EU leaders wrestle with austerity as thousands protest

European Union leaders wrestled on Thursday with German demands for strict austerity and a French-led push for growth-friendly spending at a summit targeted by thousands of protesters angry over rampant unemployment. With the EU's core eurozone economy languishing in recession, organisers said 15,000 people took part in the rally in a park next to EU headquarters in Brussels, with dozens arrested after breaking into an adjacent building. The two-day meeting opened at around 1630 GMT with French President Francois Hollande calling on fellow leaders to lift an arms embargo on Syria to help insurgents fighting the regime of President Bashar al-Assad. Hollande held head-to-head talks with British Prime Minister David Cameron after saying on arrival at the venue: "We are ready to support the rebellion." The summit will also feature a gathering of eurozone-only leaders overnight and eurozone finance ministers later on Friday, tackling a multi-billion-euro bailout for Cyprus -- the fifth for an EU state since Greece first needed rescuing three years ago. Heads of state and government were also to look at relations with key partners, notably Russia, but as demonstrators had gathered outside, austerity hardliner German Chancellor Angela Merkel said it was necessary that young people in Europe are able to find jobs. Hollande, whose pro-growth push over recent months has gained added weight thanks to a big anti-austerity vote in Italian elections last month, said the "only priority" leaders had to face today was finding fresh ways to boost growth. The French Socialist has admitted his government will not be able to cut its public deficit to the EU limit of 3.0 percent of gross domestic product this year, coming in instead at 3.7 percent as a weak economy exacts its toll. Failing to meet the target leaves France needing another year of grace from Brussels, an extension it seems likely to get. Belgian Prime Minister Elio Di Rupo, a political ally, said that "with 26 million unemployed, it is only natural that we ask the EU to develop policies which tend towards more growth." Former eurozone head and Luxembourg Prime Minister Jean-Claude Juncker said the task now was "to explain our policies better." "I can't rule out us running the risk of a social revolution or rebellion," he warned. Among the protesters, Mads Hadberg of Denmark, a 25-year-old student, asked: "Why should the people be paying for the crisis the banks created?... People are losing jobs, health benefits, pensions -- and the rich are getting richer." As the meeting began, hopes rose in Cyprus that a deal on its long-delayed financial rescue could be sealed come Friday's finance talks, which were also to be attended by International Monetary Fund managing director Christine Lagarde. "I do hope that by tomorrow we can negotiate and find a solution," said new Cyprus President Nicos Anastasiades. The debate about whether to grant more freedom on short-term spending decisions is more than academic. A brash anti-austerity party won a stunning 25 percent of the vote in last month's Italian elections, a warning for Merkel who faces polls later in the year. "We do not need another summit where EU (leaders)... try to sugar-coat and deny the harsh reality," said Hannes Swoboda, head of the Social Democrat group in the European Parliament. EU President Herman Van Rompuy said that if the worst of the debt crisis appeared over, European leaders were still meeting against a backdrop of "social distress," highlighting the danger of soaring youth unemployment, which now runs at more than 50 percent in Greece and Spain. One EU official said the vote outcome in Italy "has made a lot of people think". The problem, he added, was that governments still need to balance public finances after years of overspending, but austerity and belt-tightening cannot be the only response. "If there is no growth for 10 years then you can't pay back your debt," the official said. A draft of the summit conclusions obtained by AFP says that given the currently "unacceptably high levels of unemployment" -- expected to hit an unprecedented peak of around 12 percent this year -- it is critical to support growth "as a matter of priority".