UPDATE 2-Google plans engineering staff expansion in Europe

(Adds details on hiring growth, updates share)

NEW YORK, Sept 27 (Reuters) - Web search leader Google Inc (GOOG.O) said on Thursday it is expanding its staff of engineers in Europe, aiming to improve its products in local markets outside the United States.

The company has built engineering hubs in cities like Zurich and London as well as smaller centers elsewhere in Europe, the Middle East and Africa (EMEA). But its largest base of engineers by far is in the United States.

Nelson Mattos, Google's new head of engineering in Europe, told the Financial Times that he sought to grow the EMEA region's engineering team to be "as big as the one in North America."

The report said Google sought to expand its headcount by about one third over the next three years, with most of that in Europe. About 500 out of 7,000 Google engineers worldwide are based in the region.

Google did not confirm the size of the expansion, but a spokesman said the company was beefing up its presence in Europe.

"We are absolutely hiring engineers in Europe," he said. "The reason why we are regionalizing our engineering ... is that we create better products for local markets."

Investors started scrutinizing the pace of Google's hiring in July, when the company reported profits that fell short of expectations due to a recruiting spree.

Chief Executive Eric Schmidt said at the time that the company took on new staff more quickly than planned and would be careful in its expansion going forward.

Google's work force had ballooned nearly 13 percent between March and the end of June, growing to 13,786 full-time employees.

On an annual basis, Google's hiring grew 74 percent in the 12 months ended June 2007, compared with a 90 percent increase in the similar period ended June 2006.

But Google may have several pressing reasons to build a bigger base in Europe, where it has encountered regulatory scrutiny of its planned purchase of Web marketing firm DoubleClick Inc, an unfavorable copyright ruling in Belgium and a stronger rivalry for the search market from local firms.

Google shares were down 2 cents to $568.14 in afternoon trading on the Nasdaq. (Additional reporting by Lewis Krauskopf) (Reporting by Michele Gershberg and Eric Auchard)