The European Commission's annual social inclusion report, published on Monday, reveals that one in six Europeans lives below the national poverty line, while 10 per cent live in households without a single working member.

Conducted in 2004, the study showed that 16 per cent of EU citizens lived under the poverty threshold which is defined as 60 per cent of their country's median income, according to Business Week.

The poverty statistics ranged from nine to 10 per cent in Sweden and the Czech Republic to 21 per cent in Poland and Lithuania while in all countries except the Nordic states, Greece and Cyprus, children are often at greater risk of poverty.

Reacting to the data, which will be presented to EU leaders at a summit next month, social affairs commissioner Vladimir Spidla said that although reforms to make national systems more fiscally and socially sustainable are "encouraging" there are still "big challenges ahead".

The report suggests changing rigid labour practices in the member states in favour of a more flexible system allowing for the easier hiring and firing of people and more varied contracts but greater training, benefits and social security for workers on a Danish-type model.

"Reforms of legislation relating to contracts would allow easier job transitions and provide more opportunities for workers to progress, as would higher investments in training," the report said.

However, it warned that although Europe's 2005 employment rate saw the biggest increase since 2001, some 22 million jobs would still have to be created to meet employment targets set for 2010.

"If Europe is to respond seriously and effectively to the challenges of globalisation and a rapidly shrinking working population, flexicurity must be the order of the day. Workers must be able to move easily and with confidence from one job to the next," said Mr Spidla.