, innovation and growth that are so badly needed in the region".
Arab-Israeli tensions hampered the Union, which focused on some ambitious - though as yet unrealised - joint environmental projects.
"The EU needs to go way beyond those practical projects... the situation calls for much more tailored strategies towards individual countries," Richard Youngs told the BBC.
The new EU document speaks of helping small and medium-sized enterprises (SMEs) in the Arab world, which "have a critical role to play in job creation".
Training, educational opportunities and tourism are other areas where the EU says it can help, without neglecting the need to promote social justice and free elections.
Before the Arab upheaval the European Neighbourhood Policy was more focused on the former Soviet Union.
The EU has helped organise democratic elections in Eastern Europe, for example in Ukraine and Moldova, providing possible models for EU involvement in Arab countries.
One important lesson, Mr Youngs says, is that "the EU needs to follow through when there are election irregularities".
"If you don't help after democratic breakthroughs they can drift back to authoritarian control," he says, pointing to Ukraine, where the democratic ideals of the 2004 Orange Revolution were soon replaced by political bickering.