The stakes could not be higher. Can Blair keep his nerve and secure his legacy?

He went to the White House, they said, 'with a losing hand, and he played it'. But with Gordon Brown's announcement yesterday of 100 per cent debt relief for the world's poorest nations, the cards are being stacked in his favour ahead of the G8 summit. But will his luck hold or fold in Europe? Andy McSmith analyses his chances

Tony Blair is not a rash man, but he does often play for big stakes in world affairs. He saw one of his big gambles pay dividends last month when the proposed EU constitution collapsed, freeing him from his rash promise to allow the British a referendum before he signed the document.

"Yes, that turned out to be a clever move," one of his former ministers remarked. "But like a lot of clever successes, it comes at a price. The French are pissed off, very pissed off, and they're going to make him pay, if they can."

The Prime Minister is in for one of those weeks when he will have to look at his watch to remind himself what country he is in. And even when he returns jet-lagged to Britain next weekend, after exhausting meetings in at least five European capitals, he will not by any means have finished with the world stage.

After the general election, Mr Blair promised to devote his last term as Prime Minister to everyday issues such as crime and the state of the public services. He is determined not to be like other long-serving leaders, who fall into the habit of strutting the world stage to escape their domestic problems. But for the second half of this year, from 1 July, Tony Blair will be pushed into the centre of world affairs, as he heads both the EU and the club of the world's richest nations, G8, who will hold their summit in Gleneagles next month.

Mr Blair is off to Moscow tonight for talks in the morning with President Vladimir Putin about the G8 summit. That could be the easiest meeting he has all week. It will get more difficult tomorrow evening, when he dines in Berlin with Germany's Gerhard Schröder. On Tuesday it is Luxembourg, to talk to Jean-Claude Juncker, the country's Prime Minister and current EU President, and on to Paris for what promises to be a very difficult session with Jacques Chirac.

Then back to London, to hear Jack Straw make the opening speech in a big set-piece Commons debate on the future of Europe. On Thursday and Friday it's Brussels, for a fraught EU summit. If he is lucky, Mr Blair will be back in Britain on Saturday.

It looked at the start of last week as if all this scurrying around would only leave him looking like a man without a friend in the world. Tony Blair has always wanted to be a bridge across the Atlantic, in his special role as a pro-American, pro-EU Prime Minister, but it seemed that he had become a bridge only in the sense that everyone else was walking all over him.

As he touched down in Washington to try to coax an unwilling George Bush into making concessions on Africa and global warming, the French opened up an attack which one minister predicted last week would begin "the biggest battle since Waterloo".

By yesterday, things had picked up, at least at one end of the bridge. It took hours longer than scheduled, but eventually a beaming Gordon Brown was able to march into the Queen Elizabeth II Conference Centre in central London yesterday afternoon to announce a deal to give 100 per cent debt relief for the world's poorest nations. It is what Mr Brown calls "the most comprehensive" concession ever made by lenders to debtors in human history, bigger than the aid agencies had expected.

Debt relief is only part of the answer to Africa's problems - as agencies were quick to point out later. .When asked if yesterday's deal would fulfil the declared aim to "make poverty history", the editor of Africa Today, Patrick Smith, replied bluntly: "No chance." But it is enough to stop the Gleneagles summit ending in failure.

Before he gets to Gleneagles, however, Mr Blair has another briar patch to cross, when the 25 EU heads of government meet for this week's six-monthly summit in Brussels. Supposedly, this is the meeting that will deal with the mess left behind after the French and Dutch electors rejected the EU's proposed new constitution.

It would be a load off Tony Blair's mind if France and other big players would now agree that the constitution is dead, and set to work on less ambitious reforms to cut the number of EU commissioners and adjust the voting system to allow for the 10 new members from eastern Europe.

Mr Blair's ally, the Polish Prime Minister Marek Belka, would also like to see the constitution declared dead, because, like his British counterpart, he promised the voters a referendum that he fears he might lose. But neither the UK nor Poland wants to take responsibility for killing off the constitution, and the other big players - France, Germany, Italy and Spain - are not ready to deliver the last rites.

If the French have their way, the constitution will scarcely figure in the great Brussels poker game, which will be dominated instead by a row over the £3.4bn rebate conceded to Britain many years ago, to compensate for the relatively low return that British farmers get from the Common Agricultural Policy.

The biggest single issue before this week's Brussels summit - bigger even than the future of the battered constitution - is how much the EU will spend in the years 2007 to 2013. The EU Commission has put in a bid for a trillion euros (£667bn) over seven years. The six countries who contribute most to the EU, including Britain and France, say that is far too much, and want the budget capped at £540bn, or £77bn a year, which would still be a sizeable increase on their current budget. Jean-Claude Juncker, in his role as EU President, suggested a compromise figure of up to £600bn, which the big donors still say is too high.

The budget row was therefore shaping up into a straight fight between those who provide the cash and those who spend it, with the smaller EU nations acting as umpires, until Mr Chirac stepped forward to suggest that the whole problem could be resolved if the British gave up the rebate that Margaret Thatcher wrung from the EU in 1984.

This is not the first time the rebate has come under attack, but what took British officials aback was the very public manner in which Mr Chirac resurrected it, provoking suspicions that he was still smarting over losing the French referendum and wanted a row that united French domestic opinion.

Last July, the German EU commissioner in charge of finance, Michaele Schreyer, produced a plan that would have ended the rebate. Her argument was that much had changed in 21 years. The UK's economy is stronger now, and with the accession of 10 new EU countries, a large proportion of the subsidies that used to go to southern European farmers have been redirected to the east. If the rebate remained, Britain would contributehalf as much to the EU, proportionately, as Germany or the Netherlands.

But the British were quick to reply that if the rebate was removed, the UK contribution would leap to a level much higher than those of France or Italy's - two countries of similar size and wealth to the UK.

Jack Straw risked causing waves of offence when he said flatly that if anyone attempted to tamper with the British rebate, the Government would use the veto to end discussion - a threat repeated last week by Gordon Brown.

Mr Straw is expected to take the same intransigent line when he meets his fellow EU foreign ministers in Luxembourg tonight. Both he and the Chancellor suspect that Mr Chirac is trying to start an argument over the rebate to divert attention from the fate of the constitution.

Tony Blair's line has been more conciliatory, at least in public. After talks in London with the President of the European Parliament, Josep Borrell, he emerged to say that the UK would talk about the rebate if other governments agreed to look at EU funding. By implication, that includes the huge subsidies paid to French farmers from the Common Agricultural Policy. "I am not going in obstinately to say Britain has what Britain has and we are not discussing it with anyone," Mr Blair said. The difference between his tone and Gordon Brown's was quickly picked up by the Tories, who detected a re-emergence of the old Brown-Blair split, leaving the Prime Minister open to attack from the Tories.

Edward McMillan-Scott, a pro-EU Tory and vice president of the European Parliament, suggested yesterday that Britain was losing the argument because Mr Blair had failed to fight for the rebate with the vigour of Margaret Thatcher. John Redwood, Tory spokesman on deregulation, accused the Prime Minister of letting himself be "completely outmanoeuvred" by Jacques Chirac.

In the end, the uncomfortable choice that may face Mr Blair this week is between ridicule at home for giving in to the French, or creating enemies on the continent with a display of Thatcher-like obstinacy. It is not an easy choice for a Prime Minister who promised to put Britain at the heart of Europe.

Some of the Prime Minister's more disloyal MPs hope that his six months on the world stage will be his final appearance. They would like him to make progress in Africa, achieve a bit of success in pushing institutional reform forward in Europe, and then gracefully resign in time for a new prime minster to lead Labour at the next election.

But the Americans are in no hurry to see a change of face in 10 Downing Street, having always preferred Tony Blair to Gordon Brown. The French were reminded last week that they are not going to find the current Chancellor any easier to deal with than the current Prime Minister. This year could be Tony Blair's last big chance to make a lasting impact on the world stage, but no one abroad has a motive to make it easy for him.

After his US visit last week, one American official said that Mr Blair had come to Washington with a losing hand, but at least he played it. In Brussels, there will be more players at the table. Mr Chirac will be the one with the strongest hand, but given his reckless behaviour recently, he may throw it away.

DEBT RELIEF

$1.5bn down - $48.5bn left to go, says Geldof

Yesterday Gordon Brown announced a deal with fellow G8 finance ministers, excluding Russia, which will cancel $40bn of debt owed by 18 of the world's poorest countries. Raymond Whitaker explains

How important is the deal?

It will save heavily indebted countries more than $10bn in repayments over the next decade. Up to 20 other countries will be eligible, if they meet standards for good governance, in a package that could eventually be worth more than $55bn. But it is far from being the biggest chunk of debt ever written off at one stroke: last year, one aid agency pointed out, Iraq received more debt relief in one day than the whole of Africa in the past 10 years.

Where is the money coming from?

Under the deal, rich countries will compensate multilateral institutions such as the IMF, the World Bank and the African Development Bank for lost repayments by the 18 beneficiaries. Britain will put in $700m to $960m over the next 10 years, the US $1.3bn to $1.75bn and Germany $848m to $1.2bn.

Who benefits?

Most of the 18 countries are in sub-Saharan Africa, including Ethiopia, Rwanda, Mozambique and Uganda. Another nine are due to qualify within 18 months, among them the Democratic Republic of Congo, Malawi and Sierra Leone. But campaigners complain that the deal misses out some deserving countries, such as Sri Lanka, still recovering from the Indian Ocean tsunami.

Is everybody happy?

Some aid experts feel that writing off debt creates a problem of "moral hazard" - it rewards irresponsible countries while penalising those that do pay back what they owe.

Won't the money just go into guns, palaces and Swiss bank accounts?

Gordon Brown insists that the deal is tied to good governance. "Our agreement in return for debt relief is that it goes towards health, hospitals, nurses, education, schools, teachers and infrastructure," he said yesterday. He will have to work hard to make sure that is the case - and that the beneficiaries don't simply go and borrow more money.

What happens now?

The focus will shift to aid and fair trade, the subjects to be highlighted during next month's G8 summit in Gleneagles. Campaigners say policies that allow sub-Saharan Africa to increase its share of world trade by just 1 per cent would raise far more money than all the debt relief and aid schemes under discussion. But announcing aid packages is easier than dismantling the EU's farm subsidies.

So does all this make poverty history?

Far from it, says the Make Poverty History campaign. Despite the impressive numbers, much of the debt was never going to be repaid anyway: the Third World countries in question were struggling even to come up with the interest payments. MPH points out that the immediate effect is to save the beneficiaries $1.5bn a year; it will be campaigning during the G8 summit for international development aid to be increased by $50bn a year. That leaves $48.5bn to go, so Bob Geldof and his friends will still be heading for Edinburgh.

What Blair wants

CONSTITUTION: Everyone knows the voters of France and Holland have killed the treaty and saved Blair's bacon. All he has to do now is avoid the blame.

EXPANSION: Let them all into the EU, says Blair - even Turkey. The larger the organisation, the less chance of French and German dreams of a federal Europe coming true.

CAP REFORM: The oldest problem of all. Britain gets next to nothing out of it, and feels the subsidies make it impossible for African farmers to compete. But see Chirac.

BRITAIN'S REBATE: The joker in the pack. Blair is one against 24 in trying to keep it, but refuses to discuss it unless there is a fairer deal all round. Again, see Chirac.

EUROPE'S BUDGET: Blair is up against powerful leaders who want more spending to boost their flagging economies - and want Britain to foot more of the bill.

AID: Blair wants developed world to double Africa's aid budget. If the G8 falls short, as it will, some will label it a humiliation, but Blair will call it a triumph.

DEBT RELIEF: Gordon Brown said yesterday that$40bn (£22bn) owed by 18 countries will be written off, with more possibly to come, but some wonder whether this boosts reform in the developing world.

TRADE: Blair knows the poorest countries would benefit most if they could compete equally, but he won't push his luck by adding this to his initiatives.

CLIMATE CHANGE: Blair got no payback from George Bush on this, but hopes that other Americans will feel the force of world opinion.

NUCLEAR CLEAN-UP: When nothing else can be agreed at G8 summits, everyone will concur that the nuclear warheads still littering the old Soviet Union really must be sorted out.

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