The Home Secretary, Charles Clarke, rejected the claims as "completely and utterly untrue" and criticised his counterpart for arriving late at yesterday's meeting of EU interior ministers and leaving early. However, as confusion reigned, diplomats later suggested that Mr Clarke was reacting to press agency reports that misinterpreted the French minister's comments. These stories suggested that the suspects themselves had been arrested and then released.
The row followed a news conference at which M. Sarkozy, talking about the terrorist cell in the north of England, said it seemed that "some of the group had been arrested" in spring 2004. He also said there was a strong suspicion that the explosive used in the bombings came from the Balkans or Eastern Europe.
After seeing reports of the comments, the Home Secretary replied: "Mr Sarkozy was inaccurate, shall I put it gently, in suggesting there had been a discussion of this kind, because there was not."
Mr Clarke held a brief bilateral meeting with the French minister at the gathering in Brussels yesterday. But the Home Secretary insisted that M. Sarkozy's comments were "certainly not from any conversation I, or any of my ministerial colleagues, or anybody in this delegation, have had".
Asked if he had called on the French Interior Minister to correct his remarks, Mr Clarke said: "No, I haven't seen him. He left the Council [of Ministers] halfway through. He didn't feel it appropriate to stay till the end of the discussions. That perhaps is his style. But he's a great leader for France and I wish him all the best." Other ministers confirmed Mr Clarke's assertion that there was no detailed discussion of the investigation into the London bombings.
But French officials later insisted that M. Sarkozy had not claimed that the suspects themselves were arrested, as some news agencies reported, nor had he cited the Home Secretary as the source of the comments.
The French minister was sticking by his remarks last night, although there was no information about what report they were based upon.
Mr Clarke's comments were unusually frank, particularly since the Home Secretary was chairing yesterday's meeting and supposed to be playing a neutral role as holder of the EU's rotating presidency. Franco-British relations had suffered a setback over the breakdown of last month's EU summit which was supposed to agree a budget for the EU for 2007-13.
In Brussels, the EU interior ministers also promised yesterday to examine the causes of the radicalisation of young Muslims. An unpublished report from the European Commission identified a "crisis of identity" among young people born to immigrant parents as a key danger.
The document, leaked to the Belgian newspaper De Standaard, describes radicalisation as "a modern kind of dictatorship", likens it to neo-Nazism or nationalism, and says the internet, university campuses and places of worship are tools of recruitment. It says second-generation immigrants often feel little connection to their parents' country or culture but may also encounter discrimination in European countries.
"Alienation from both parental roots and country of origin, and the society in which they live, can lead to a desire to identify with a more motivating or powerful locus of identity."
The Commission document questions whether governments should organise education of religious teachers to ensure that they are "fluent in the language and the constitutional values of the member state concerned". But it concedes this might smack of a "Big Brother" approach.
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