Berlusconi's announcement, at an EU summit in Brussels, came despite pleas from fellow leaders not to abandon the targets in the face of growing financial pressure, although Poland also appeared ready to vote parts of it down.

"I have announced my intention to exercise my veto," the Italian leader told a press conference on the sidelines of the summit.

"Our businesses are in absolutely no position at the moment to absorb the costs of the regulations that have been proposed," he said.

Last year, EU leaders vowed to cut greenhouse gas emissions by 20 percent by 2020, compared to 1990 levels. They also pledged to have renewable energies make up 20 percent of all energy sources.

But many EU nations have begun to baulk at the costs involved and the consequences to industry of the climate change goals.

The foreign minister of Poland, heavily dependent on coal-fired power, said his country would resist attempts to railroad the targets through.

"This is a very intricate game and Poland is ready to introduce a veto if there will be attempts to force us to achieve an agreement on the climate package," Radoslaw Sikorski told reporters.

However he insisted Warsaw did not want to kill the whole package, which is meant to be approved by December.

"Poland will veto, not the entire package, but part of the technical details," he added.

Ahead of the summit, Polish Prime Minister Donald Tusk led eastern European nations in calling on their EU partners to "respect the differences in member states' economic potential," in fixing national goals for reducing greenhouse gas emissions.

In a statement, leaders of the three Baltic states, Bulgaria, the Czech Republic, Hungary, Romania and Slovakia as well as Poland stressed "the Union's climate and energy policy should reconcile environmental objectives and the need for sustainable economic growth."

The call for special attention to be paid to economic concerns in finalising the climate package is just what Brussels and other EU member states had feared as the financial crisis takes hold.

"This is not the time to abandon a climate change agenda which is important for the future," British Prime Minister Gordon Brown warned ahead of the summit.

"The climate change agenda is part of the solution for many of the problems we face as a global economy," he said, noting that high oil prices and less energy security "makes it more important that we deal with a long-term policy."

European Commission chief Jose Manuel Barroso also urged the leaders to press ahead and not abandon Europe's leadership role.

"If we now give any signal that we are not really committed to doing it, others will not have the incentive to do it," he added.

But Berlusconi said it was unrealistic to expect Europe to adhere to strict limits when other major polluters would not.

"We do not think that now is the time to be playing the role of Don Quixote, when the big producers of CO2, such as the United States or China, are totally against adherence to our targets", he said.

In a draft of conclusions to be released at the end of the summit, the leaders were set to express their "determination" to honour the climate change goals, whose "balance and fundamental parameters" must be respected.

They would also underline their commitment to improving the security of energy supplies in Europe.

No final decision on the climate package was expected Wednesday but the European Commission had been hopeful that it could seal a deal in December.

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