Spanish Prime Minister Jose Aznar is hoping to end his country's spell at the helm of the European Union with some firm decisions on immigration and asylum, institutional reform, as well as a breakthrough on the EU's problematic defence policy.

Immigration will be the first issue delegates tackle.

The Spanish Presidency has identified three key areas to be discussed:

• Protection of external borders
• How to deal with countries of origin
• Common asylum policy

EU justice and home affairs ministers agreed in principle last week on the need for a multi-national border guard and on the need for increased surveillance of sea borders.

The EU would like a breakthrough on establishing its own forces

The summit is expected to endorse these measures, and to think about how they would work in practice.

Spanish and British proposals for financial penalties for those developing countries which do not seek to curb emigration, or which do not accept their people back, are likely to prove more controversial.

France, Sweden and Luxembourg are unhappy with such measures, labelling them counter-productive.

Delegates will also take on institutional reform.

The Spanish Presidency hopes to discuss a number of issues:

• Future of the rotating presidency
• Creating an inner cabinet of commissioners to sett EU agenda
• Reducing summits from two days to one

One idea which has been mooted is a team presidency under which ministers from different member states head a council devoted to a particular policy issue for a period of two-and-a-half years.

Recent ideas suggested by the president of the European Commission, Romano Prodi, will also be addressed.

Mr Prodi proposes that:

• Countries should have just one commissioner in future
• A select few should be chosen to form an inner cabinet

Delegates will then move on to European economic growth.

Just as the summit opened, eurozone finance ministers agreed to French demands to push back a deadline for balancing its budget to 2007.

Earlier this year governments agreed to eliminate budget deficits by 2004, but the new French Government has promised tax cuts.

Security policy has also been tabled into the discussions.

A key element of the EU's common policy is defence and the formation of a rapid reaction force, but this has been held up due to differences between EU member Greece and candidate member Turkey.

EU leaders are hoping to persuade Greece to drop its objections to arrangements with Turkey that allow the EU access to Nato military assets for its own crisis management operations.

The Spanish presidency is seeking agreement on a clearer timetable for EU enlargement.

They want member states to agree that it is reasonable to expect an accession treaty to be signed in 2003, with up to 10 new members joining in 2004.

They also want agreement on a clearer time-frame for the accession of applicant countries not included in the group of 10.

The summit is also expected to issue a statement confirming that the Nice Treaty will not conflict with the neutrality of any member states.

The statement is designed to help the Irish Government persuade voters to vote in favour of ratifying the treaty in a second referendum later this year.