Blair gambles on appeal to 'People's Europe'

Unrepentant over the collapse of Friday's EU summit, Tony Blair will embark on a campaign this week to appeal to European opinion over the heads of Jacques Chirac, Gerhard Schröder and other leaders of "old Europe".

The Prime Minister flew home yesterday with the recriminations of half of Europe ringing in his ears. Most other European leaders blamed the failure of the summit on his refusal to make concessions on Britain's EU budget rebate unless they were linked to reforms of the Common Agricultural Policy.

But Mr Blair believes that the European public supports his ideas for modernising the EU, an argument he intends to pursue during Britain's six-month presidency, which begins next week.

The Luxembourg Prime Minister, Jean-Claude Juncker, who chaired the talks as the current holder of the presidency, was so angry when the summit ended, according to British officials, that his country is threatening to refuse to co-operate when it hands over to Britain. Mr Juncker warned that the EU is now "in deep crisis".

Mr Blair's crusade will begin with a speech to the European Parliament in Brussels on Thursday, when he will tell European MPs not to confuse his stance with that taken by Margaret Thatcher.

Mr Blair is expected to insist that he believes in a strong "social model" for Europe, rather than an unfettered free market. He will claim that this is proved by his record as the Prime Minister who signed the UK up to the social chapter of the Maastricht treaty, and oversaw the introduction of a national minimum wage.

British officials admitted yesterday that Mr Blair is facing a bad start to his six months at the head of the EU, with other European leaders holding him responsible for what the German Chancellor, Gerhard Schröder, described yesterday as "one of the worst political crises Europe has ever seen". But Jack Straw, the Foreign Secretary, insisted that the crisis could be turned into an opportunity to rethink the EU's future.

"If people are caught up for 36 hours in a soulless building in Brussels, tempers are going to fray,'" Mr Straw told BBC Radio 4's Today programme. "It is in many ways a sad day for Europe. But out of this ... there is an opportunity to reconnect. This will be seen as something of a turning point for the European Union. Sometimes to secure a turn in democracies, there has to be a shock."

Mr Straw added: "It is essentially a division between whether you want a European Union that is able to cope with the future or a European Union that is trapped in the past."

The EU Trade Commissioner, Peter Mandelson, also said some good could come out of the crisis. "There will be many of us working hard to make sure that there's a proper debate and that Europe and its budget emerges, not unscathed, but in a better, improved form," he said.

John Redwood, the Tory deregulation spokesman, said Mr Blair could have averted the crisis by opening up the issue of waste and fraud in the EU bureaucracy, which exists on a big enough scale to be responsible for the shortfall in the budget. "He seems to be hyping up the disagreement instead of finding a way round it," Mr Redwood said.

The budget talks reached an impasse between Mr Blair's refusal to accept any cut in the British rebate and the refusal of President Jacques Chirac's refusal to discuss the Common Agricultural Policy, which mainly benefits French farmers.

Mr Juncker had offered what was intended as a compromise, but the British claimed that it would have meant a cut of between a quarter and a third of the rebate without any concession from the French.