"Europe must work together to make its forces more deployable, more sustainable and more interoperable for today's threats," he told reporters during a meeting of European Union defence ministers in southwest England.

"We must invest more in research, and we must spend our defence budgets more effectively," he said.

Britain assumed the six-month rotating EU presidency in July.

Before they set their minds to business, the ministers were treated to a 40-minute display of British firepower, as the host country showed how it would secure a hostile airport with just the sort of forces it thinks the EU needs.

In the first-ever exercise of its kind before EU defence ministers, fighter planes, transport and refuelling aircraft, helicopters, artillery and ground troops were all involved in a five-phase exercise.

Harrier jump jets flew in low over the ministers' heads to destroy "enemy" vehicles dotted around the Royal Air Force base in Lyneham, guided to their targets by an advance team of reconnaissance paratroopers.

"We now need the sort of forces we saw this morning. Flexible, deployable, quick, speedy, high readiness," Reid said.

The informal meeting comes amid renewed calls to boost EU defence spending as the bloc's area of operations spreads from the Balkans to Africa.

It also comes after US General Joseph Ralston and General Klaus Naumann of Germany warned that Europe could be overwhelmed by security challenges such as international terrorism unless it starts pooling its defences.

"Staying the course is not an option -- indeed, it is a recipe for disaster. Seen in this light, defence integration is not just an appealing or interesting idea: it is an imperative," they said in a report.

"They are absolutely right," said Reid, whose country is one of only a few EU member states spending around or above two percent of gross domestic product on their defence budgets, as recommended by NATO.

The ministers also discussed the bloc's biggest military operation, the EUFOR mission in Bosnia, and are expected to take a decision late next month on gradually scaling it down.

"Over the next six weeks we will be planning for the mission's second year, and as part of that we will be looking forward to the transition towards the use of EU civilian rather than military instruments," Reid said.

"Of course that will not happen until the time is right," he added.

Almost 10 years after the signing of the Dayton peace accord, which ended Bosnia's three-year war in December 1995, the country has a reformed military, and recently made moves to unify its ethnically-divided police force.

"I think we are constructing already what is going to be the follow up of the mission to Bosnia Hercegovina," said EU foreign policy chief Javier Solana.

Solana added that he expected the EU to begin talks with Bosnia on an association agreement -- seen as the first step toward joining the bloc -- before the 10th anniversary of the Dayton accord on December 14.

In other developments, the ministers agreed on a new code of conduct to open Europe's arms industry to competition, which will come into effect next year.

"We envisage that perhaps there would be a six-month implementation period leading up to the thing actually going on line in the middle of next year," said European Defence Agency head Nick Whitney.

"During that period a number of countries will probably be reflecting as to whether they can move that fast to join the code when it begins," he said.

He would not say who was ready to take part, although Solana confirmed that Britain and France would be involved among a majority of EU states.

All rights reserved. � 2005 Agence France-Presse. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by Agence France-Presse. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of Agence France-Presse.

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