TEHRAN The European Union told Saturday the 12 applicant countries and turkey that market reforms and balanced budgets were a precondition to joining the union by the year 2004.

EU finance ministers, at the end of two days of informal talks on the international economy in Malmo, Sweden Saturday, met for the first time their colleagues from the applicant countries.

German Finance Minister Hans Eichel said "Strict economic criteria" were necessary otherwise membership of the union made no sense. "We emphasized the necessity of a stable financial sector," Eichel said of the meeting.

The ministers discussed the economic and political challenges facing the East and Central European applicant states as they make adjustments necessary for membership in the European Union, DPA reported.

Turkey, which hopes to join the EU, has yet to be accepted as an applicant nation. The EU ministers called on the World Bank and International Monetary Fund (IMF) to make available more funds for Turkey to help it overcome its serious financial crisis.

The discussion was based on the executive EU commission's warning of financial instability that hit a number of member states in the early 1990s.

Like their Western counterparts a decade ago, the East European countries have borrowed large amounts of cash abroad to finance their huge domestic investments.

Meanwhile, Europe is not immune to the U.S. economic slump but is confident it is "weathering the storm" and that its economy will continue to grow, although at a slower than expected rate, AFP quoted EU officials as saying here Saturday.

"We are not immune to developments in the United States and the world at large," European Central Bank President Wim Duisenberg said after a session between EU finance ministers and national Central Bank heads on the second day of an informal ecofin meeting in southern Sweden.

"But we are such a large autonomous economic area, comprising a market of some 300 million people, that the impact of developments outside the euro area on the euro area are not negligible, but very limited indeed," he said.

"We are confident that we are weathering this storm, to the extent that gives Europe a rate of growth both this year and next year at or slightly above the potential trend rate of growth which we have observed for the euro area over the past 25-30 years," he said.

"We put the long-term observed trend growth of the euro area economy at two to two-and-a-half percent," Duisenberg added.

"So when I say that we expect output to grow at or above that range that means at or above two-and-a-half percent."

He said the ECB had been "anxiously looking for more than a year for signals whether the so-called 'new economy' had arrived in Europe."

"But so far we see no definite signals that the new economy, defined as a lasting upward jump in the rate of growth of productivity, has made itself manifest in the euro area economy."

Meanwhile, demonstrators hurled bottles and smoke bombs at police during an anti-EU protest in Sweden on Saturday and 225 of the protesters were briefly detained, a police spokeswoman said.

The 1,000-strong crowd of demonstrators was heading for a the trade fair in the southern city of Malmo, which was hosting a two-day meeting of European Union finance ministers and Central Bankers.

Merima Lullic of Malmo Police said officers had to step in after the initially peaceful demonstration became violent.