The text of a possible statement - formally dropping Britain's long-standing opposition to EU involvement in defence matters - is likely to be agreed when the political top brass meets for the annual Anglo-French summit in St Malo today and tomorrow.
Both British and French sources stressed the "historic" nature of yesterday's meeting - an attempt by the two countries to force the pace on an important European issue, in a manner usually associated with Franco-German summits.
Although some differences remain, Mr Blair, President Chirac and the French Prime Minister, Lionel Jospin, are expected to agree a statement of principles for negotiations with other European countries - and the US - on the development of an EU capacity to act militarily separately from Nato.
Britain stresses that this is not intended to rival or weaken the western alliance but to provide EU countries with a capability to intervene in European trouble spots (such as the Balkans) when the US is not able, or willing, to do so.
It is understood that some of the unresolved issues are between France and France, rather than between France and Britain. In other words, there are differences of approach between President Chirac and Mr Jospin and between the French foreign and defence ministries.
Mr Blair startled other European governments in October when he said it was time to have another try at solving the institutional and logistical problems which have defeated earlier attempts to create a European defence identity. The Prime Minister said he was ready to drop Britain's long standing opposition to defence issues being decided at EU level.
It is believed that the St Malo statement would leave open the possibility of the Western European Union, at present a kind of half-way house between Nato and the EU, being brought fully into the EU treaties and institutions. This is something which has been long demanded by the French and Germans.
French officials said the core issue was "how to allow the EU to take over political and strategic management of military operations, including using forces assigned to Nato". Such a development would be extremely welcome to the French. They remain outside the military structures of Nato but have become aware of the limits of their political and military capacity to act alone.
Britain says the overall responsibility of Nato for defending the Continent must not be challenged. But those EU countries willing to do so should create a new decision-making process - and provide the transport, satellite and other logistic hardware - for independent,peace-keeping and punitive actions on the Continent.Reuse content