Slowing economic growth in Europe is emerging as the key risk for 2005, Chancellor Gordon Brown warned yesterday as he promised to push employment and market reforms in the eurozone.

Britain's economy has withstood soaring oil prices and growing raw material costs but now faces the challenge of sluggish growth in key export markets, Mr Brown said in his first major speech since the Labour party won re-election.

"As we look ahead to the rest of 2005, the latest risk is low economic growth in Europe... particularly low in Germany, our largest export market in the euro area," he said.

The eurozone has grown at around half the rate of the United States and Britain in the past five years and so Britain must promote structural reforms when it takes on the rotating European Union presidency in July.

"Our aim is a Europe that instead of being a trade bloc looking inward on itself, looks outwards, engages with the rest of the world and reforms and liberalises to meet the global challenge," Mr Brown told business leaders.

An economic downturn in Europe was high on the agenda of the European finance ministers' meeting in Luxembourg last week, after news of recession in Italy and stagnation in the Netherlands, Belgium and France.

There are also signs the momentum is running out of the economic boom that helped Prime Minister Tony Blair's Labour party to a third straight term in this month's election.

Factory output has slumped while consumer spending is slowing, causing misery for High Street retailers. Inflation is also creeping up although it remains on target.

Mr Brown highlighted labour market reform as being central to European economic growth and said Britain would continue to resist pressure from EU politicians to scrap a provision under which governments can allow firms to ignore working hour limits.

"We will resist the opt-out being removed to the 48-hour week," the chancellor said, sticking to the line that flexible work hours are vital for economic efficiency.    

While both Mr Brown and Mr Blair have signalled that joining the euro single currency is very unlikely for now, they still have to convince a eurosceptic British public to back a new EU Constitution in a referendum planned for 2006.

Polls show such a vote will be tough to win and analysts predict the referendum could end Mr Blair's premiership if he fails to reverse public opinion.

Mr Brown - who is widely seen as Mr Blair's successor - said he hoped a "national consensus" on Europe can be built around the drive for pro-economic reform.

To that end, he will ask a cross-party advisory committee on Europe to discuss whether all political parties in Britain can agree a common line on European economic reform.