Andrew Grice: The Week in Politics

EU mess means Blair may stay on for longer

As Tony Blair prepared for a difficult European Union summit, he found himself caught between a rock and a hard place - and between "two Jacks".

As Tony Blair prepared for a difficult European Union summit, he found himself caught between a rock and a hard place - and between "two Jacks".

The rock was Jacques Chirac. The French President may be rapidly losing authority in his own country after it rejected the proposed EU constitution, but proved an immovable roadblock for Mr Blair by switching the EU's focus to Britain's £3bn a year rebate on its EU contributions, which all 24 other members want it to give up. So Mr Blair, who in 1994 promised he would "never be isolated in Europe", found himself in danger of being just that at the Brussels summit.

The hard place was Mr Blair's own Cabinet. There were some tense exchanges behind the scenes with the two ministers who matter most on Europe - Gordon Brown and Jack Straw who are much more cautious about the European project than the Prime Minister.

Mr Blair's instinct was to do a deal on the British rebate in Brussels if a reasonable one was on offer in order to clear the decks before Britain takes the rotating chair of the EU for six months on 1 July. Mr Brown, the guardian of the purse strings, described the rebate as "non-negotiable". That phrase has never been used by Downing Street, which recognises that a club with 25 members can only work through compromise and negotiation; Blair aides say Mr Brown will soon realise this if he becomes Prime Minister.

Mr Straw has played a bigger role in the EU's current drama than has been acknowledged. He pushed and prodded a reluctant Mr Blair into conceding a referendum in April last year. That, in turn, put strong pressure on M. Chirac to announce one. The French President was bemused because Mr Blair had assured him he would not hold a referendum.

When France voted "no" three weeks ago, Mr Straw shot out of the traps while Mr Blair was on holiday in Italy. The role of Eurosceptic comes naturally to him, and he made crystal clear that he regarded the constitution as dead. M. Chirac, meanwhile, raised the stakes over the British rebate. Mr Straw and Mr Brown saw that as an opportunity to urge the Prime Minister not to give way over it at the summit.

A Blair aide said: "He was caught in a pincer movement of Jacques Chirac and Jack Straw. Chirac put him in a corner and Jack and Gordon cemented him there by demanding 'no surrender' over the rebate."

Mr Blair has been irritated by reports in Eurosceptic newspapers that he was "wobbling" over the rebate and that his Chancellor and Foreign Secretary had to stiffen his spine. He suspects that friends of Mr Brown and Mr Straw were trying to make sure everyone knew they had doubts about a deal in case Mr Blair signed up to one.

Mr Brown was unhappy about a possible British concession - forgoing the contributions to the British rebate by the 10 new members who joined the EU last year. He was even less happy that the idea was floated publicly by his old foe Peter Mandelson, now Britain's European Commissioner. In fact, Mr Blair had had the plan in his back pocket for some time.

Despite the attacks on the rebate, Mr Blair can claim that Europe is moving Britain's way. The funny thing is that he may be winning the battle over the EU's future direction without really firing a shot - or holding a referendum. The economic and political problems facing M. Chirac and the German Chancellor Gerhard Schröder make Mr Blair look like the relatively strong man of Europe.

He will, though, have his mettle tested during Britain's six months in the EU hot seat. It will be difficult, if not downright impossible, to strike a deal on the budget when the British rebate would have to be a central part of it.

Mr Blair faces a tricky balancing act when he returns to Brussels on Thursday to address the European Parliament. He will outline a "new social model" for Europe to scotch Britain's imageas favouring a US-style free market, insisting he supports some social protection.

As Mr Mandelson noted in a Fabian Society lecture this week, the Labour Government is seen in Europe as "neo-Thatcherite" because of its economic rhetoric. The challenge for the British presidency, he said, was to show that reform was needed "not to Americanise Europe but to make our European model of society sustainable for generations to come".

Britain's spell in the presidency may test Mr Blair's authority at home as well as in Europe. With the EU budget cloud hanging over it, the same Cabinet tensions could resurface.

The election showed that Mr Blair was more of a liability than he believed, so he is privately relieved that he does not need to hold a referendum in a year's time which, if he had lost, would surely have led to his resignation. As a result, some Blairites are talking about their man outlasting M. Chirac, who faces re-election in 2007, as well as Mr Schröder, who seems destined for electoral defeat this September.

Mr Brown may have other ideas. I suspect that, by the autumn of next year, his lieutenants will be getting itchy feet and expecting their marching orders.

a.grice@independent.co.uk