By Alastair Macdonald
STRASBOURG (Reuters) - Jean-Claude Juncker, president of the European Union's executive body, will call on member states to take advantage of Brexit and an economic upswing that is pulling the EU out of crisis to forge a tighter Union, putting the euro zone at the heart of world trade.
Juncker, president of the European Commission, will use his annual State of the European Union address to the EU legislature in Strasbourg on Wednesday to propose an agenda for the remaining two years of his mandate, which will end shortly after Britain leaves the bloc in March 2019.
In stark contrast to the previous two years, dominated by existential fears raised by the Greek debt crisis, migrants crossing the Mediterranean in the hundreds of thousands, and Britain's 2016 Brexit vote, officials said Juncker wants the EU to seize a window of opportunity to strengthen its integration.
Speaking from 9 a.m. (0700 GMT), Juncker is expected to renew his arguments for the bloc to forge ahead with free trade deals as the United States under President Donald Trump takes a more insular turn. After Japan on the trade front, Australia, New Zealand and South America are next in Brussels' sights for rapid new agreements.
At the same time, he is likely to enlarge on proposals for the EU to take a tougher line with China over allegations of cut-price dumping and for it to scrutinize more closely future investments in strategic European assets by state-owned firms.
Juncker, a former prime minister of Luxembourg and long-time chairman of the euro zone finance ministers group, has sounded alarm at noisy disputes over EU subsidies, civil liberties, fiscal policy and national sovereignty that are dividing northern and southern states, rich and poor, the west from the ex-communist east.
EURO ZONE REFORM
With the election in France of reform-minded President Emmanuel Macron in May and with German Chancellor Angela Merkel, the EU's pivotal leader, cruising to a fourth term later this month, Juncker's speech comes as the bloc's founding power couple ready for intense debate on how to strengthen the euro common currency.
Juncker may offer ideas, officials say, on how the euro zone could tighten economic integration through shared budgets and leadership, favored by France in the face of German doubts, but also avoid alienating the minority, especially in the east, who do not yet use the euro and whose voice within the EU is being much diminished by the loss Britain, the main non-euro power.
He is likely to balance renewed criticism of governments, notably in Poland and Hungary, as well as membership candidates like Turkey, which are accused of undermining democratic rights by making proposals that will please eastern governments which, for example, complain of protectionist labor rules in the west.
As the veteran leader of one of the EU's smallest states, Juncker has long been a defender of national rights, notably over issues such as taxation, but he could expand on his calls for governments to curb the areas where they can veto EU policy.
While Juncker can expect a generally warm reception in the European Parliament, a broadly federalist body with the noisy exception of dedicated anti-EU parties, the test of whether his proposals translate into action will be the reactions in the coming months of national leaders in the 27 member states.
(Reporting by Alastair Macdonald; Editing by Leslie Adler)